Britain may have to change its economic model if it is refused access to the European Union’s single market after Brexit.
That was the warning from the country’s finance minister Chancellor Philip Hammond in an interview with a German newspaper.
It came ahead of Prime Minister Theresa May’s expected key Brexit speech on Tuesday (Jan 27) when she is expected to lay out her Brexit vision as she addresses ambassadors and high commissioners from across the globe.
Hammond had said he was “optimistic” a reciprocal deal on market access could be struck, and that he hoped the UK would “remain in the mainstream of European economic and social thinking”.
“But if we are forced to be something different, then we will have to become something different,” he said.
In particular Hammond said Britain could use its corporate tax ie lower it, as a form of leverage in the negotiations.
Opposition leader Jeremy Corbyn criticised the chancellor’s stance saying such thinking was “risky”:
“He appears to be making a sort of threat to the European community, saying ‘well, if you don’t give us exactly what we want, we’re going to become this sort of strange entity on the shores of Europe where there’ll be very low levels of corporate taxation and designed to undermine the effectiveness or otherwise of industry across Europe. It seems to me a recipe for some kind of trade war with Europe in the future. That really isn’t a very sensible way forward.”
Theresa May is to launch formal negotiations for Britain’s withdrawal from the EU by the end of March. She wants to keep access to the single market while limiting EU migration.
German Chancellor Angela Merkel has said the EU must consider limiting Britain’s access to its market if London fails to accept the bloc’s ‘four freedoms’ in Brexit negotiations.
The EU’s single market emerged from the 1992 Maastricht Treaty on European integration. This enshrines the EU’s “four freedoms” – of movement of goods, capital, people, and services.
With an apparent hardening of positions in some European capitals over Britain’s “cherry-picking of bits of EU legislation”, there is speculation that Tuesday’s speech could see May begin to prepare voters for a clean break, a so-called “hard Brexit”.