“There would be a sigh of relief from business if we were able to get an early agreement on a transition arrangement,” said Mr Hammond.
“There is a large amount of business investment that is being postponed until business can see more clearly what the likely outcome of these discussions is. The earlier we can give business that reassurance the more quickly we will get businesses investing again.”
Mr Hammond said the British people want a Brexit that protects their jobs and their standard of living. The chancellor said he was not at odds with other ministers in government over his approach to Brexit, adding that Prime Minister Theresa May will still be British leader by the end of this year.
Mr Hammond also said he was confident Ms May will strike a deal with the DUP to gain support for her minority government.
Meanwhile, the chairman of Britain’s biggest private sector employer, supermarket giant Tesco, has warned that a cap on immigration will have a “materially detrimental effect on the UK economy”.
John Allan, chairman of the supermarket and of housebuilder Barratt Developments, said an over-restrictive immigration policy would drive the British economy down.
“That will be bad for everyone. It will lead to fewer jobs and decreasing real wages,” Mr Allan said in his role as chairman of lobby group London First.
He called for an “intelligent debate” on the immigration issue.
Ms May promised on Wednesday to listen more closely to business concerns about Britain leaving the EU when she set out a Brexit-focused government programme, pared back to reflect her weakened authority in the wake of an election that saw her lose her parliamentary majority.
She plans a bill to repeal EU law on immigration to end free movement, and make migration of EU nationals subject to UK law.
The British government remains committed to its target to reduce immigration to the tens of thousands.
Tesco has a UK workforce of 310,000, though earlier this week it announced up to 1,100 job cuts.