Hopes of a Brexit breakthrough were raised last night as it emerged EU negotiators are looking at a compromise over the controversial issue of fishing rights.

Michel Barnier, Brussels’ chief negotiator, will hold showdown talks with eight EU fisheries ministers tomorrow.

Diplomats say they expect Mr Barnier to outline possible compromises for the Brexit trade talks.

Mr Barnier is expected to tell the ministers that a concession in the row over future access to British waters is needed to get a deal over the line.

Eurocrats hope it could give the British negotiating team some room to soften their stance on state aid and governance.

An EU diplomat said: ‘That’s the price the UK needs to pocket for a compromise on the level playing field.’

Officials said negotiations were once again ‘completely stuck’ on the level playing field, policing a future deal and fishing rights.

France is expected to lead the charge against Mr Barnier being too lenient on the UK. The French government believes the offer of zero tariff, zero quota access to the single market gives the EU more leverage over Britain.

British sources downplayed the significance of the meeting, vowing that the UK would not back down. ‘We’ve been clear all along about our fundamental principles and we are working hard to find a deal that meets them,’ a source said.

It comes as Home Office figures revealed that hundreds of thousands more EU nationals are living in Britain than previously thought.

The Home Office said 4.26 million European citizens have applied to maintain their right to live here after January 1.

A report by the Commons library in February said the number 3.4 million, adding that it could be as high as 4 million.

However, data covering applications up to the end of September shows that the estimate was between 260,000 and 860,000 too low. Poles have made the most applications (773,000), followed by Romanians (671,000) and Italians (402,000).