LONDON – Britain’s divorce from the European Union could be implemented gradually, but the terms of the break-up should be agreed within 18 months, Brexit minister David Davis said on Wednesday.

Finance Minister Philip Hammond has said a "transitional" arrangement could be "helpful" in cushioning the Brexit process, but Davis said it should only be used to smooth the application of a final agreement, not as a staging post in negotiations.

Davis, a leading eurosceptic, last week said he was "not really interested" in an interim deal and he told a parliamentary committee on Wednesday that it should be struck "only if it’s necessary."

The government intends to begin the formal process of leaving the EU by the end of March, starting the clock ticking on a two-year deadline to negotiate its departure and future relationship with the bloc.

However, European Commission chief negotiator Michel Barnier said earlier this month that talks to agree the terms of the divorce should be concluded in 18 months.

Davis told parliament’s Exiting the European Union Committee: "The British people want this done with some degree of expedition.

"Barnier said 18 months and I think it is all negotiable in that time."

’Lose-lose’ for financial services

Brexit champion Nigel Farage has branded an interim deal as a delaying tactic and evidence of "more backsliding." But a House of Lords committee warned Thursday that financial services firms could abandon London even before Brexit unless they received assurances about their future early in the exit negotiations.

The EU financial affairs sub-committee said that any agreement on the industry’s operations outside the bloc would likely take longer than two years.

Committee chairwoman Kishwer Falkner urged the government to "agree a transitional period so as to prevent UK-based financial services firms from restructuring or relocating on the basis of a ’worst-case’ scenario." She also warned EU leaders that punishing Britain for the June referendum vote to leave the bloc by hurting its dominant industry could backfire.

"EU firms rely on the services provided in the UK, and pain caused to the UK’s financial sector will not be the EU’s gain, but New York’s," she said.

"We are in danger of a lose-lose scenario if pragmatism does not prevail." The committee heard evidence of the repercussions of ending "passporting" rights to operate in Europe’s single market and blocking Britain-based firms from clearing euro-denominated transactions.

Losing the capacity to do so-called euro-clearing could on cost Britain up to 232,000 jobs, according to an analysis submitted by the London Stock Exchange Group.

’No plan before February’

Davis said there was still "work to be done" in formulating the government’s Brexit strategy, and that the plan would not be published until February, at the earliest.

The minister warned that striking a new trade deal with the EU would not be a simple case of agreeing cross-border tariffs, and that other barriers like EU red tape could be more important, particularly for Britain’s strong service sector.

He added that the government’s aim was for a "smooth and orderly" divorce that allowed "maximum market access with minimum of disruption" to British business.

The British economy has so far defied widespread predictions of a Brexit slowdown, with official figures released on Wednesday showing unemployment at its lowest level since 2005. – AFP