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His intervention throws new light on differences of opinion in the Cabinet. David Davis, the Secretary of State for Exiting the European Union, and Dr Liam Fox, the International Trade Secretary, are both thought to oppose a transitional deal.
Mr Hammond also raised further questions about Britain’s desire for a “hard Brexit”. He suggested that leaving the European customs union, which sets EU-wide tarriffs on goods, could lead to a five-fold increase in border checks and cost hundreds of millions of pounds a year.
Boris Johnson, the Foreign Secretary, wants Brexit to be delivered “as soon as possible” and has said the UK is likely to have to leave the customs union so it can strike its own trade deals.
In further signs that Mr Hammond is pushing against a hard Brexit, he insisted that controls on European migration, which will be possible after Brexit, need not “choke off” the supply of high-skilled workers. [...]
The Chancellor told MPs on the Treasury select committee that a transition deal after Britain leaves the EU would be “generally helpful”. The deal would mean the UK would not formally quit until after the 2020 general election.
He said: “There is an emerging view among businesses, among regulators and among thoughtful politicians that having a longer period to manage the adjustment between where we are now as full members of the EU and where we get to in the future would be generally helpful, would tend towards a smoother transition and would run less risks of disruption.”
He said both the UK and the remaining 27 members would need to agree on the need for a transitional arrangement rather than it being demanded by Mrs May during the negotiations.
He told MPs: "I don't think we should approach this on the basis that we need transitional arrangements, because I think we can only get to a situation where we have a transition if there is a genuine meeting of minds on both sides of this negotiation."
He added: "The further we go into this discussion, the more likely it is that we will mutually conclude that we need a longer period to deliver." [...]