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Philip Hammond reassures City their concerns over Brexit are being listened to

Natasha Clark
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Hammond told the Treasury select committee he was listening to concerns from the City about Brexit (Source: Getty)

Philip Hammond has distanced himself from previous pre-referendum analysis done by the Treasury which suggested there would be an economic shock if the UK were to leave the EU.

Appearing before the Treasury select committee this afternoon, the chancellor said that some of the assumptions that were made in the controversial analysis had "already been proved to be invalid".

"The analysis the Treasury published in April was based on a specific set of assumptions," he said. "It did not take into account some of the mitigation" such as the response from the Bank of England.

"The model doesn't capture all the potential outcomes," he added.

The chancellor also reassured the financial services industry in London that the government was listening closely to its concerns over a so-called hard Brexit.

MP Stephen Hammond forced the chancellor to respond to our front page today which highlighted that key figures in the City are growing increasingly frustrated with what they say is an unsupportive approach from the Brexit Department and the Department for International Trade.

The chancellor reassured businesses that their comments were being taken on board and that the government was considering them seriously.

"We are all aware of the fact that financial services remain our largest single sector," he said. "It plays a very important role in our external current account balance, providing one of the few bright spots... in the European Union.

"We understand it has a particular set of challenges... I hope the industry knows, helping to address those challenges will be a very high priority for the government."

Read more: There's no room for complacency about the value of passporting

Tory MP Chris Philp also ​revealed that he had been in talks with a bank, later named as Citigroup, who said they may relocate 10 per cent of their staff if the UK could not guarantee passporting for its staff.

Passporting and equivilence

Hammond went on to say that access to passporting would be important, but he was aware that business were looking beyond them to protect their interests. The chancellor added that equivalence is "one of the routes being discussed" but that it had "some challenges" and admitted that it "would not be a stable basis [on which] to plan long term".

During the appearance he hinted to MPs that he was frustrated at the leaks of cabinet documents and conversations to newspapers. Today the Guardian revealed papers that showed leaving the EU customs union would cost the UK £75bn.

"Cabinet conversations should remain private," he said.

Hammond also said that the Treasury would be conducting detailed analysis of the potential Brexit deals, but that it would not be published to keep the prime minister's negotiating hand secret.

"The best way to support this Brexit process is to give the prime minister the maximum space at the negotiation table... those who are trying to undermine that are seeking to close down that space," he said in an attack on MPs who are trying to force the government to reveal their plans now.

A transitional arrangement

The chancellor hinted that some form of transitional arrangements may be put in place while negotiations are going on to mitigate some of the potential economic consequences that could occur.

"One of the mitigations the industry is proposing is some kind of transitional period … we understand that," he said.

Yet again, he refused to rule anything out of the upcoming discussions, when pressed on whether the UK would remain in the customs union or single market. "Every time we rule something out, we hand a chip to our opposite numbers," he explained.

He also refused to provide reassurance to EU nationals living in the UK about their future post-Brexit, and insisted that the independence of the Bank of England was safe.

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