EU leaders have formally agreed Friday to start the second phase of Brexit negotiations, mainly centered around trade talks and a transition period.
"The European Council ... decides that it is sufficient to move to the second phase related to transition and the framework for the future relationship," EU leaders said Friday, following a two-day summit in Brussels.
Both negotiating teams will continue preparatory works and should reconvene in March to detail how their future relationship will work.
British Prime Minister Theresa May received a round of applause from European leaders on Thursday night. At a summit dinner in Brussels, Belgium, on Thursday, May made a brief speech emphasizing the need for the U.K. and the EU to move forward together with negotiations. This was met with spontaneous applause from EU leaders.
European Commission President Jean-Claude Juncker said Friday that May was applauded because some "thought that indeed she did a big effort" to conclude phase one of the negotiations and "this needs to be recognized."
However, analysts believe May will find future Brexit talks increasingly difficult.
"I expect very, very tough negations," Zsolt Darvas, senior fellow at the Brussels-based think-tank Bruegel, told CNBC on Friday.
One of the issues set to dominate talks is the future of the financial services industry. "At the end, I think that access to financial services will be limited for U.K.-based firms and therefore a number of companies will relocate to the continent," Darvas said.