The European Union said it is willing to discuss a free trade deal with the U.K. but it is only going to finalize it once the country has officially left the bloc.
This means that businesses in the U.K. will officially lose access to the EU's single market on March 29th, 2019 – unless they agree on a transition deal.
In a document outlining the EU's draft guidelines for the Brexit talks, the EU said: "Based on the Union's interests, the European Council stands ready to initiate work towards such an agreement, to be finalized and concluded once the United Kingdom is no longer a Member State."
The U.K. government had hoped to discuss and conclude a new trade deal during the two-year period before it has to leave the European Union. But the EU has been reluctant to offer trade talks. The remaining 27 countries want the negotiations to focus first and foremost on how the U.K. is leaving and only after that to agree on how they will cooperate in the future.
"Only once we have achieved sufficient progress on the withdrawal, can we discuss framework for the future," European Council President Donald Tusk said Friday at a press conference in Malta.
"The U.K. is now on the other side of the other side of the table," Tusk said, adding that the EU's role is to "minimize the uncertainty" that Brexit has created for businesses and citizens.
The EU has reiterated in its draft guidelines document that there needs to be early guarantee on citizens' rights and on avoiding a hard border between Northern Ireland and the Republic of Ireland.
"In view of the unique circumstances on the island of Ireland, flexible and imaginative solutions will be required, including with the aim of avoiding a hard border, while respecting the integrity of the Union legal order," the document said.
The Union has opened the door to transitional arrangements but U.K. will have to continue contributing to the EU's budget.
"The negotiations may also seek to determine transitional arrangements which are in the interest of the Union and, as appropriate, to provide for bridges towards the foreseeable framework for the future relationship. Any such transitional arrangements must be clearly defined, limited in time, and subject to effective enforcement mechanisms," the document stated.
It added, however, that in this case, "existing Union regulatory, budgetary, supervisory and enforcement instruments and structures (will) apply."
President Tusk told reporters that "the talks which are about to start will be difficult, complex and sometimes even confrontational. There is no way around it." However, he pledged that the EU will not pursue a punitive approach.
"Brexit in itself is already punitive enough," he said.
Tusk, who represents the 27 heads of state, will visit Prime Minister Theresa May in London next month. This will happen before leaders gather in Brussels on April 29th to approve the final document outlining what the EU wants to achieve in Brexit talks.