UK needs Brexit deal to end austerity: Hammond

LONDON (Reuters) - British finance minister Philip Hammond said an end to his spending squeeze depended on the country getting a Brexit deal and he warned he would have to drop plans to boost public services without one.

Hammond, who is due to announce an annual budget plan on Monday, said the government would be able to show voters that "their hard work has paid off" if Britain achieves a smooth exit from the European Union in five months' time.

Hammond has angered many Conservative Party lawmakers by arguing Britain should remain close to the EU.

"If we don't get a deal ... we would need to take a different approach to the future of Britain's economy," Hammond said in an interview with Sky News broadcast on Sunday.

"We would need to look at a different strategy and frankly we'd need to have a new budget that set out a different strategy for the future."

Britain has cut its budget deficit sharply since the financial crisis 10 years ago but its debt levels remain high.

Most economists say Britain would suffer an economic shock if it leaves the EU with no deal.

Hammond said he was very confident that Britain would negotiate a Brexit deal that would minimise trade friction with the bloc but the government, and the Bank of England, would have to look at the situation and take action if there is no deal.

(Writing by William Schomberg; Editing by Paul Sandle and Alison Williams)