Hammond refuses to rule out UK customs union membership

The UK's position on membership of the customs union with the EU after Brexit was thrown into confusion on Friday when Chancellor Philip Hammond refused to rule it out.

Conservative MP Nicky Morgan, who chairs parliament's influential Treasury select committee, published a letter from Hammond in which he spurned the chance to rule out membership.

Instead, Hammond said the matter was still subject to negotiations on the transition phase once the UK leaves the 28 member bloc in march 2019.

Hammond said the UK would have to "seek a new customs arrangement with the EU that facilitates the freest and most frictionless trade possible in good between the UK and EU".

Morgan, who campaigned to remain in the EU, said the chancellor's response proved the government position was still not final.

“It was widely thought that being in a long-term customs union with the EU had been ruled out by the government. But the Chancellor’s letter confirms that this is not the case,” Morgan said.

“It is vital that the Cabinet reach agreement on these central questions about the UK’s future relationship with the EU, as a matter of urgency.”

There are still deep divisions within Prime Minister Theresa May's Cabinet over what the relationship with the EU should be after Brexit. Hammond is in favour of a closer relationship, while hard Brexiteers such as Foreign Secretary Boris Johnson and Environment Secretary Michael Gove want to cut ties altogether.

Hammond's failure to rule out membership will anger the latter pair as they want to sign new trade deals with other countries, claiming they can do these quickly, even though the latest EU/Canada agreement took seven years to complete.

Under customs union rules, import tariffs are uniform regardless of which member state is importing. However, members cannot negotiate separate trade deals with nations outside the bloc. The EU has told Britain it cannot have the benefits of membership once it leaves.