14 January 2018

Die Welt: Philip Hammond sees Brexit onus on Europe

WELT AM SONNTAG: Mr. Chancellor, many of us in Germany do not want to abandon hope. So I must first ask you: are the chances of the UK remaining in the EU beyond March 2019 greater than zero?

Philip Hammond: I would advise those people who value a close relationship between the UK and Europe to stop harking on about this illusion. We should focus instead on the new relationship and ensure that the UK and Europe continue to work closely together in the future. Those of us who campaigned against Brexit before the referendum have moved on. We are now entirely focussed on trying to get the best future partnership with the EU. That’s where the future lies.

WELT AM SONNTAG: So could Britain, in one way or another, still remain part of the Single Market and the Customs Union despite Brexit?

Hammond: The moment we leave the European Union, we will automatically cease to be part of the Customs Union and the Single Market. But that does not mean we can’t agree on new partnerships which replicate some of the features of the Customs Union and the Single Market. And that’s what we should be discussing. [...]

WELT AM SONNTAG: Are you optimistic that this balancing act will succeed?

Hammond: [...]We hear a willingness and enthusiasm in the USA and from many other countries around the world to make new trade deals with us. But we don’t hear that from Europe. We hear from Europe only backward-looking stuff. “Are you sure you want to leave?” Or “It’s a bad decision to leave.” Or “You must be punished for deciding to leave.” Well, we are leaving and we want to retain the closest possible partnership with the European Union. But we can only have that if the European Union also wants it. And the British people need to hear from their neighbours in Europe: “Yes, even though you’re leaving, we want to continue working closely together with you. We don’t want there to be a large country, a large economy in Europe which is drifting away from the European mainstream. We want you to be close to us.” [...]

WELT AM SONNTAG: There could at least soon be an agreement on the two-year transition phase.

Hammond: Yes, we need it to give businesses the planning certainty they require, ideally before the March Council. But I am confident that will work.That is why we have deliberately and consciously accepted the EU’s suggestions on transition on current terms. That is the only way to get it done quickly and it needs to be done quickly.[...]

WELT AM SONNTAG: Last year you said Britain might be forced to change its economic model if it received insufficient access to the European market. Does that still apply?

Hammond: We’ve had an election in the UK in the meantime which made it very clear that the British people have no appetite for changing our economic model. Whatever people say, in practice they have a strong attachment to a European-style market economy, with strong social welfare, strong labour protection and strong environmental rules. All the things we take for granted. And I hope very much that our European neighbours will want to keep us close and ensure we retain a European approach across Europe.

WELT AM SONNTAG: What is then your vision for the post-Brexit UK, in say 2025? How will it compete?

Hammond: The principal reason why I campaigned to remain in the European Union is that I think that the UK economy would have benefitted from a completion of the Single Market in the services sector where the UK has a very strong position. But even without EU membership, our growth will be driven by the expansion in global trade in services and the tech industries. In the new industrial revolution, many UK companies and foreign companies based in the UK are leading. Big data, artificial intelligence, autonomous vehicles, genome analysis, synthetic biology: in many of the technology areas which will transform the way we live, companies based in the UK are leading.

WELT AM SONNTAG: Would the UK be willing to accept a free trade agreement with the EU that does not include services?

Hammond: I don’t think that’s realistic proposition for us. More than 80% of our economy is services. Services is the fastest growing area of global trade. And it is the area where we have our biggest comparative advantage. In our goods trade with the rest of the EU we have an annual deficit of 100 billion euros whilst we have a surplus of 40 billion euros in our trade in services. To enter into an agreement on goods with no agreement on services would be a very one-sided arrangement and I don’t think that could be attractive for us.

WELT AM SONNTAG: But what do you have to offer in return?

Hammond: That’s a very mercantilist question. (laughs) The benefits of trade accrue to both parties or it wouldn’t happen. The British consumer also benefits from a BMW sold in Britain because he gets a good car at a reasonable price. Things are no different with our services. We are world market leaders in financial, legal and other high-quality services and play a hugely important role in the competitiveness of European business. Every time European firms raise capital through the City of London and do so more cheaply than they could raise it elsewhere in Europe, that makes those businesses that little bit more competitive. Why should you cut yourself off from the world’s leading financial centre right on your doorstep and find yourself beholden to other centres like Hong Kong, Singapore, New York or Tokyo.

Full interview on Die Welt

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