Hammond - 'Brexit in two years is a necessity'
Interim arrangements for Britain's exit from the EU will be put in place if discussions are making good progress but "haven't quite got there" within two years, UK Chancellor Philip Hammond said.
Britain has reinvented itself before and will do again if the country faces the "catastrophe" of being closed off from EU markets, he warned.
Speaking at the World Economic Forum in Davos, he said that preferential migration arrangements "could" form part of the Brexit negotiations.
"That could be a subject for the negotiations," he said. "What we have said clearly is that we can't accept the principle of free movement."
Mr Hammond said quitting within two years was a "political necessity" and the broad principles can be agreed in the time scale if there is political will in Brussels. He ruled out separate negotiations for Scotland.
Mr Hammond was speaking as it emerged the UK saw the fastest fall in retail sales in nearly five years during the run-up to Christmas.
It is the first time since the Brexit vote that economic data has shown a hit to the UK economy.
The Chancellor also insisted he "didn't issue any threats" to the EU over turning the UK into a 'low tax' centre if it fails to agree a good exit deal.
Mr Hammond later said his "strong preference", which he shared with Prime Minister Theresa May, was to secure a comprehensive free trade agreement with the remaining EU which allows Britain access to European markets.
This would allow the UK to remain "within the European economic mainstream" and "operate to European norms and European regulatory standards", said the Chancellor.
But he warned that Britain was ready to take action "in whatever way we can" to preserve its competitiveness if it was excluded from EU markets.