By William James and Kylie MacLellan
LONDON (Reuters) - British firms should have access to European Union workers during a post-Brexit transitional period, a senior minister said on Friday following reports of a cabinet agreement that the EU's free movement rules could continue to apply for up to two years.
Concerns over immigration were a key driver behind last year's vote to leave the EU, and the government has made controlling Britain's borders central to its Brexit plans and the main reason for its decision to leave the EU single market.
But last month's national election, in which voters stripped Prime Minister Theresa May of her parliamentary majority, has reopened the debate about what kind of future relationship with the EU Britain should pursue, with the government promising to seek as wide a consensus as possible.
Any position Britain adopts will be subject to negotiation with the EU, which on Thursday demanded more clarity from ministers after the first full round of exit talks ended with limited progress.
Media reported on Friday that finance minister Philip Hammond, one of May's most prominent pro-European ministers, had won cabinet backing for a plan to allow free movement of people to continue for at least two years after Brexit.
One of the leading pro-Brexit members of May's cabinet, environment minister Michael Gove, said there was no opposition to a transitional arrangement that involved access to EU workers.
"The prime minister has made clear, as we leave the European Union we will have an implementation period which will ensure that we can continue to have, not just access to labour, but the economic stability and certainty which business requests," he said according to media reports of a speech he made on Friday.
"That is something around which the government and the cabinet is united."
As part of Hammond's plans, EU citizens would remain free to move to Britain for up to two years after March 2019, when Britain is due to leave the bloc, The Times newspaper reported on Friday. The Guardian newspaper cited a senior cabinet source as saying free movement could last for up to four years.
Asked about the reports, May's office pointed to the speech the prime minister made in January to set out her Brexit position, in which she called for a "phased process of implementation" to allow businesses to prepare.
May stressed the need for a "smooth orderly exit" from the EU on Thursday at a meeting with businesses. Brexit minister David Davis has previously said that Britain would not suddenly shut the door on low-skilled EU migrants after Brexit.
TIME TO ADAPT
A report published by a committee of lawmakers from Britain's upper house of parliament also stressed the importance of phasing in any immigration controls.
"It will take companies time to adapt their business models to be less dependent on EU workers and an implementation period is essential to ensure a smooth transition," said Michael Forsyth, chairman of the economics committee of the House of Lords.
The report said the necessary training of the British workforce and investment in new technologies could take a number of years, and businesses would need to retain access to the EU labour market during this time.
The committee of lawmakers also said that without improvements to the accuracy of migration data the government would struggle to control immigration after Brexit as it would be formulating policy "in the dark".
Existing data does not provide an accurate number of migrants entering or leaving the country, or the number of migrants in work, it said, calling on the government to work to improve the data before basing new policy on it.
The government has repeatedly failed to meet a pledge to reduce the annual net migration level to below 100,000. In 2016 the figure fell to its lowest in more than 2-1/2 years but, at 248,000, was still more than double that target, which covers immigration from the EU and outside.
The committee said sticking with a numerical target risked causing "considerable" disruption to businesses and the economy.
"The objective of reducing migration to sustainable levels should be implemented flexibly and be able to take account of labour market needs, in particular during the implementation period," it said.