A new report has suggested that the UK has made a key breakthrough in the Brexit negotiations, securing the right to sign its own free trade deals during the transition period.

According to the Times, the European Union's chief negotiator Michel Barnier has softened his stance on one of Britain's key demands - namely, that the country should be able to pursue an independent trade policy even while it remains part of the customs union and single market, during the transitional phase that will follow the UK's formal departure from the EU in March 2019.

The EU's current negotiating guidelines still state that Britain will not be able to implement trade deals unless authorized to do so by the EU, but a new draft of the potential transition deal is likely to allow Britain to both negotiate and sign trade deals during the period.

If realized, this concession brings the UK and EU a step closer to a deal on a workable Brexit transition package, which would see Britain continue to operate under EU rules and regulations for a period of around two years while it establishes a new relationship with the EU and its current trading partners.

It is also understood that the EU is willing to allow the UK to participate as an independent entity at the World Trade Organization in Geneva during the transition, meaning Britain will not need to defer to the EU during discussions, as long as it does not actively contradict EU policies.

This is expected to make it easier for British ministers to negotiate new free trade deals with the 70 countries with which the EU has existing agreements.

However, UK government sources recommended that optimism should be tempered while the negotiations remain ongoing, noting that the latest draft text represents an improvement, but that key ambiguities still need to be addressed before a deal can be struck.