He said that the deadline of December 31, 2020 was "logical" as it would avoid the complications derived from the UK still being subject to the bloc's rules and obligations once the EU's next multi-annual budget kicks in on January 1, 2021, Efe news reported.

"The transition period is useful and will enable the public administration in Britain to prepare themselves for the kind of challenges they will have to face," Barnier said at a press conference in Brussels while presenting the EU's formal position on the transition.

The cut-off date for the transition phase is contained in the EU's guidelines for the next phase of Brexit negotiations.

The guidelines state that the UK should continue to follow EU trade laws and stay in the European customs union and single market during the transition phase. Rulings of the European Court of Justice will continue to apply, the EU said.

The UK has already said it plans to leave the customs union and single market and end the supremacy of EU court rulings as part of Brexit. But the precise terms of the transition phase are the subject of the next set of negotiations.

British Prime Minister Theresa May had asked for the transition to last around two years.

The country is set to officially leave the bloc on March 29, 2019, exactly two years after triggering Article 50 of the Treaty on the EU that allows member states to initiate the withdrawal process.