Donald Tusk said that the EU and UK could now begin the second phase of Brexit talks, “so that people and businesses have clarity about the situation”.

Tusk was speaking to press in Brussels on Friday morning.

He said the EU “would be ready to discuss” a two-year transitional period, beyond the current 2019 Brexit date, where the UK would remain part of the single market and customs union. “But naturally we have our conditions.”

According to Tusk, the UK should continue to follow all EU law during the transition period, “including new law”, as well as “budgetary commitments” and be subject to “judicial oversight” from the European Court of Justice.

However, EU decisions made during this interim time would be taken “without the UK”, Tusk stated.

The council president said he wanted this phase of negotiations to begin “as soon as possible”. But London needed to do more. “We need more clarity on how the UK sees our future relations after it has left the single market and customs union.”

Tusk said the bloc was open to exploring a “close relationship” in trade, “in the fight against terrorism and international crime, as well as in security, defence and foreign policy.”

“The most difficult challenge is still ahead”, Tusk warned, as “we have de facto less than a year” to reach a deal.

Earlier, the Financial Times had reported that Jean Claude Juncker, head of the European Commission, and Theresa May, the British prime minister, had agreed to a 15-page “progress report” in the early hours of 8 December. The agreement included a resolution to the Irish border question, and would see the UK pay a financial settlement to the EU of roughly €55.5bn-€65.5bn.