Philip Hammond has used a speech in Germany to push for a Brexit that prioritises “economic logic”, arguing that any deal must ensure frictionless trade in goods and services and saying a transitional arrangement will be vital.

Burnishing his role as the cabinet’s most vocal advocate of a seemingly softer departure from the EU, the chancellor warned against “petty politics” getting in the way of an economically advantageous deal.

He also took a barely disguised jab at Boris Johnson.

Referring to the foreign secretary’s argument that the UK should seek a “cake and eat it” approach to curbing the free movement of people while retaining access to the single market, Hammond quoted Germany’s second postwar chancellor, Ludwig Erhard.

Speaking in Berlin at an event organised by Erhard’s CDU party, Hammond cited – in German – Erhard’s quote: “A compromise is the art of dividing a cake in such a way that everyone believes he has the biggest piece.”

Hammond added: “Wise words with some applicability to the Brexit negotiations although I try to discourage talk of ‘cake’ amongst my colleagues.”

Emphasising the point at the end of the speech, Hammond said the purpose of a Brexit negotiations should be “an outcome that increases the size of the cake for all”.

He added: “Because in the end, the question is not whether to have cake, or eat it or even who has the largest slice, the question that matters is whether we can be smart enough to work out how to continue collaborating together, to keep the cake expanding, for the benefit of all.”

Listing the potential risks to Brexit talks, Hammond gave another thinly veiled warning, this time seemingly to those in his party who are pushing for a hard Brexit, irrespective of the economic consequences.

“The first is an outcome risk: that somehow we allow petty politics to interfere with economic logic, and we end up with a suboptimal solution that fails to maximise our mutual benefit,” he said.



Reiterating warnings about a possible “cliff edge” of tariffs, Hammond urged the government to negotiate an early transitional arrangement.

He also said there should be a focus on a deal that “allows the complex supply chains and business relationships that crisscross our continent to continue to deliver value”, and an early deal on the mutual rights of overseas EU nationals.

Hammond said: “I campaigned and voted for Britain to remain in the EU. But I am a democrat and I accept the decision of the British people.”

Referring to last year’s referendum result, the chancellor cautioned against over-interpreting the message on immigration: “They voted to regain control of our borders, not to shut down the flow of people that are the lifeblood of our economy, but to be able to manage it.”

He ended: “I am confident that with the political will to run with the economic logic we will reach an arrangement that puts jobs and prosperity first, that keeps our markets for goods and services and capital open, that achieves early agreement on transitional arrangements and delivers an outcome that increases the size of the cake for all.”

Hammond had been expected to be removed as chancellor if Theresa May won an enhanced majority in the general election, in part because of a perception he took a different view over Brexit.

However, his position has been cemented after she failed to win a majority, and since the election Hammond has been more public in his advice that any deal must prioritise the economy.

A week ago, he used the annual speech at Mansion House in the City of London to argue for a deal that puts jobs as prosperity first.

He said: “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.”