LONDON—Embattled British Prime Minister Theresa May on Friday warned that Brexit talks had hit an impasse and called on European leaders to present new proposals as negotiations between the two sides turn increasingly acrimonious.
Following a tense meeting with her EU counterparts in Salzburg earlier this week where her post-Brexit plans were rejected as being unworkable, Mrs. May said it’s now up to European leaders to smooth the path for Britain’s departure from the European Union.
“We now need to hear from the EU what the real issues are and what their alternative is so that we can discuss them,” Mrs. May said, standing in front of two Union Jack flags in Downing Street. “Until we do, we cannot make progress.”
Investors are becoming increasingly nervous that the U.K. could crash out of the EU without a deal. The pound slipped further against the dollar and the euro as Mrs. May spoke, adding to losses earlier in the day. The pound was down 1.5% against the dollar and 1% against the euro at €1.1147.
Mrs. May’s remarks appeared to be aimed at demonstrating resolve ahead of the Conservative Party conference later this month, where she will have to unite a political party deeply fractured by Brexit. She has faced heavy criticism in the U.K. for the perceived humiliation of the slap-down by EU leaders at the conference in Salzburg. European Council President Donald Tusk said the EU’s remaining 27 members thought Britain’s proposed economic framework “will not work.”
“Yesterday Donald Tusk said our proposals would undermine the single market,” Mrs. May said on Friday. “He didn’t explain how in any detail or make any counterproposal. So we are at an impasse.”
The U.K. government’s Brexit proposal—which aims to give British firms frictionless access to the EU market in goods—may now need to be altered, analysts say. With less than 200 days until the U.K. formally quits the bloc in late March 2019, EU leaders have warned that time is running out. A final deal should be wrapped by November to leave enough time for it to be ratified by governments on both sides of the negotiations.
Looming over both sides is the threat of a “no deal” Brexit, which would see the U.K. crash out of the EU without a deal, a scenario that has the potential to cause an economic upset. Both sides have said they wish to avoid such a scenario. An official from the EU’s executive arm said the European Commission “is and will contribute to work constructively” to achieve a deal.
In an apparent olive branch to her EU counterparts, Mrs. May assured that EU citizens living in the U.K. would have their rights protected in the event of a “no deal” Brexit.
A key sticking point remains what happens to Northern Ireland should the Brexit talks collapse. The EU wants Northern Ireland, which is part of the U.K., to continue following a swath of EU rules and for customs and regulatory checks to take place between mainland Britain and Northern Ireland. But Mrs. May said that the idea of Northern Ireland being cleaved from the U.K. was “unacceptable.” She added that her government will set out an alternative plan but didn’t specify when.
Meanwhile, Mrs. May is battling to shore up support at home. With the Conservative Party conference less than two weeks away, Mrs. May used the intervention to try to bolster her credentials with the Brexit contingent of her party. She reiterated that she would not “overturn the results of the referendum” and stated that she was working “day and night” for a deal that would see the U.K. leave the EU.
Write to Max Colchester at max.colchester@wsj.com