The European Union has set out its stall for the second phase of Brexit negotiations by saying any transitional arrangements agreed with the U.K. to preserve current trading terms beyond March 2019 should not last beyond 2020.
The European Commission has published draft negotiation guidelines for the second phase of negotiations, stating that a transitional period to preserve current trading terms beyond March 2019 "should not last beyond Dec. 31, 2020."
The date marks the end of the EU's seven-year budget cycle.
The second phase of talks, made possible by a breakthrough 'divorce' agreement earlier this month, will first focus on agreeing the precise terms of the transition phase — which the U.K. government wants to last around two years — before moving on to the long-term future trading relationship.
The negotiating guidelines also state that there "should be no cherry picking," meaning the U.K. will have to follow the rules of the EU's Single Market and Customs Union in full, including any changes, during the transition period.
U.K. Prime Minister Theresa May chaired meetings of her cabinet this week aimed at establishing a negotiating position for the second phase, though any details have yet to emerge.
The U.K. business lobby has urged both sides to agree the exact terms of the transitional period as soon as possible, in order to prevent firms acting on contingency plans and moving operations out of the country.
Some U.K. politicians have suggested that the transitional period could allow more time to agree a future trade deal, but both the EU and U.K. negotiating teams insist they are aiming to complete a deal by October 2018, in order for it to be ratified by both parliaments before the U.K. officially leaves the bloc in March 2019.