The main thing the EU want from us is our money. There will be a black hole in the EU finances after we leave. It would be monumentally stupid of us to agree to pay the EU their "divorce bill" at this stage (they've still not said what the amount is but it's rumored to be between fifty and one hundred billion Euros).
If we agree to pay them what they demand, then they have no need to negotiate a trade deal sensibly: it would be in their financial interest to do so but they also want to ensure we get a bad deal to discourage other countries from leaving.
We've offered to continue paying during a two year transition period, but they're still trying to screw more money out of us.
The EU are in breach of Article 50 by still refusing to talk about trade at this point - but they have the power to be in breach and get away with it. The UK's best negotiating tactic still remains what I've been advocating now for months - walk away from the talks, prepare for a hard exit and only return to the talks if and when the EU are prepared to negotiate without preconditions. If the EU are never prepared to negotiate in good faith (likely) then a hard exit is better than what they've offered up till now.