European Union leaders have formally agreed to progress Brexit talks to the second phase.

The negotiations will now move onto the shape of the transition period after the UK leaves the EU in March 2019 and the future long-term trade relationship.

Donald Tusk, the president of the European Council, announced the decision on Twitter following a summit in Brussels.

Last week the UK and EU agreed phase one, the divorce deal, on the issues of citizens’ rights, the Irish border and the UK’s £39bn exit bill.

In its guidelines for the next stage of the talks, Brussels has said the UK must accept all EU rules and regulations, including the jurisdiction of the European Court of Justice, during any two year transition period.

The EU document said the UK must continue to accept the free movement of people if it wants to remain the Single Market and Customs Union during transition.

EU leaders also confirmed talks on the future trade deal will not begin until March 2018.

Theresa May was applauded by European leaders on Thursday evening after reassuring them she wanted a “smooth” Brexit for businesses and citizens.

The prime minister met her EU counterparts after suffering a humiliating Commons defeat at the hands of Tory rebels who have ensured parliament will vote on the final Brexit deal.

And May is facing a further challenge to her authority next week when MPs vote on a government amendment to enshrine the Brexit date of March 29 2019 in law.

Downing Street today insisted there were no plans to back down and remove the fixed date from the EU Withdrawal Bill, but added “a pragmatic approach” was being taken.