The Chancellor has admitted no Brexit deal could leave planes grounded in March 2019.
Addressing the Commons Treasury committee Philip Hammond said crashing out of the European Union could have a devastating impact on the UK with cargo and passenger planes unable to fly.
He did say he believed the scenario was unlikely but could not rule it out, adding that it was something that needed to be prepared for.
And the Chancellor warned that negotiations must move quickly on to agreeing transitional arrangements to a future UK-EU partnership to avoid damage to the British and European economies.
Hammond, who has attempted to put the brakes on a Hard Brexit from within a deeply divided cabinet, told MPs there was a ‘need for speed’ from the remaining 27 EU member states, amid growing signs that the deadlock in negotiations will not be broken at next week’s summit in Brussels.
And he admitted delays in moving the talks on from the divorce deal to the transition were creating a ‘cloud of uncertainty’ which was acting as a damper on the UK economy.
But the Chancellor added he was not yet ready to authorise massive spending on infrastructure like expanded lorry parks at Channel ports to prepare for the possibility of Britain crashing out of the EU without a deal.
He urged EU leaders to allow ‘at least exploratory discussions’ to begin on transition arrangements and the future relationship. Progress on the kind of interim deal proposed by Theresa May in her speech last month in Florence would mean ‘breaking out’ of the negotiation structure set out by the European Commission.
‘Our European partners need to think very carefully about the need for speed in order to protect the potential value to all of us of having an interim period that protects our businesses and citizens and allows investment and normal business activity – contracting and so on – to carry on,’ Hammond said.
He made clear Britain was preparing for the possibility that no deal would be reached.
‘We have to consider the possibility of a bad-tempered breakdown in negotiations where we have non-cooperation, or a worst-case scenario where people are not necessarily acting in their own economic self-interest,’ he said.
Labour transport spokesman Karl Turner said: ‘Philip Hammond has today confirmed that ‘no deal’ would be a total disaster for the aviation sector.
‘The impact of this uncertainty will be felt by passengers long before March 2019 as airlines may not be able to sell advance tickets if a deal is not reached.
‘If air cargo is grounded, we will not be able to import or export freely.
‘It is imperative that the Government prioritises securing a deal for the aviation sector and provides the industry with the certainty it needs in the run-up to March 2019 and beyond.’