Hammond speech pushes for transitionary period post Brexit
Chancellor Philip Hammond used his Mansion House speech to assure the City that he would try and press for a transitionary agreement keeping the UK in the customs union until new rules are implemented.
Speaking to an audience for the annual speech, which was delayed from last week due to the Grenfell Tower fire, Hammond identified four priorities that he said would allow Britain to achieve "a Brexit that works for the people".
Firstly, he said Brexit talks, which David Davis and his team began with their European Commission counterparts on Monday, will need to secure a comprehensive agreement for trade in goods and services.
"Secondly, by negotiating mutually beneficial transitional arrangements to avoid unnecessary disruption and dangerous cliff edges.
"Thirdly, by agreeing frictionless customs arrangements to facilitate trade across our borders – and crucially – to keep the land border on the island of Ireland open and free-flowing. To do this in the context of our wider objectives will be challenging. It will almost certainly involve the deployment of new technology," Hammond said, in the official text of his speech.
As a result there is likely to be an "implementation period" outside the EU customs union itself, but with current customs border arrangements remaining in place, until new long-term post-Brexit arrangements are up and running.
Finally, he said, there would need to be a "pragmatic approach" to the export of financial services.
He said "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 Chancellor said protectionist agendas were already being advanced from within the EU, "disguised as arguments about regulatory competence, financial stability, and supervisory oversight", with which he said Britain should have "no truck" but should "engage...be flexible and pragmatic" in acknowledging and resolving concerns from the EU financial industry as the UK will still provide a large market of vital financial services to EU firms and citizens from what would be outside EU jurisdiction.
The Institute of Directors welcomed the "pragmatic approach" on Brexit in the speech, with EU and trade policy head Allie Renison saying "the focus on jobs and the economy is a step towards shoring up shaky business confidence".
While Chancellor reiterated the government’s intention to leave the EU customs union, she noted that he showed some flexibility on the process to do so.
"The emphasis on the need for an early agreement on transitional provisions – as opposed to sorting this out toward the end of the negotiations – is positive. Firms will need to know, at the latest by next summer, whether there will be substantive changes to trade and migration arrangements in order to have time to activate any contingency plans."
Labour's shadow chancellor John McDonnell claimed Hammond’s speech showed how divided the government was on its approach to Brexit.
"We have seen the Chancellor again trying to distance himself from the position of his Prime Minister on Brexit. It just shows further disarray at the top of government. The fact that there is clearly such a serious split between Number 10 and 11 is very worrying and only helps to undermine our country ahead of the Brexit negotiations.
"It further shows just how weak a position Theresa May is in. And raises the serious question of: how can she negotiate Brexit when her own chancellor is so publicly disputing her position on Brexit and briefing against his own cabinet colleagues?"