Brexit: Philip Hammond admits UK's planned withdrawal already hitting economic investment

Chancellor says a transitional deal with the EU is needed to ‘start seeing businesses investing again’

Businesses are already pulling investment because of Brexit, the Chancellor has admitted – as he again urged Theresa May to agree a “transitional arrangement”.

Philip Hammond said a temporary deal with the EU was badly needed to get “businesses investing again”, appearing to acknowledge that companies are currently putting their plans on hold.

“The thing that is causing concern in the business community is the risk of a cliff edge,” Mr Hammond said.

“The sooner we can reassure businesses that there is going to be a smooth path from where we are now to the future arrangements we put in place with the European Union, the sooner we will have that sigh of relief and start seeing businesses investing again.”

The Chancellor said it was also a critical issue for firms across the Channel, pointing to the example of car manufacturers in Germany, attempting to secure four-year contracts with British firms.

“This is not just a UK problem. This is an issue in the European Union as well,” he told BBC Radio 4’s Today programme.

Mr Hammond also challenged the Prime Minister on her vow that Britain will no longer be subject to rulings by the European Court of Justice (ECJ), once Brexit is completed.

Asked if the ECJ could oversee the transitional arrangement he wanted, he replied: “All these things remain to be negotiated.”

The comments come after the Chancellor confirmed his position as the Cabinet’s leading advocate of a soft Brexit, calling for current customs arrangements to remain in place in transition.

In his Mansion House speech in the City of London this week, he dropped any pretence that he sees economic benefits to EU withdrawal – while insisting Britain will leave.

The Chancellor urged Ms May to abandon her red line that securing immigration controls is the first priority, in favour of a deal to protect jobs.

However, Mr Hammond’s hint that a transitional deal could last four years is likely to run into opposition from the European Parliament, which has argued that would be too long.

In the interview, the Chancellor also warned Labour not to try to exploit the Tories’ lack of a Commons majority to disrupt the Brexit process and the eight bills in the Queen’s Speech.

“I hope that the Labour Party and Mr Corbyn will act in the national interest,” he said.

“Of course it is possible for people to make mischief in Parliament, to cause delay in Parliament, but I think they would do so at their peril.

“There is a very clear majority for us to get on with this. Even among people who voted to remain in the European Union, the overwhelming sense now is that we need to get on with this.”

The Chancellor also sought to play down claims that he was at odds with the Prime Minister, although he failed to deny reports that she had been planning to sack him after the election.

“We get on very well. This is a piece of popular mythology that has been peddled by the media. I have known Theresa May for many, many years,” Mr Hammond said.

“I am supporting her, right behind her, with her all the way in the job that she is doing because it is in the national interest that we make this Government work well and work well for Britain.”