File picture: AP Photo/Alastair Grant.

BRUSSELS - The European Union sees a failure of Brexit talks leading to Britain leaving without a deal as the costliest outcome for the bloc but while it can "handle it", it is not clear that Britain can, a senior EU negotiator said on Monday.

It would be, deputy chief negotiator Sabine Weyand said, "the most costly version of Brexit for everyone concerned but we also think we can handle it. I'm less sure about the UK side."

She also said that the Irish backstop, whose rejection by British lawmakers has left a deal by March 29 in doubt, still seemed the best way to avoid a customs border with Ireland that many fear could fuel a return to violence in Northern Ireland.

As a result, any discussions on how to avoid such a border in the event of a no-deal Brexit, could well have to return to setting up something similar to the backstop under which Britain would remain for a time in an EU customs union.