A post-Brexit transition period of “about two years” will give the business the “certainty and comfort” to plan ahead, Philip Hammond has said.
The chancellor said he initially argued for a longer transition phase but the cabinet had united behind a shorter period which offered both flexibility and a “degree of precision”.
Businesses have said they are “growing impatient” with Tory splits on Brexit.
Mr Hammond said he operated on the basis all ministers were “sackable”.
He described comments made by foreign secretary Boris Johnson in a newspaper interview over the weekend that a transition period should last “not a second more” than two years, as a “rhetorical flourish”.
Mr Hammond, who will make his keynote speech to the Tory conference later, acknowledged the current period was “turbulent” for business and there had already been a “dampening” of investment.
Business, he told BBC Radio 4’s Today programme, were right to say they wanted “clarity” in order to prepare for the UK’s exit in March 2019.
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While he said he had initially made the case for a transition period of between three and four years, he said the entire cabinet had signed up to a “time-limited interim period of around two years” ahead of Theresa May’s Florence speech last month.
“We have come to this agreed formula of about two years which works for everyone,” he told Today.
Media captionTheresa May: Cabinet agreed to Brexit position
“That leaves us some flexibility but a degree of precision that business needs to start planning…. a transition of about two years will take the immediate pressure off business…If we don’t give businesses clarity about the future, they will have to make decisions assuming the worst possible outcome.
“What we are hearing from business is a plea… ‘don’t put us in a position where we have to assume the worst and act accordingly – give us the comfort and certainty we need’.”
The British Chambers of Commerce said public disagreements between cabinet ministers were undermining business confidence, warning business leaders were “growing impatient with division” at the heart of the government.
It called for ministers attending the Conservative Party conference to show “competence and coherence”.
The organisation’s director general Adam Marshall said: “Public disagreements between cabinet ministers in recent weeks have only served to undermine business confidence, not just on Brexit negotiations.”
Boris Johnson arrives at the Conservative conference on SundayImage copyrightAFP
Boris Johnson has described the cabinet as a “nest of singing birds”
Mrs May has insisted the cabinet, including Mr Johnson, is “united” on the mission of the government.
But, on Sunday, she sidestepped a question about whether the foreign secretary, who has made a series of interventions in the past couple of weeks, was “unsackable”.
Asked on Monday about Mr Johnson’s position, Mr Hammond said all ministers served at the discretion of the prime minister, who was free to choose which roles they filled.
“I always operate – I think it is a sound and cautious principle – on the principle that everyone is sackable.”
In his speech, Mr Hammond is set to announce an extra £300m to improve rail links in the north of England.
Employers have also been calling for clear action on cutting business costs, building key infrastructure, helping firms plug skills gaps, and support for private sector investment.