Hammond fires warning shot across Brussels' bows over single market

Philip Hammond has warned the UK is "not going to lie down" if Brussels seeks to impose trade tariffs after Brexit.

The Chancellor indicated the Government could retaliate by slashing business taxes if the EU moved to shut Britain out of the single market.

His comments, made to a German newspaper, came ahead of a major speech by the Prime Minister Theresa May on Tuesday.

In an interview with the German Welt am Sonntag, Mr Hammond said: "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."

Mrs May will announce the UK is prepared to leave the single market in a speech on Tuesday, it has been reported.

Her so-called red lines in the upcoming Brexit negotiations are an end to free movement and lifting the bar to starting trade talks with other countries before breaking with Brussels.

However, former UKIP leader Nigel Farage has told Sky News he was "yet to be convinced" by Mrs May over Brexit.

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Speaking to the Sophy Ridge on Sunday programme, the MEP said : "I'm quite certain Theresa May will do what she always does - sound very reassuring, she will look to be very much in control, saying all the right things and people like me will say it sounds great but why is it taking so long?

"When it comes to immigration, in particular, which she is highlighting, this is coming from the person who was home secretary and failed completely.

"I'm yet to be convinced, I have to say."

Meanwhile, Labour leader Jeremy Corbyn accused the PM of pursuing "an extremely risky strategy", taking the UK in "the direction of a bargain basement economy".

Criticising Mr Hammond's remarks, he told the BBC's Andrew Marr show: "It seems to me a recipe for some kind of trade war with Europe in the future. That doesn't really seem to me a very sensible way forward."

Mr Corbyn added: "She (Munich: SOQ.MU - news) (the PM) appears to be heading us in the direction of a bargain basement economy on the shores of Europe where we have low levels of corporate taxation, we will lose access to half our export market.

"It seems to me an extremely risky strategy."

Liberal Democrat leader Tim Farron told the BBC's Sunday Politics that "a hard Brexit is not the democratic choice of the British people".