On Thursday, British Prime Minister Theresa May wants to unveil her roadmap for Brexit. Her Chancellor of the Exchequer forges ahead — with a clear message to the Britain’s EU partners.
Welt am Sonntag: Chancellor, will we be able to travel freely to post-Brexit Britain?
Philip Hammond: Assuming you hold a German passport you can travel to the U.K. to do business and to travel, of course. The question is about the freedom to travel for work, the freedom to settle and the freedom to establish a business.
Welt am Sonntag: So we won’t be able to take up a job in Great Britain anymore in, say, 2020.
Hammond: We haven’t taken a firm position on exactly what nature our immigration controls will take. But we are aware that the message from the referendum is that we must control our immigration policy. So there will be a decision that the British government make about how we manage immigration from outside the U.K. We would take the decision in the interest of the U.K, but that does not mean that we would close our doors to European migrants coming to work in the U.K. We have over three million European migrants working in our economy and we have full employment. So clearly we need people to come and work in our economy to keep it functioning. Therefore, we will operate in a rational and sensible economically driven way. But we must have overall control. At the moment, we don’t have any control, not any more than Germany does.
Welt am Sonntag: And that has to stop?
Hammond: That has to stop. That’s the message the British people sent on June 23rd.
Welt am Sonntag: The message we hear here, on the European continent, is that the two countries that traditionally were the leading champions of capitalism and free trade now turn their back to the world.
Hammond: I would reject that emphatically. I can’t speak for what is going on in the U.S., that is a different political movement. But in my judgement it would be a mistake to read the Brexit vote as being part of the same strand of thinking that has formed in the US. If you look at the media and the reporting during the Brexit referendum campaign, there was no anti-trade rhetoric. It was the exact opposite. The people who campaigned to leave, campaigned on a platform to build free trade agreements with China, with India, with the U.S., with Japan, with other countries around the world. If I present this emotionally rather than politically, the leaders need to respect the British people’s sense that our history and our destiny is an engagement with the wider world and not just with the European continent; that historically we have never been a nation that was focused on continental Europe. We have been a nation that has been focused beyond that, to the wider world.
Welt am Sonntag: Will the U.K. have a stronger relationship with the U.S. than with the EU in the future?
Hammond: It is a different relationship. Historically, the U.S. is a security partner and we have a very, very strong security and intelligence relationship with the United States. Our relationship with the European Union is more important in scale economically than our relationship with the United States, but we don’t have the same kind of security partnership with the European Union.
Welt am Sonntag: The impression on the European continent is also that your government sees the future business model of the U.K. as being the tax haven of Europe. The government wants to introduce the lowest corporate tax rate among all industrialized countries.
Hammond: We are now objectively a European-style economy. We are on the U.S. end of the European spectrum, but we do have an open-market economy with a social model that is recognisably the European social model that is recognisably in the mainstream of European norms, not U.S. norms. And most of us who had voted Remain would like the U.K. to remain a recognisably European-style economy with European-style taxation systems, European-style regulation systems etcetera. I personally hope we will be able to 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.
Welt am Sonntag: We don’t understand: Who or what would force you?
Hammond: Economic circumstances. If we have no access to the European market, if we are closed off, if Britain were to leave the European Union without an agreement on market access, then we could suffer from economic damage at least in the short-term. In this case, we could be forced to change our economic model and we will have to change our model to regain competitiveness. And you can be sure we will do whatever we have to do. The British people are not going to lie down and say, too bad, we’ve been wounded. We will change our model, and we will come back, and we will be competitively engaged.
Welt am Sonntag: In Britain’s future relationship with the EU, you want to stick to the free movement of goods and services but restrict the free movement of people. That’s cherry-picking, isn’t it?
Hammond: We aim for a new arrangement on a reciprocal basis. I think Mercedes-Benz, and BMW and Volkswagen would also like to sell their cars in the U.K. market without paying tariffs. I don’t call that cherry-picking. Is it cherry-picking when South Korea does a trade deal with the European Union, is it cherry-picking when Canada does a trade deal with the European Union? We should be able to reach an arrangement to allow, on a reciprocal basis, access to each other’s markets without the political integration that membership of the EU has come to imply.
Welt am Sonntag: What is your time horizon for the Brexit negotiations?
Hammond: We are going to serve the notice in spring. We would expect that we start with substantive negotiations with the EU before the summer. The treaty is clear that the negotiation of an exit agreement has to take account of the future relationship between the parties. To do that we have to talk about the future relationship. So we would expect that we would discuss the topics in parallel.
Welt am Sonntag: How long do you expect these discussions to take?
Hammond: We are ambitious to do this as quickly as possible. Uncertainty is damaging for business on all sides. We would like to get as much clarity as we can as early as we can. And we would hope that we could move quickly to an understanding about what the future arrangement could be and we could move seamlessly to it in 2019. But I’ve already mentioned the possibility that there will a time period between Britain leaving the EU and the full introduction of a long-term future arrangement between the U.K. and the EU. And in such a case we would have to decide what happens in the period between leaving the EU and the commencement of such an agreement in the interim period.
Welt am Sonntag: How optimistic are you to get a good deal for Britain’s key industries, such as cars, pharmaceuticals and financial services?
Hammond: We are optimistic that we will be able to reach an agreement that gives reciprocal access to each other’s markets. The logic is there. We have complex pan-European supply chains, we have many European businesses with very important operations in the UK with large sales in the UK. Germany’s largest bank has a large operation in London, and I would assume that it would like to continue that operation, so there’s lots of economic logic. I acknowledge that there are political red lines on both sides as we navigate this process. And I think the right way to do this is to be open with each other about the political challenges and to recognise the political red lines on both sides, and not to fight those red lines but to explore together whether there is a space in between the red lines where we can find an economically beneficial solution which delivers benefits to both sides. Neither the UK nor the EU is so strong economically, which such strong growth, such strong employment, that we can ignore the risks and the opportunities. And we have to try to make the best deal we can, to support economic growth on both sides of the channel.
Welt am Sonntag: At least in Germany, many people still hope that the Brits might come to their senses and in the end decide not to leave the EU.
Hammond: This is not going to happen. Those of us, like me, who campaigned to remain in the EU and to try to reform it from the inside, have moved on. To be very honest, since the referendum we have seen on the European side movement away from the UK positions, suggesting that the underlying driver on the European side is still for more political integration, for a defence component to the European Union, the things that are anathema to the UK. So the vast majority of people, like me, who campaigned to remain have now refocused on campaigning to get the right kind of Brexit and the right kind of future arrangement, so we remain close to the EU, working closely with the EU, but being outside of the construct of the EU.
Welt am Sonntag: Most young Britons voted to remain. Might your country change its mind on EU membership 10 or 15 years from now?
Hammond: My guess is that without Britain as a member, the European Union will move in a direction that will make it less attractive to people in the UK, because there is a mood for further political integration, I sense, and there is, and never has been, no appetite in the UK to that. There is a tension there that has become greater as the EU has taken further steps of integration. Also, we do want the Euro to be successful, but we recognise — and have recognised for some time — that the reality of the Euro means that more political integration will be needed to maintain the success of the new currency, and that is not something the British people would be supportive of — even British people who have been generally been supportive of EU membership.
NOW WATCH: Briefing videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.