By Nicholas Winning
LONDON -- The U.K. could change its economic model if it isn't granted access to trade in the European Union after it leaves the bloc, U.K. Treasury Chief Philip Hammond indicated in an interview with a German newspaper on Sunday.
Asked whether the U.K. was seeking to become a tax haven with low levels of corporate tax, Mr. Hammond told Die Welt that the U.K. would like "to remain a recognizably European-style economy," but it would be forced to change its model if it were to leave the EU without an agreement on market access.
"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 becompetitively engaged," he was quoted as saying.
It wasn't clear what specific action Mr. Hammond was suggesting the U.K. might take and no one was immediately available at the Treasury for further comment.
Mr. Hammond's comments come ahead of a key Brexit speech by Prime Minister Theresa May on Tuesday where she has said she would provide more details of the government's plans for leaving the EU.
Mrs. May has said the U.K. will seek to regain control over immigration from the EU and remove the country from the jurisdiction of the European Court of Justice, fueling expectations that she intends to negotiate a clean break from the EU that would be incompatible with continued tariff-free access to European markets. She has said she would begin the formal process for leaving the EU by the end of March.
EU leaders have said the U.K. cannot hope to enjoy the same access to the European single market if it ends the free movement of people from Europe, one of the fundamental principles of the bloc. The pound has weakened amid concerns Mrs. May is heading for a so-called hard Brexit which could damage the U.K.'s economic prospects.
Mrs. May has said she hopes to negotiate a deal that allows U.K. companies to continue to trade with and operate within the EU, but hasn't provided any details of the arrangement she is seeking. Lawmakers and business people -- many of whom wanted the U.K. to stay in the EU -- have urged her to set out her plans to allow businesses to prepare for the changes.
Ahead of Tuesday's speech, Downing Street said Mrs. May will call on Britons to put an end to the divisions of the June referendum result to leave the bloc and "unite to make a success of Brexit and build a truly Global Britain" while it builds a new and "positive" relationship with its European friends and neighbors. She will make the speech to an audience made up of overseas and domestic diplomats and U.K. officials who will be tasked with negotiating the Brexit deal, her office said.
Downing Street declined further comment on the speech and reports in some Sunday newspapers that the prime minister was going to point to a clean and hard Brexit. In line with usual practice of not commenting on currency movements, it also declined to comment on a report in the Sunday Times that Mrs. May's staff believe her speech could trigger a further weakening in the pound.
In an article in the Sunday Times newspaper, David Davis, the minister who heads up the ministry charged with managing Brexit, the Department for Exiting the European Union, indicated the government would be open to a transitional agreement to help smooth the U.K.'s exit from the bloc.
"We have been listening to what business is saying about the need for certainty wherever it can be brought," Mr. Davis said. "That's why, if it proves necessary, we have said we will consider time for implementation of new arrangements."
Agreeing on terms that work for both the U.K. and the 27 nations of the EU will be "testing," he said, adding that Britain wanted a mutually beneficial arrangement.
"So for all the heat and controversy of the past six months, no one here or in Europe should be in any doubt: the U.K. is going to leave the EU," he said.
Write to Nicholas Winning at email@example.com
(END) Dow Jones Newswires
January 15, 2017 10:02 ET (15:02 GMT)
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