Theresa May greets Donald Tusk at 10 Downing Street in London in September © AFP

Donald Tusk, European Council president, has declared that Britain has finally abandoned its “have cake and eat it” Brexit strategy, although he warned that more work had to be done to produce a breakthrough in talks.

Mr Tusk, standing outside 10 Downing Street, hailed the “constructive and realistic” tone of Theresa May’s Brexit speech in Florence last week, reinforced by a private conversation over lunch.

Negotiations on the details of Brexit, taking place simultaneously in Brussels, were also reported to be taking place in a much more positive atmosphere following the UK prime minister’s initial €20bn offer to fill a hole in the EU budget.

Mr Tusk welcomed Mrs May’s Florence speech, in which she asked for a two-year transition deal on Brussels’ terms, effectively extending Britain’s EU membership until 2021 in all but name.

Mrs May acknowledged that Britain would have to accept EU rules and European Court rulings during the transition and offered €20bn to make up a shortfall in the bloc’s budget in 2019 and 2020.

Mr Tusk suggested that the Florence speech marked the moment when foreign secretary Boris Johnson, who famously declared that Britain could “have its cake and eat it”, had finally been confronted with reality.

“This shows that the theory of having cake and eating it is finally coming to an end — at least I hope so,” he said after the Downing Street talks.

“That’s the good news. Of course nobody will ever tell me that Brexit is a good thing. I’ve always said that Brexit is all about damage control and I don’t change that opinion.”

Mr Tusk said both sides would work to achieve “sufficient progress” on the terms of the divorce deal, allowing negotiations to move on to a second phase covering the long-term trading relationship.

But he added: “If today member states asked me, I would say there is not sufficient progress yet. But we will work on it.”

Downing Street accepts it may not be possible to make a breakthrough on the first stage of talks — covering the north/south Irish border, citizens’ rights and a financial settlement — before next month’s European Council in Brussels.

But Mr Barnier is discussing with European capitals the prospect of offering some reward to Mrs May for her “constructive” Florence speech at the October summit, if more progress is made in backroom negotiations in the coming weeks.

Mr Barnier could ask for an extension to his mandate to discuss for the first time the details of a transition deal alongside the divorce talks, with a view to wrapping up both before the December European Council.

Such a move would be welcomed by business, which wants to see an early agreement on a transition deal, guaranteeing there will be no “cliff edge” exit. Downing Street said Mrs May “stressed the importance of agreeing a period of implementation once Britain leaves the EU in March 2019” in her talks with Mr Tusk.

Key to any breakthrough will be the extent to which British officials can convince EU chief negotiator Michel Barnier that Mrs May’s €20bn offer is only the start and that she is willing to pay for other past and future liabilities.

Mr Barnier is looking for guarantees that Britain will honour commitments that will be paid well after 2020. The EU also wants Britain to accept it will have to make new contributions in 2019-20 to pay for access to the single market and customs union.

In a sign of the new flexible thinking in London, British officials accept that the European Court of Justice will continue to have jurisdiction in the transitional period, which Mrs May said would last for “around two years” after Brexit formally takes place in March 2019.

Mr Johnson is insisting that new EU laws made in that period should not apply to Britain, but Mrs May is expected to disappoint him. British officials argue that any new law proposed in Brussels would normally take at least two years to become national law and therefore the issue is largely academic.

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