Powersharing talks between the DUP and Sinn Fein have stalled, Northern Ireland Secretary James Brokenshire said, forcing him to set a new deadline for a deal.
Mr Brokenshire said parties would now have to reach an agreement by the end of October, in order for Westminster to have time to prepare to set a budget the following week.
He said talks between the parties had made progress but had broken down last week over culture and language issues.
Mr Brokenshire made the assessment while giving evidence to the Northern Ireland Affairs Committee at Westminster.
He said: "A breakthrough has not been reached. Whilst if I had given evidence to this committee last week, I might have indicated some momentum, some more positive progress, that momentum stalled at the end of last week."
He added: "The prospects do not look positive at this time."
Northern Ireland's powersharing Executive collapsed in January, when Sinn Fein pulled out of government with their DUP counterparts in protest at how the latter had handled allegations of mismanaging a renewable energy scheme.
Since then, a number of talks processes have been entered into by the parties aimed at reaching a deal to return to government, but without success.
Sinn Fein leader in Northern Ireland Michelle O'Neill said her party would not return to powersharing without an agreed Irish Language Act.
DUP leader Arlene Foster rejected the proposal, instead suggesting a "cross community" bill with provisions for Irish and Ulster Scots.
However, Sinn Fein said the party would only agree to standalone Irish language legislation.