Hammond to push for soft Brexit and infrastructure boost, as DUP talks stumble

Chancellor Philip Hammond will make a case for avoiding a 'hard' Brexit and boosting investment in UK infrastructure projects, as he delivers his annual Mansion House speech to the City of London later on Thursday.

Saved from Theresa May's axe after her bungled snap election, Hammond is expected to push for a "pragmatic" Brexit that places less importance on immigration control, according to a Treasury official cited by Bloomberg.

Leaked snippets of the speech revealed that the Treasury is working with the European Investment Bank (EIB) to ensure access to cheap funding for projects is maintained while the UK remains inside the EU, the Telegraph said, while a £400m investment programme from the British Business Bank (BBB) will be brought forward.

"Investors need certainty in order to continue to support the UK economy and create jobs as we leave the EU," Hammond will say, according to the Treasury. "That is why we will fortify the vital financial support that helps businesses to grow - from cutting edge start-ups right through to large scale infrastructure projects."

Meanwhile, a newly confident Hammond and the Treasury were said to have put some stumbling blocks in the way of the Prime Minister's talks with the Democratic Unionist Party about forming a minority government.

Following the Conservative party's careless loss of majority in parliament in last week's election, May has been attempting to add the Tories 318 Commons seats to the 10 of the Northern Irish party in a vote-by-vote "confidence and supply" agreement.

But the Treasury has dug in its heels against the costs of a deal, the Times reported, amid calls from some ministers to call the Northern Irish party’s bluff but from other senior sources that May has few other options.

A potential announcement on the deal could be delayed due to diary commitments of both leaders, the BBC reported, as well as the horrendous Grenfell Tower fire in west London, which killed at least 12 several people on Wednesday.

The Queen’s Speech, which had been scheduled to form the opening of parliament next Monday, is likely to be pushed back by a week.

Political uncertainty has kept the pound, since last year a key measure of the market's confidence in the UK economy and Brexit strategy, near its 2017 lows.

Mid-morning on Thursday, sterling was down 0.3% against the dollar at 1.2711 and near flat versus the euro at just over 0.88.

Economists at Barclays said their working assumption remained that May would remains as PM "in the near-term".

"The formation of a government and the passage of the Queen's Speech should provide some stability, although we see potential for a leadership challenge after that point," Andrzej Szczepaniak said in a note on Thursday morning.