UPDATE 1-EU chief executive says chances for Brexit deal fading every day

(Adds detail, quote)

By Gabriela Baczynska

BRUSSELS, Sept 16 (Reuters) - Every passing day reduces chances for sealing a new trade deal with Britain, the European Union's chief executive said on Wednesday, warning London that there was "very little time" left to put an agreement in place by the end of the year.

In her major annual policy speech, European Commission President Ursula von der Leyen dedicated just a few sentences to Brexit, mostly focusing on the economic recovery from the coronavirus pandemic as well as digital and climate investments.

"With every day that passes, the chances of a timely agreement do start to fade," von der Leyen told the European Parliament in a "state of the (European) Union" speech styled on the ones U.S. presidents deliver.

Von der Leyen also stressed both the EU and Britain negotiated and ratified their Brexit divorce deal and warned London the agreement "cannot be unilaterally changed, disregarded or dis-applied".

"This is a matter of law, trust and good faith... Trust is the foundation of any strong partnership," she said.

Von der Leyen said the bloc would "never backtrack" on UK's divorce deal, which took three years to negotiate, as it was protecting the delicate peace on the island of Ireland from the consequences of Brexit.

Brexit talks are now in crisis yet again as Prime Minister Boris Johnson put forward a new Internal Market Bill to the UK parliament that would undercut Britain's EU divorce treaty.

That increased the risk of the most damaging, no-deal economic split precipitating at the end of the year when Britain's standstill post-Brexit transition ends.

Reuters reported exclusively on Tuesday, however, that Britain had quietly offered concessions on fisheries in trade talks with the European Union last week, leaving the bloc thinking London might still be open to clinching an agreement. (Reporting by Gabriela Baczynska, Editing by Jan Strupczewski)

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