European Council President Donald Tusk said on Thursday Britain and the European Union have agreed a draft text setting out a close post-Brexit economic relationship.
This paves the way for a summit of EU leaders to endorse the deal.
Britain is due to leave the EU on March 29, 2019 and diplomats are trying to put the finishing touches to a divorce deal and the accompanying outline of their future relationship so that EU leaders can rubber-stamp them at a summit on Sunday.
After a Reuters report that negotiators from the European Commission and Britain had agreed a draft declaration on future ties, Tusk confirmed the deal had been agreed in principle.
The text, seen by Reuters, said the EU and Britain “agree to develop an ambitious, wide-ranging and balanced economic partnership.
“This partnership will be comprehensive, encompassing a free trade area as well as wider sectoral cooperation … will be underpinned by provisions ensuring a level playing field.”
The text said the post-Brexit relationship would respect “the integrity of the Union’s Single Market and the Customs Union as well as the United Kingdom’s internal market, and recognise the development of an independent trade policy by the United Kingdom beyond this economic partnership.”
Both sides need an agreement to keep trade flowing between the world’s biggest trading bloc and the fifth largest national economy.
But May has struggled to untangle nearly 46 years of membership without damaging trade or upsetting the members of parliament who will ultimately decide the fate of any deals she can secure.
Despite the hopes of financial firms in London, Britain secured no improvements to its proposed future trading relations in financial services.
The two sides reiterated they wanted to replace a provisional agreement preventing the return of extensive border checks on the island of Ireland with a permanent solution.
British Prime Minister Theresa May updated her cabinet on the state of talks by teleconference but her spokesman cautioned that no final deal can be agreed ahead of the EU summit on Sunday.
The draft declaration will now be screened by national envoys of the remaining 27 EU states meeting in Brussels on Thursday.
Both the EU and Britain “should aim to deliver a level of liberalisation in trade in services well beyond the parties’ WTO commitments,” according to the draft declaration.
The transition period, which Britain and the EU hope will begin once Britain leaves the EU on March 29, can be extended “for up to one or two years,” according to the draft declaration.