Finance Minister Philip Hammond warned the European Union yesterday that Britain would be forced to find different ways to remain competitive if there was no “comprehensive trading relationship” after Brexit.
At the World Economic Forum in Davos, Switzerland, Hammond stuck closely to the government’s script that Britain wants to explore ways with the EU to ensure that decades of close ties are not broken, saying with goodwill, anything was possible.
But the Chancellor, who is keen to show Davos that Britain is “open for business”, said while the government did not want to leave the economic mainstream and trigger a race to the bottom on tax, the decision was “not entirely in our gift”.
“We have to remain competitive. The best way to do that is to have a comprehensive trading relationship with the European Union, our closest neighbours,” he told Reuters.
“But if we can’t achieve that then we will have to find other ways to maintain our competitiveness, because our first obligation as government is to make sure that our people are able to maintain their standard of living.”
Our first obligation as government is to make sure that our people are able to maintain their standard of living
British officials want to reassure business and political leaders in Davos on Brexit after Prime Minister Theresa May said this week she was taking Britain out of the EU’s single market of 500 million consumers to be able to control immigration.
On Wednesday, two of the world’s biggest banks, UBS and HSBC, said they could each move about 1,000 jobs out of London to prepare for Brexit disruption, and May’s government wants to prevent a mass exodus. And in a speech in Davos yesterday, May also underlined that she wants an agreement that “may take in elements of current single market arrangements in certain areas” and to have a customs agreement with the EU.
Asked how that could work, Hammond said Britain wanted to explore options to find ways businesses – including the financial industry, which fears losing the right to sell their services in the bloc – can trade freely.
“Obviously we can’t be in the full customs union because the restrictions that implies goes beyond the political imperatives from a UK point of view,” Hammond said.
“But we have a lot of reasons on both sides of this discussion to want to try and maintain the most frictionless border system possible,” he said, pointing to fresh produce imports every day, which neither side would want to disrupt.
And he said Britain would always be an attractive investment destination because of “the high level of confidence in our institutions”.
Growth rates would slow this year, but he did not expect to have to borrow more to keep the economy afloat, and he said the country was still a haven for foreign talent and entrepreneurs.