A change to the UK's economic model would have to take place for the UK to remain competitive if it had no access to the European market, and did not rule out a change to the corporate tax rate.
"I personally hope we will be able to remain in the mainstream of European economic and social thinking. But if we are forced to be something different, then we will have to become something different," said Hammond, speaking to Welt am Sonntag when it was put to him that "the government wants to introduce the lowest corporate tax rate among all industrialised countries".
When asked what would force the UK, he continued:
"Economic circumstances. If we have no access to the European market, if we are closed off, if Britain were to leave the European Union without an agreement on market access, then we could suffer from economic damage at least in the short-term.
"In this case, we could be forced to change our economic model and we will have to change our model to regain competitiveness. And you can be sure we will do whatever we have to do. The British people are not going to lie down and say, too bad, we’ve been wounded. We will change our model, and we will come back, and we will be competitively engaged."
A cut to the UK's corporate tax rate was first mooted by former chancellor George Osborne after the vote to leave the EU in order for the country to remain competitive, reducing it to 15 per cent, while there have been subsequent reports of the Prime Minister Theresa May mulling slashing it to 10 per cent.
However, the subject did not come up in Hammond's first Autumn Statement at the end of last year and as planned previously, the headline rate of corporate tax will fall to 17 per cent by 2020.