Chancellor flexes muscles on Brexit and sets up cabinet showdown with Prime Minister

Chancellor of the Exchequer Philip Hammond delivers keynote speech to City leaders at Mansion Hous

Chancellor of the Exchequer Philip Hammond delivers keynote speech to City leaders at Mansion House - Credit: PA

Chancellor Philip Hammond has drawn his strongest Brexit battle line yet as the row over how the UK will leave the EU intensifies within the Cabinet.

In a keynote speech to City leaders at Mansion House, Hammond said immigration to Britain will be managed but not 'shut down' after a 'jobs first' Brexit.

He also signalled the UK would seek to maintain the 'frictionless' border arrangements of the European Union's customs union for an 'implementation period' after leaving the bloc.

The Chancellor again signalled his 'soft Brexit' credentials by stressing Britain would leave the EU 'in a way that prioritises British jobs and underpins Britain's prosperity'.

The address will be interpreted as a fresh marker in an internal Cabinet battle over Brexit, with Hammond apparently favouring an approach that puts businesses first while colleagues, including Theresa May, have made immigration controls a red line for negotiations.

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Hammond said he is not turning a 'blind eye' to a 'growing tide of hostility' against globalisation and mass immigration, and stressed he would push for a new phase of world trade that 'delivers clear benefits for ordinary working people'.

But he added: 'We are not about to turn inward. But we do want to ensure that the arrangements we have in place work for our economy.

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'Just as the British people understand the benefits of trade, so too they understand how important it is to business to be able to access global talent and to move individuals around their organisations.

'So while we seek to manage migration, we do not seek to shut it down.'

Hammond insisted the economy must be a priority in Brexit talks, noting that British people 'did not vote to become poorer'.

He said: 'We recognise that this is a negotiation, and our negotiating counterparts, while broadly sharing our desire for a close ongoing relationship, will have their own priorities.

'So we must be clear about ours.

'I have said before, and I remain clear today, that when the British people voted last June, they did not vote to become poorer, or less secure.

'They did vote to leave the EU.

'And we will leave the EU.

'But it must be done in a way that works for Britain.

'In a way that prioritises British jobs, and underpins Britain's prosperity.

'Anything less will be a failure to deliver on the instructions of the British people.'

Hammond outlined his three priorities for a 'Brexit for Britain' - a comprehensive free trade agreement for goods and services, transitional arrangements 'to avoid unnecessary disruption and dangerous cliff edges', and 'frictionless customs arrangements' for cross-border trade and 'crucially' to maintain the 'open and free-flowing' Irish border.

'To do this in the context of our wider objectives will be challenging,' he said.

'It will almost certainly involve the deployment of new technology.

'And therefore we'll almost certainly need an implementation period, outside the customs union itself, but with current customs border arrangements remaining in place, until new long-term arrangements are up and running.'

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