The UK and EU have agreed on a “large part” of the agreement that will lead to the “orderly withdrawal” of the UK.Brexit negotiators Michel Barnier and David Davis said they had agreed terms for a transition period, calling the announcement a “decisive step”.

But issues still to be resolved include the Northern Ireland border.The transitional period is set to last from 29 March 2019 to December 2020, and is intended to smooth the path to a future permanent relationship.

Mr Barnier said there was also an agreement on the rights of 4.5m EU citizens in the UK and the 1.2m UK citizens in the EU after Brexit, including giving EU citizens arriving in the UK during the transition the same rights and guarantees as those who arrive before Brexit.

The proposed deal will include an emergency “backstop” option to avoid a hard border that would allow Northern Ireland to stay in the single market and the customs union – a move which Theresa May had opposed.The UK will also be able to negotiate and sign trade deals during the transition period.

Both the UK and the EU hope the terms of an agreement on the transitional period can be signed off by Theresa May’s fellow leaders at the EU summit this week.Mr Barnier said the new draft legal text marks a “decisive step” but added that it was “not the end of the road”.

Mr Davis said the move provided further certainty for businesses and included safeguards for fishing quotas during the transition period.“We must seize the moment and carry on the momentum of the last few weeks,” he said.

“The deal today should give us confidence that a good deal for the UK and EU is closer than ever before.”Labour’s shadow Brexit secretary Keir Starmer MP welcomed the transition deal, calling it “a step in the right direction”.But Bertie Armstrong, chief executive of the Scottish Fishermen’s Federation, said the agreement for fishing during the implementation period fell “far short of an acceptable deal”.

Among other issues the two sides have had to negotiate for the transition period have been what role the European Court of Justice has in the UK, whether the UK can negotiate future trade deals with non-EU countries as well as the continuing issues of Gibraltar post-Brexit.

The current proposal includes the emergency “backstop” to avoid a hard border in Ireland which BBC Europe editor Katya Adler said was “something Theresa May said no UK PM could sign up to”.