Philip Hammond has welcomed an intervention by business leaders who called for an indefinite delay in Britain’s departure from the European single market and customs union and said that people wanted to see a “sensible Brexit”.

The chancellor insisted he was happy to see the CBI making its voice heard, but his stance was apparently challenged by the trade secretary, Liam Fox, who said it would not be possible to indulge a “perpetual transitional period”.



Hammond also warned on Friday “it would be madness not to seek to have the closest possible arrangement” with Britain’s largest trading partner and closest neighbour.

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“I’m glad that the business community is exercising a voice in this discussion. I think that’s helpful,” Hammond said in an interview with Bloomberg and Reuters at the G20 summit in Hamburg, Germany.

He said he did not believe it would be “legally or politically possible” to remain in the single market or customs union after Brexit – as that would limit the UK’s ability to control immigration or make trade deals.

But he said the benefits of the two models should be retained during a transitional period.

He said: “My preference is that we negotiate a transitional structure which takes us outside of those memberships but in the transition phase replicates as much as possible of the existing arrangements, so that the shock to business is minimised for the transition period.”



His tone contrasted that of Fox,one of the strongest proponents of Brexit in the cabinet, who used a visit to Paris to deliver a seeming rebuke to the CBI’s call for an indefinite delay in leaving the single market and customs union.

He said it was perfectly reasonable that people should want to have some arrangements to ensure minimal disruption but added: “We can’t have a perpetual transitional period undermining the concept of Brexit itself.”

Facebook Twitter Pinterest Liam Fox spoke out against a ‘perpetual transitional period’. Photograph: Daniel Leal-Olivas/AFP/Getty Images

Fox also dismissed warnings from the EU’s chief Brexit negotiator, Michel Barnier, that leaving the single market and customs union would carry consequences.

“We’re going into an arrangement with the EU already with zero tariffs, we’re going there with complete regulatory equivalence and with customs systems that already work,” he said. “The only reason we wouldn’t replicate them would be if politics got in the way of good economics.”

Fox’s bullish comments about the negotiations highlighted the split within the cabinet over how the government should approach Brexit. Hammond – the leading voice for a soft form of Brexit within government – made clear that he thought there were great economic risks if the UK fails to achieve a good deal.

He said: “The thing that I remind my colleagues [about] is that if we lose access to our European markets, that will be an instant effect, overnight, and to people who are looking to us to protect jobs, economic growth, living standards, they won’t thank us if we deliver them an instant hit with only a longer-term, slowly-building benefit to compensate. That’s the concern that we have to have in our minds.”

Asked if there was any chance that Brexit would not happen, the chancellor laughed and said: “No. The British people have made up their minds.”

But he made clear that the millions of people who did not want the UK to leave the EU were now determined that the outcome should not be economically damaging.

“There’s a significant constituency of people who voted to remain in the EU but have accepted the decision, but what they want to see is a Brexit that looks sensible to them.”

He described that as a Brexit focused on protecting jobs, business, prosperity and trade, and one that recovers sovereignty for the UK but also recognises the reality of an interconnected world.

Facebook Twitter Pinterest Philip Hammond, back right, arrives with Theresa May and her husband Philip in Germany for the G20. Photograph: Stefan Rousseau/PA

“The EU will remain our largest trading partner and our nearest neighbours, and it would be madness not to seek to have the closest possible arrangement with them going forward,” added Hammond.

Hammond’s comments came as more than 30 business leaders had a five-hour summit with the Brexit secretary, David Davis, and other ministers at the government’s Chevening country house, to discuss their concerns about the direction of exit discussions with Europe.



Business leaders reported that the meeting had gone “better than expected” and hinted at a thawing of the government position.

Terry Scuoler, chief executive of EEF, the manufacturers’ organisation, said: “This meeting has been a good first step and it’s clear ministers are listening to business concerns, which we welcome. We had an open and frank discussion and we’ve started a process where we will work together to obtain as much clarity and certainty as possible for industry as we prepare to leave the EU.”



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In a sign of the tightrope still to walk for Davis, the Chevening “away day” was also welcomed by some of corporate Britain’s more ardent advocates of leaving the EU.

Gerald Mason, of Tate & Lyle – the US-owned sugar giant which stands to benefit from Brexit and once employed Davis, said: “It was a really positive and wide-ranging discussion about the challenges and the opportunities of Brexit and I was left encouraged by it.”

But in contrast to some of the more alarmed warnings from businesses in recent weeks, the meeting seems to have gone some way to reassuring the country’s biggest companies that the government was finally listening to their concerns on Brexit. “It was a highly welcome and constructive engagement with government,” said the HSBC chairman, Douglas Flint.

The chancellor was not at the meeting because he is in Hamburg for the G20. In his interview, he was also asked if Theresa May would still be prime minister in a month’s time. He said: “I’m very confident about that. The prime minister has been very open about the fact that we didn’t get the outcome from the election that we hoped for. But we’ve got a job to do.”



However, he appeared to acknowledge that the Conservatives’ reputation had suffered, adding: “In doing so we will rebuild our reputation with our public.”

He argued that the DUP deal – which he claimed meant bringing together two parties from the same tradition – had “created a stable base for a government which in the first session, at least, of parliament, will have quite a narrow focus”.

