UK's future tenure in EU Customs Union not decided - Hammond

UK Finance Minister Philip Hammond said on Wednesday that the Government has not yet made any decision on whether the UK will remain in the European Union Customs Union (EUCU) in the wake of Brexit.

His comment came amid reports of several studies, which were circulated at a Brexit cabinet meeting, that said leaving the EUCU could lower UK's gross domestic product (GDP).

The studies -- from Treasury, the National Institute of Economic and Social Research and Centre for Economic Performance and London School of Economics -- said quitting the EUCU would cause GDP to fall by 4.5% by 2030, jam the country's ports and hinder trade.

The EUCU included all 28 EU states plus Turkey, Monaco, Andorra and San Marino. It further included non-EU UK territories Jersey, Guernsey and the Isle of Man.

It allowed members to trade goods without customs levies but impose tariffs on goods coming from outside the union. It also negotiated trade deals as part of the union and not as individual countries.

TRADE TALKS

Hammond, speaking to lawmakers from parliament's lower house, confirmed that UK was not able to enter into trade talks with third parties at the present time. This was due to the constraints of the UK's EU membership.

"Certainly until such time as the Article 50 notice is served, it would not be appropriate to enter into any substantive negotiation with any third parties," Hammond said.

"It's become the convention to believe that it takes years to negotiate trade deals, and certainly there have been some very long drawn-out multilateral trade deals," he said.

"I think there is a reasonable argument ... that negotiating a straightforward bilateral trade deal ought to be a great deal simpler than negotiating a trade deal between a third country and a bloc of 28 countries."

LOW INTEREST RATES

Hammond said there would be no change in UK monetary policy.

"Monetary policy is independently determined, that will continue to be the case. The (Bank of England's) Monetary Policy Committee will continue to make decisions on interest rates and recommendations on unconventional monetary policy."

FUTURE BREXIT DEAL

"We are clear that this will be a negotiation between two sovereign entities: the United Kingdom and the European Union, and that we should not feel constrained by the existing structures and existing arrangements," said Hammond.

"We should be able to talk about the way in which it would be mutually beneficial to construct future collaborative arrangements between the European Union and the United Kingdom in a way that benefits both."

On Tuesday, the High Court said it would rule as quickly as possible on whether MPs, not the government, can activate Article 50 of the Lisbon Treaty, the formal mechanism for a country planning to quit the EU.

Prime Minister Theresa May has said she would trigger Article 50 by end-March.

MPs are to debate Britain’s strategy to leave the EU in Parliament and it is suggested that they may also have a vote on the final terms of the deal.

On Thursday, the prime minister is to travel to Brussels to update the EU on Brexit.