19 October 2016

Reuters: UK's Hammond assails 'hard Brexit' camp, vows to protect economy

Hammond also sought to ease concern among investors that the Government may want to influence monetary policy after a spat between Bank of England Governor Mark Carney and Prime Minister Theresa May who has criticized the BoE's low interest rates.

The June 23 Brexit decision has posed a tough challenge for British policymakers who say they must heed the call from voters to tighten border controls, something which could reduce access to the EU's single market and hurt the economy.

Newspapers have reported a split in Prime Minister Theresa May's cabinet, with Hammond at odds with ministers pushing to prioritize controls on migration over economic concerns.

Hammond said May needed a range of options to strengthen her negotiating hand with the EU and he would make sure she knew the cost of all those alternatives.

"Those that are undermining the effort are those that are seeking to close down that negotiating space, seeking to arrive at hard decisions that we don't need to make at this stage," he told a parliamentary committee.

"I think that it would be far more helpful to this debate if we were able to conduct these internal discussions privately without leaks to newspapers."

Britain is due to enter a two-year negotiating period to decide the terms of its exit from the bloc by the end of March.

Nearly four months after the vote, sterling GBP=D4 is 17 percent below its pre-referendum levels against the dollar.

Its latest falls were triggered by concerns that May favored a hard Brexit. But the pound rose as Hammond spoke and market analysts said it was significant that he had struck a "softer" tone than May.

"It gives the markets a glimmer of hope that the UK may not target a 'hard' Brexit," Kathleen Brooks, a Research Director at City Index, said.

Hammond said any steps to reduce net migration would protect "the vital interests of our economy", citing the financial sector as a high priority. He said he did not expect highly skilled workers to be targeted in any clampdown.

"I cannot conceive of any circumstances in which we would be using those controls to prevent banks, companies moving highly, qualified highly skilled people between different parts of their businesses," he said. "That's essential for the smooth operation of our economy."

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