Hammond says UK will seek Brexit transitional deal of up to three years

Britain’s relationship with the EU may look similar to its current one for up to three years after Brexit, with free movement, access to the single market and an inability to strike trade deals with other countries, Philip Hammond has said.

The chancellor confirmed multiple reports over the past week that the cabinet had agreed to seek a transitional period of about three years, ending before the next election, which is due in 2022.

He said there was broad consensus in the cabinet that such a period would be necessary to cushion the impact of leaving the EU.

The agreement was made last week but not announced by Theresa May, who has left the UK for a three-week holiday. Instead, the news has seeped out from other cabinet ministers, and was confirmed by Hammond on Friday morning.

Speaking on BBC Radio 4’s Today programme, the chancellor conceded that “many things will look similar” the day after Brexit officially takes place in March 2019. A three-year transitional period would have to be agreed by the rest of the EU, and only after that would the UK have a completely new immigration system, its own trade deal with the EU, and be able to strike trade deals with other countries.

“There will be a process between the date we leave the European Union and the date on which the new treaty-based arrangements between the UK and the European Union which we hope and expect to negotiate come into force,” said Hammond.

“I can’t tell you a precise period of time because we haven’t had that discussion yet. It will be driven by technical considerations, how long it will take us to put the necessary arrangements in place. People have talked about a year, two years, maybe three years.

“I think there is a broad consensus that this process has to be completed by the scheduled time of the next general election, which is in June 2022, so a period of at the most three years in order to put these new arrangements in place and move us on a steady path without cliff edges from where we are today to the new long-term relationship with the European Union.”

Some Brexit supporters may be unhappy with the prospect of the UK being unable to strike trade deals with third parties for three years after leaving the EU but Hammond insisted the cabinet was united.

“The important point is that we are able to get started on that process and during a transition period when we would hope to have continued access to the European market it may be that during that period we don’t bring those new agreements into force. But it will take us time anyway to negotiate them.”

Brandon Lewis, the immigration minister, caused confusion on Thursday when he said free movement would end in March 2019, but Amber Rudd, the home secretary, later clarified that EU migrants would still be able to come as long as they registered their presence.

Hammond confirmed free movement would probably end in name only until 2022.

“We’ve been clear that it will be some time before we are able to introduce full migration controls between the UK and the European Union,” he said. “That’s not a matter of opinion, that’s a matter of fact. During the transition period that will follow our departure from the European Union, European citizens will still be able to come here but they will have to register.”

Hammond suggested there could be a tribunal system, rather than the European court of justice, to settle any disputes during the transitional period, similar to the arrangements in place in European Economic Area countries such as Norway.

However, the lack of oversight from the ECJ could prove a sticking point with other EU member states. Some in Brussels are also unenthusiastic about the idea of a transition period that gives the UK too many benefits without actual membership of the EU. The EU signalled on Friday that a transition period could only be agreed after the separation terms.

A spokesman said: “Concerning the transition period, you know very well what our chief negotiator tends to say on that subject, which is that once you know where you are going you can also consider the modalities of getting there. So I will not start commenting on the sequencing. The next round is at the end of August; and then we will take it from there,.”

Labour welcomed the chancellor’s decision to commit to firm transitional arrangements for Brexit but expressed concern that it was unclear whether he was speaking on behalf of the prime minister and the whole cabinet.

Keir Starmer, shadow Brexit secretary, said: “Labour has been calling on the government to commit to appropriate transitional arrangements for a long time. If jobs and the economy are to come first, there can be no threat of a cliff edge for businesses after we leave the European Union.

“The chancellor now appears to accept this. However, in light of the clear divisions this week within the cabinet, I hope the chancellor was not merely speaking in a personal capacity. I also hope that this is the final burial of the flawed proposition that ‘no deal’ is a viable option.”