trade deal between Britain and the European Union is imminent and could be agreed as early as this evening, a senior EU diplomat said.

The diplomat, who spoke on condition of anonymity, said on Wednesday EU member states would have to approve a provisional application of the deal with effect from January 1 because there is not enough time for it to be ratified by the European Parliament, the Reuters news agency reported.

There was no confirmation from Britain that a deal was about to be struck, although it is understood that Boris Johnson was due to hold fresh talks with European Commission president Ursula von der Leyen in a bid to get a last-minute breakthrough

The senior diplomat said EU member states would have to approve a provisional application of the deal with effect from January 1 because there was not enough time for the European Parliament to ratify it.

“It seems the deal is pretty much there. It’s a matter of announcing it today or tomorrow,” said one EU diplomat.

The diplomat said the Council, which represents the member states in Brussels, had started preparations to enable a “provisional application”, or fast-track implementation.

Britain said that two significant issues – fishing and competition – still remained to be resolved and that there had not been sufficient progress for a deal. The Commission declined to comment.

Sterling jumped more than 1% against the dollar on the Reuters report.

The UK’s chief negotiator David Frost was this afternoon in Brussels, reportedly still in the negotiating room with the EU’s Stephanie Riso.

“Deal is NOT finalised – seems very likely it’s heading that way tonight but not signed and sealed,” BBC political editor Laura Kuenssberg tweeted.

“Nor have all EU capitals seen all the legal text – it’s clear this is on the final lap, but it’s not done yet and there is still last min haggling going on this afternoon.”

Mr Johnson and Ms von der Leyen were due to speak later today or tomorrow, according to Brussels sources, as they seek to reach an agreement before Christmas.

They spoke on Monday to try to bridge the gap on allocating fish catches in UK waters from 2021, as well as ensuring fair trade under “level-playing field” arrangements.

A Cabinet minister earlier said he was “reasonably optimistic” that a Brexit deal could be struck within days.

Communities Secretary Robert Jenrick stressed that there were still “serious areas of disagreement” but the UK and EU seem to be edging closer towards a new trade pact.