Philip Hammond says Brexit deal must put jobs and prosperity first

A Brexit deal that puts jobs and prosperity first is the only way the UK will be able to deliver the strong growth that will enable it finally to escape from the long years of austerity, the chancellor has said.

In his strongest call yet for a managed approach, Philip Hammond said a comprehensive trade agreement, a transitional deal after the 2019 deadline for the end of talks, and a commitment to keep borders open should form a three-point Brexit plan for Britain.

There would be “audible sighs of relief”, he said, if the talks that began in Brussels on Monday ended with a business-friendly agreement.

Hammond said in a speech at Mansion House in the City of London: “I have said before, and I remain clear today, that when the British people voted last June, they did not vote to become poorer or less secure.

“They did vote to leave the EU. And we will leave the EU. But it must be done in a way that works for Britain. In a way that prioritises British jobs, and underpins Britain’s prosperity. Anything less will be a failure to deliver on the instructions of the British people.”

Hammond, who campaigned for remain in the referendum and has been arguing in cabinet against the idea of Britain leaving the EU without a deal, said the result of the general election had shown that the country was “weary after seven years of hard slog repairing the damage of the great recession”.

But he added that funding for public services could only be delivered by higher taxes, higher borrowing or stronger economic growth. The chancellor said the latter was the only long-term sustainable solution for this country in the face of the pressure of an ageing population.

Hammond said the future of the economy was inexorably linked to the kind of Brexit deal reached with the EU.

He told the audience of financiers: “I am confident we can do a Brexit deal that puts jobs and prosperity first, that reassures employers that they will still be able to access the talent they need, that keeps our markets for goods and services and capital open, that achieves early agreement on transitional arrangements so that trade can carry on flowing smoothly, and businesses up and down the country can move on with investment decisions that they want to make, but that have been on hold since the referendum.

“The collective sigh of relief will be audible. The benefit to our economy will be huge, in established sectors like manufacturing, the car industry, financial services, and pharmaceuticals; in emerging areas like biotech, and fintech; in the housing market; in the services sector; in the travel industry; in companies, large and small, right up and down our country, employing, between them, millions of people.

Hammond said his three-pronged approach involved:

• A comprehensive agreement for trade in goods and services.
  
• The negotiation of mutually beneficial transitional arrangements to avoid unnecessary disruption and dangerous cliff edges.
  
• An agreement on frictionless customs arrangements to facilitate trade across borders – and to keep the land border on the island of Ireland open and free-flowing.
  

The chancellor said achieving this while sticking to the government’s long-term objectives would be challenging.

“It will almost certainly involve the deployment of new technology. And therefore we’ll almost certainly need an implementation period, outside the customs union itself, but with current customs border arrangements remaining in place, until new long-term arrangements are up and running.”

Hammond has been lobbied by the financial sector to ensure the City is not frozen out of EU markets after Brexit.

“Let’s be honest, we are already hearing protectionist agendas being advanced, disguised as arguments about regulatory competence, financial stability and supervisory oversight. We can have no truck with that approach.”

The chancellor said fragmentation of financial services would be damaging to both the UK and the EU, and he called for the talks to deliver a regulatory regime that was transparent, based on international standards, that made a priority of financial stability, and was permanent.

Responding to Hammond’s speech, the EU’s chief Brexit negotiator, Michel Barnier, warned the UK will have to stay under the jurisdiction of the European court of justice for years to come if the chancellor wants to secure a transitional period to protect businesses after the UK leaves the EU in 2019.

The former French minister added that the EU side needed further clarity over what the British government hoped to secure by the end of the negotiations, although he noted the British delegation had been clear with him that the UK still wished to leave the single market and the customs union.

Speaking to reporters after briefing EU ministers in Luxembourg on the first day of formal negotiations between the UK and the EU, Barnier said: “I have always stated that the issue of transitional periods, their nature, their duration, short duration in any case, and indeed hypothetical short duration of such periods would be within a framework of the overall structure of supervisory regulation of the European court of justice. The time for that has not yet come. I have always stated that there may well be the need for certain transitional periods. Some phasing out, others phasing in.”

Expressing some frustration at the British government’s stuttering start to its withdrawal from the bloc, he added: “In order to work on this subject we need to be enlightened more on the nature of future relations, which obviously will have repercussions on the content and dimensions for such transition periods, but the time has not yet come for us.”