The deal is tantalisingly close - but reports of last-minute concessions by prime minister Theresa May infuriated the DUP who are propping up her minority government in Westminster.

Irish prime minister Leo Varadkar said he had been told the deal would be done on Monday, but the UK appeared to have changed its mind after DUP leader Arlene Foster told May she would not support such a deal.

The draft deal was said to promise there would be no difference in regulations between Northern Ireland and the Republic after Brexit, in order to avoid customs checkpoints which could see a return to border tensions.

However this would either mean a divergence in regulations between Northern Ireland and the UK, or the UK accepting EU regulations - which is unlikely as May has regularly insisted Britain will leave both the European single market and the customs union.

Foster said the DUP "will not accept any form of regulatory divergence which separates Northern Ireland economically or politically from the rest of the United Kingdom".

On Monday, after a frantic weekend of work by EU and UK negotiators, May and European Commission president Jean-Claude Juncker had been widely expected to put the finishing touches to the deal over lunch in Brussels.

Instead, after several hours together, they emerged to admit there were still unresolved sticking points.

"It was not possible to reach a complete agreement today," Juncker said, with "two or three" issues that needed further negotiation.

The BBC reported that the Irish border was one of those issues.

May said a lot of progress had been made on many issues, but differences remained which required "further negotiation and consultation".

She said she was confident they would "conclude this positively".

Juncker said he was still confident they would be able to announce "sufficient progress" by a European Council meeting in a week's time.

"Sufficient progress" is the test, assessed by the European nations, for the Brexit talks to move on to their future relationship with the UK - including the all-important trade and customs arrangements.

Phase one of the negotiations covers the financial exit settlement, guarantees for EU citizens in the UK and the future status of the border between Ireland and Northern Ireland.

Last week the EU effectively gave Ireland a veto over the deal, saying any solution to the border question must be acceptable to them.

Irish prime minister Leo Varadkar said he was "surprised and disappointed" the British government had not agreed to a draft text of the deal.

"My position is unequivocal, Ireland wants to proceed to phase two (of the negotiations)," he said. "(But) we cannot agree unless there are firm guarantees on the lack of a hard border in any circumstances."

He said he didn't want to "point fingers" on who was to blame for the change of heart, but he said the DUP were just one party in Northern Ireland and "we need to have regard to all the parties".

Scottish first minister Nicola Sturgeon said the DUP had an "unhealthy influence" at Westminster.

Both she, and London mayor Sadiq Khan, have seized on the idea that a region of the UK may be able to effectively stay inside the single market, as proposed in the draft deal.

Sturgeon said "if that's good enough and possible enough for Northern Ireland there's no reason why it can't be the case for Scotland".

Khan said the "clear solution" was to keep the entire UK in the single market and customs union.

But if not, he said he would like a similar deal to Northern Ireland's for London.

The European Council on December 15 will likely be the last chance this year for the UK and EU to strike a divorce deal.

The UK is anxious to avoid it stretching into next year. British companies have told May they need to know details of the 'transition period' to follow Brexit on March 29 2019, at least a year early so they can make plans.

Without this certainty, there may be an increased corporate exodus to the continent in the second quarter of 2018.

Talks will resume on Wednesday, and May will reportedly go to Brussels in person to try and push them to a conclusion.