Hammond: Britain is leaving customs union and single market

British chancellor Philip Hammond said he would not agree to a deal that would "destroy" Britain.

Speaking in advance of the start of what are expected to be largely procedural Brexit talks about talks and their scheduling on Monday morning Mr Hammond said "no deal would be a very, very bad outcome for Britain.

But there is a possible worse outcome and “that is a deal that is deliberately structured to suck the lifeblood out of our economy over a period of time”.

Mr Hammond said Brexit meant the UK would definitely be leaving the single market, but must avoid “cliff edges”.

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"What we put in place may not be a single arrangement that endures forever, it may be an arrangement which lasts for a couple of years as a temporary measure before we get to the long-term agreed status quo," he told BBC One's Andrew Marr Show.

“We’re leaving the EU and because we are leaving the EU. We will be leaving the single market and by the way, we will be leaving the customs union.

"The question is not whether we are leaving the customs union. The question is what do we put in its place in order to deliver the objectives the prime minister set out in her Lancaster House speech of having no hard land border in Ireland and enabling British goods to flow freely backwards and forwards across the border with the European Union?

“It’s a statement of common sense that if we are going to radically change the way we work together, we need to get there via a slope, not a cliff edge.”

British minister Andrea Leadsom said on Sunday it was "perfectly possible" to negotiate Britain's exit from the European Union in the next two years, as required by the rules of the trading bloc.

A delegation led by UK Brexit secretary, David Davis, will meet the EU chief negotiator Michel Barnier and his team in the European Commission's Berlaymont headquarters for a day-long session of discussions.

Exit agreement

The first part of the negotiations on an exit agreement, widely described as the “divorce talks”, are due to focus on three elements - the continuing rights of citizens in each other’s jurisdictions after Brexit, the financial liabilities of the UK, and Ireland’s border.

The EU insists that only when “substantial progress” is made on all three will it be possible to engage in the other main strand of talks - on trade.

Spin from sources close to Mr Davis over the weekend suggests that he is willing to make "major" concessions in accepting that timeframe on Monday, and in accepting that the initial discussions will not come up with a financial settlement but a means of calculating it - positions that have been widely acknowledged informally in Brussels for some time although the British had spoken publicly of their hope that the talks would be simultaneous, in parallel.

British media reported a willingness by the UK to make what the ‘Sunday Times’ called a “bold offer” on citizens rights - in effect to reciprocate the EU’s suggestion of a like-for-like deal preserving current rights to travel and reside for both sets of citizens.

But the offer would be withheld until Thursday when Mrs May would herself present it to the scheduled European summit.

Mr Davis was also reported to be acknowledging the widely accepted reality that a complete Ireland deal cannot be finalised until trade talks are engaged because the issue of cross-border trade will inevitably be tied to a settlement on the broader issue.

Commission sources accept as much, but believe that issues relating to the free movement of people and Common Travel Area, and to the preservation of EU-related elements of the Belfast Agreement may be advanced.

Mr Davis is expected to say when he arrives in Brussels that despite a “long road” ahead for the talks the destination is clear, “ a deep and special partnership between the UK and the EU”. He will say that the UK will remain a committed partner to allies in Europe, and that both sides will emerge from the talks strong and prosperous.