Prime Minister Theresa May would return to Brussels later in the week for fresh talks, Hammond said, after an agreement on Monday was scuppered by objections from a pro- British party in Northern Ireland to plans for the Irish border.
"This is a very complex set of negotiations, there are are many moving parts in it, there are many parties involved, and we're very confident we'll be able to move this forward," Hammond said as he arrived for a meeting with his EU counterparts in Brussels.
"We have made a lot of progress over the last weeks, we've made tremendous steps forward. We are very close but we're not there yet," Hammond told reporters.
"As the prime minister said yesterday we will have to do some further consultations, some further discussion today and she expects to come back to Brussels later in the week."
May is widely expected to return on Wednesday or Thursday, with the EU warning that Sunday is the latest if she wants leaders to approve the opening of Brexit trade talks at a summit on December 14-15.
A deal between May and European Commission President Jean-Claude Juncker on Monday had been widely touted, after Britain approved a draft agreement that would have put Northern Ireland in "regulatory alignment" with EU-member Ireland.
Dublin wants Northern Ireland to follow the EU's single market and customs rules after Brexit in order to avoid a "hard border", which it fears could harm both the island's economy and the two-decade-old peace process.
But Northern Ireland's Democratic Unionist Party (DUP), the staunchly pro-British group that props up May's minority government in London, told May in a phone call that they would not accept the agreement.
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