Negotiators from London and Brussels have come to an agreement on Britain's future relationship with the European Union after Brexit.

Britain and the EU reached an agreement after negotiators worked through the night on a 26-page text of the political declaration, which is due to be formally signed at a summit on Sunday.

In a tweet confirming that a deal was ready to be signed off, European Council President Donald Tusk said: "I have just sent to EU27 a draft Political Declaration on the Future Relationship between the EU and UK."

"The Commission President has informed me that it has been agreed at negotiators' level and agreed in principle at political level, subject to the endorsement of the Leaders."

British Prime Minister Theresa May later hailed it as "the right deal for Britain".

May will return to Brussels to meet with European Commission President Jean-Claude Juncker on Saturday, seeking to finalize the agreement before Sunday's crucial leaders' summit.

The failure to finalize a deal on Wednesday had raised questions over whether the EU summit on Sunday will still go ahead, with German Chancellor Merkel reportedly concerned it could turn into another negotiation meeting.

Merkel had indicated through diplomats that she would be unwilling to participate on Sunday unless a finalized agreement emerges in advance.

The special summit was originally billed as a chance for the EU's 27 other leaders to "rubber stamp" two documents -- the withdrawal deal and a non-binding political agreement on the UK's future relationship with Brussels.

An EU source told Sky News:"Leaders do not feel like negotiating on Sunday. They would like to come to rubber stamp.

"There is concern among all of the EU27. If there is a summit it should be assured that you can (do everything)."

The two sides had already signed off on the 585-page withdrawal agreement covering citizens' rights, the 39-billion-pound ($50 billion) financial settlement and the Irish border.

The draft text of the declaration lays out ambitions for a new relationship with the EU once the UK leaves, expected to be on March 29, 2019. It is understood the sticking points are Gibraltar, goods and fisheries.