Philip Hammond: No deal will be "sub-optimal" for financial services, and Brexit has left Britain under a "cloud of uncertainty"

 
Catherine Neilan
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David Cameron Chairs Weekly Government Cabinet Meeting
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Philip Hammond has said a no deal would be "sub-optimal" for financial services, but had to prepare for "a wide range of scenarios" including for negotiations to break down.

"Will everything be in place on day one after we leave? Definitely not, definitely not," he said.

He would not commit spending for a no deal scenario in next month's Budget on "a potentially abortive basis". Funds would be "specific to the outcome" and to tie up funds on hypothetical scenarios could be costly, he added.

"Some are urging me to spend money simply to send message to EU that we mean business. I think they know that," he said.

Brexit has left Britain under a "cloud of uncertainty", the chancellor has admitted, causing consumers to stop spending.

"[The economy] is fundamentally robust and we have some very positive things going on, with a strong outlook for the future," he said during a hearing at the Treasury Select Committee Today.

But he added that the "cloud of uncertainty over current negotiations is acting as a temporary dampener".

"We need to remove it as soon as possible to make some progress," he said.

Hammond, who has been criticised by some for being unnecessarily negative about Brexit, told the Conservative party conference that the single biggest economic stimulus the government could supply was certainty around the process.

Transition

Today Hammond said there was a "complete understanding across government" about the need for a transitional period "to avoid people having to make worst case assumptions and having to act on them in a way that would be damaging to their businesses," as well as both the UK and EU's economy.

It would also prevent "a large amount" of government spending, he added.

Hammond said there was "a high degree of consensus" on that from his counterparts across the EU27. But he said it was vital that Brussels acted soon.

"In many areas like future financial services frameworks, the only work that has been done so far has come from UK and we need EU to engage with us: look at the proposals, challenge them, kick the tyres. But it's a shared problem and if we don’t talk about it soon we won't get to an agreement in time."

He added: "It's self evident that transition is a wasting asset. It has value today and will still have a value at Christmas, but as we move through 2018 that value will diminish significantly, and our European partners need to think very carefully about the need for speed to act on a transition period that will protect all of us."

Hammond dismissed accusations that the cabinet was in conflict over the matter, saying ministers were fully behind Theresa May's Florence speech, which is where she first put forward the proposal as official policy.

Financial services

Britain will not adopt the "asymmetric and unilateral" framework for financial services that the EU has forced on the EU, Hammond confirmed.

The chancellor said it was generally accepted that passporting was not going to be "the future route" and that "some form of enhanced equivalence" would be a more likely option.

But he rejected the basis on which the EU and US' financial services trade.

"The equivalence that the EU offers to the US' financial services is asymmetric and unilaterally granted, which can be withdrawn on a very short basis," he said.