Signing free trade deals around the world will make a limited difference to Britain’s economic prospects after it leaves the European Union, the Chancellor has said after meeting with his counterparts at the G20.
Speaking at the global summit in Hamburg Philip Hammond warned that the unusually large portion of Britain’s exports that comes from services rather than physical goods would be unaffected by such treaties – which have been championed by the Prime Minister and leading Brexiteers.
Mr Hammond’s relaxed attitude towards trade deals puts him somewhat at odds with the Prime Minister, who said in her Lancaster House speech in January that she had an “emphasis on striking trade agreements with countries outside Europe”.
Speaking to the Bloomberg and Reuters news agencies the Chancellor also thanked the Confederation of British Industry (CBI) for saying the UK should retain single market membership for a transitional Brexit period. He said the business group had had made a “helpful” contribution to the national debate.
“Obviously we do a large amount of trade outside the EU at the moment, so we have a trade base which works without special agreements or free trade arrangements,” Mr Hammond told the news agencies.
“Much of our trade with the world is service trade, where free trade agreements won't make any particular difference.
“But clearly there is potential to expand our goods trade with the rest of the world. History teaches us, though, that this will be a process, it will not be a sudden change. We will have to negotiate agreements, those agreements will no doubt have implementation periods.
“Then of course if your business is in complex goods, consumer goods, intermediate products going into supply chains, you don't just start selling on day one, you have to build the market. This is a process and it will take time.”
Around 40 per cent of Britain's exports are services, with 60 per cent goods – an unusually higher proportion of services than most other countries.
As well as striking a different note from the Prime Minister, the Chancellor’s views put him at odds with leading Tory Brexiteers, who have argued that signing trade deals around the world could underpin Britain’s prosperity post-EU.
During the EU referendum campaign future Brexit Secretary David Davis appeared unaware of how trade deals with the EU worked – calling for a UK-Germany accord. Germany is a member of the EU, however, and does not sign individual trade deals.
Speaking in the same interview in Hamburg on Friday Mr Hammond said he did not believe it was practical politically or legally for Britain to remain in the single market or customs union for the transition period – as suggested by the CBI.
Instead, he and argued that Britain should aim for a transitional structure that “replicates as much as possible of the existing arrangements, so that the shock to business is minimised for the transition”.
“The thing that I remind my colleagues is that if we lose access to our European markets, that will be an instant effect, overnight, and to people who are looking to us to protect jobs, economic growth, living standards, they won't thank us if we deliver them an instant hit with only a longer term slowly building benefit to compensate. That's the concern that we have to have in our minds,” he said.
In February the Government confirmed it was “definitely” leaving the Customs Union.
Mr Hammond campaigned for the Remain side of the EU referendum and is seen as one of the most pro-EU members of Ms May's cabinet.
