The prime minister has said it is time to "get ready" for a no-deal Brexit as he accused the EU of having failed to negotiate "seriously" in recent months.
Boris Johnson has said the UK should prepare for an "Austrialia-style" Brexit deal following the latest round of talks with EU leaders, but refused to walk away from discussions as he had previously threatened.
Both sides had set the October talks as a deadline for striking a post-Brexit free trade deal, but failed to reach agreement over ongoing issues, including around fishing rights and state aid rules.
Speaking from Downing Street on Friday, Johnson said the UK had hoped for "nothing more complicated" than a free trade deal similar to that struck between the EU and Canada, but said that for "whatever reason" negotiators in Brussels were unwilling to agree.
"We hope to enjoy with our friends and partners from January, and from the outset, we were totally clear that we wanted nothing more complicated than a Canada style relationship based on friendship and free trade," he said.
"To judge by the latest EU summit in Brussels that won't work for our EU partners. They want the continued ability to control our legislative freedom, our fisheries in a way that is completely unacceptable to an independent country.
"And since we have only 10 weeks until the end of the transition period on January 1 I have to make a judgement about the likely outcome. And to get us all ready."
On Thursday, the UK's chief negotiator Lord Frost said he was "disappointed and surprised" after Brussels ditched a formal commitment to work "intensively" to find a deal.
But Johnson backed away from his previous commitment to walk away from talks with the bloc unless a deal was reached in October, saying instead the talks would remain frozen unless there was a "fundamental change of approach".
And the prime minister said the UK would now step up preparations for a no-deal exit when the transition period ends on 31 December.
"We can do it, because we always knew that there would be change on 1 January whatever type of relationship we had," he said.
"And so now is the time for our businesses to get ready and for hauliers to get ready, and for travellers to get ready.
"And of course we're willing to discuss the practicalities with our friends, where a lot of progress has already been made on such issues as social security and aviation nuclear cooperation, and so on.
He added: "But for whatever reason, it's clear from the summit that after 45 years of membership they are not willing, unless there's some fundamental change of approach, to offer this country, the same terms as Canada.
"And so with high hearts and with complete confidence, we will prepare to embrace the alternative and we will prosper mightily as an independent, free-trading nation controlling our own borders are fisheries and setting our own laws."
EU chief negotiator Michel Barnier is due to arrive in London today for further talks after EU leaders proposed a further "two to three weeks" of negotiations.
Meanwhile, speaking ahead of the statement, German chancellor Angela Merkel urged Johnson to continue with the process in the hope of striking an agreement.
"In some place things have moved well, in other places there is still a lot of work to be done," she said.
"We have asked the United Kingdom to remain open to compromise, so that an agreement can be reached. This, of course, means that we too will need to make compromises."
John Johnston is a reporter for CSW's sister title PoliticsHome, where this story first appeared.