Downing Street has watered down a key demand over post-Brexit fishing rights as part of a broader compromise, EU sources said as Germany’s ambassador in Brussels said there was a chance of a deal by the weekend. The UK dropped a push for fishing vessels operating under the UK flag to be majority British-owned in the future, it was claimed. It came as Jacob Rees-Mogg, the leader of the Commons who is responsible for its timetable, suggested it was “theoretically possible” that MPs could be asked to approve a trade deal retrospectively. “I haven’t heard anyone talk about ratification post-31 December,” he told a ConservativeHome podcast. But Boris Johnson’s spokesman said later this would not happen: “We’re confident that all of the necessary domestic UK legislation required for 1 January will be in force by the end of the transition period.” As talks over a trade and security deal continued, the UK government’s attempt to “renationalise” vessels that are now UK-flagged and are set to enjoy a boost to their catch from new fishing arrangements next year is understood to have been resolved. European-owned vessels under British colours would need to operate under UK standards rather than EU regulations. They would also need to significantly increase the percentage of the catch they land in British ports. One source said the UK now wanted 100% of the catch to be landed in the UK, rather than 70% as previously suggested, but government sources were unable to confirm the details. It is understood the ownership rules are likely to be different for vessels now under the UK flag and those that operate under British colours in the future. The fishing vessels issue had caused problems with Spain and the Netherlands whose citizens have invested in UK-flagged vessels since the 1990s, and its resolution is an important step towards agreement on a deal – although sources on both sides said serious issues remained. The EU’s chief negotiator, Michel Barnier, told MEPs on Monday that he in turn had compromised on the “architecture” of the agreement on fisheries and that he had accepted that there would be a transition period to phase in changes. But there is no agreement on the proportion of the EU catch in UK waters that will be repatriated nor on whether European fleet will be able to fish in waters six to 12 miles from the UK coast. Beyond fishing, the two sides are also unable to agree on the terms of the UK’s involvement in the EU’s Erasmus student exchange scheme. The UK only wants to fund student exchanges and opt out of “cooperation actions” through which senior university academics across Europe get together to share ideas. Barnier has told representatives in Brussels that the UK was “cherrypicking”. Despite the outstanding problems, Germany’s ambassador to the EU, Michael Clauss, told a thinktank on Tuesday that a deal by the end of this week remained doable. He said: “It’s not over yet. We still have a couple of days to go, so we’ll see. End of year hasn’t come yet and I think there’s still clearly the possibility of having a deal, maybe by end of this week. There’s at least a chance.” Ireland’s foreign minister Simon Coveney said there were indications in Brussels that the talks were in the decisive stage. He said: “I think what we’re seeing this week, having had a number of stalls in this process, is slow, but at the same time some, progress. “My understanding is we’re making some progress in that area [the level playing field]. I think you can take it that because negotiating teams have gone really quiet here, that’s an indication to me that there is a serious if difficult negotiation continuing. I’m still hopeful that can result in a successful outcome agreement.” On Monday, Barnier said a “narrow path” to a post-Brexit trade and security deal was possible. If a deal is not secured by this weekend, the European parliament will not have time to scrutinise and vote on a deal. But speaking to the Europe committee of MSPs in the Scottish parliament, the cabinet minister Michael Gove said this should not lead to an accidental no-deal exit. He said: “There is something that the EU has called provisional application, which means if a treaty is agreed, they can choose to apply it from the get go and the European Parliament can approve it subsequently … The UK parliament can still make sure we ratify a deal before 31 December, and the EU has its own processes to ensure a deal is in place.”