Britain could end up paying the European Union to retain access to the single market, David Davis and Philip Hammond have said, in a concerted attempt to signal that the government is willing to take a flexible approach to the looming Brexit negotiations.

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Theresa May has never made ongoing financial contributions a red line – unlike controlling immigration – but Davis still surprised MPs when he conceded on Thursday morning that the government may be willing to pay to retain single market access, a point Hammond then reinforced in a speech in Scotland.



Concern has been growing in Brussels about the lack of clarity in the UK’s Brexit strategy, increasing fears that it has an unrealistic “have cake and eat it” approach, as stated in a memo snapped by a photographer in Downing Street this week and a series of flamboyant interventions by the foreign secretary, Boris Johnson.



Claims that ending contributions to the EU’s budget could free up “£350m a week” to be spent back home was a central thrust of Vote Leave in the referendum campaign; it was emblazoned on the side of its red buses.

But the Brexit secretary and the chancellor, who have forged a close working relationship in recent weeks, appear to have consciously decided to strike a more emollient tone, stressing the government’s willingness to make concessions where necessary – a stance backed up by No 10.

During questions in the House of Commons on Thursday morning, the Labour MP Wayne David asked Davis if he would “consider making any contribution in any shape or form for access to the single market”.



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Davis said the government would look at the options during the article 50 process over the next two years. “The major criterion here is that we get the best possible access for goods and services to the European market,” he said. “And if that is included in what he is talking about, then of course we would consider it.”

Sterling jumped by more than 1% on the foreign exchanges after Davis’s comments, with traders keen to clutch at any hint Britain could retain its lucrative access to the EU single market.

Hammond later reinforced the Brexit secretary’s point in Edinburgh. “You can’t go into any negotiation expecting to get every single objective that you set out and concede nothing on the way,” the chancellor said. “It will have to be a deal that works for both sides. I think David Davis is absolutely right not to rule out the possibility that we might want to contribute in some way to some form of mechanism.”



The UK government had not taken any decisions on whether it wanted to join the customs union, he added, but hinted this was at the centre of any deal with Brussels. The customs union is at the heart of the European free trade area, the European body that includes Norway, Switzerland and Liechtenstein and incorporates the EU.

“We’re sitting down at the table as the sixth largest economy in the world to negotiate with the world’s largest trading bloc, the European Union, a deal that works for both sides. It has to work for both sides; if it doesn’t work for both sides then it won’t get done,” Hammond said. “And we should be flexible and open minded about how we put that deal together.”

Vincenzo Scarpetta, senior economic analyst at the Open Europe thinktank, suggested one option might be to pay to retain access to the single market during a transitional period on the way to Brexit. “It may be that it’s a card that the UK might want to play to smooth things over a bit,” he said.

Labour MP Angela Eagle, who memorably urged Johnson to “get that lie off your bus” during one of the televised referendum debates, said the admission underlined how flimsy many of the promises made by the leave campaign had been. “We now know the campaign was full of cynical untruths,” she said. “That £350m a week for the NHS is just not going to happen – and the more these lies are exposed, the more illegitimate the referendum decision in the first place”.

In a speech on Thursday evening to a CBI dinner in Cardiff, Davis made clear that the government would not pursue controls on immigration at the expense of the “national interest”, another indication of flexibility.

“As we take back control of immigration by ending free movement as it has operated before, let me also say this: we won’t do so in a way that it is contrary to the national and economic interest. Because as the chancellor has said, Britain must win the global battle for talent. No one wants to see labour shortages in key sectors. That wouldn’t be in anybody’s interest,” he said.

Pro-Brexit Conservative MPs appeared relaxed about Davis’s admission, with Anne-Marie Trevelyan saying it was important the government retain “maximum flexibility” with negotiations unable to begin until article 50 of the Lisbon treaty is formally invoked next year.

But Ukip donor Arron Banks reacted with derision to the idea the government could end up continuing to pay into the EU. He described Davis’s remarks as “an incredibly foolish concession by a politician who clearly knows nothing about business or negotiation” and suggested he buy a copy of “Negotiating for Dummies”.

A German Christian Democrat MEP Reimer Böge, the former chair of the European parliament’s budgets committee, has said the UK could pay up to €5bn (£4.2bn) a year for the highest levels of access to the single market, equivalent to the status of Norway. “If you want something, you are obliged to pay for it. This is part of the deal,” Böge said. “If you take the Norway calculation for the UK, it will be €4bn to €5bn.”



The UK’s net contribution was £8.5bn a in 2015, so a Norway-style deal would amount to around half the current annual EU bill based on current exchange rates.

Britain’s limbo status will be underlined at an EU summit in Brussels on 15 December. It emerged on Thursday night that May has been invited to formal talks but not to the traditional dinner afterwards, which will instead involve just leaders from the other 27 member states.

