Prime Minister Theresa May on Tuesday said she was planning to negotiate both Brexit and Britains future relationship with the EU by 2019 but a transition period may be required after that.
Appearing before a parliamentary committee, May said companies and government might require time to adjust, in her first comments explicitly evoking a possible transition arrangement to ease Britain's EU departure.
"I would expect us to be able to negotiate a deal in the two-year period. But it may be the case that there may be some practical aspects that require a period of implementation thereafter," she said.
Finance Minister Philip Hammond has said such a deal could be "helpful" to "manage the adjustment between where we are now, as full members of the European Union, and where we get to in the future".
It "would tend towards a smoother transition and would run less risks of disruption including, crucially, risks to financial stability which must be a fairly real concern", he said last week.
Speaking at a summit of the Confederation of British Industry in November, May had alluded to a transition deal saying: "We don't want a cliff-edge".
CBI president Paul Drechsler at the same conference said: "Businesses are inevitably considering the cliff-edge scenario -- a sudden and overnight transformation in trading conditions.
"If this happens, firms could find themselves stranded in a regulatory no man's land," he said.
Brexit speech next month
Grilled by MPs on Tuesday about the timing of the exit deal and the new trade arrangements with the EU, May said: "I am working on the basis that we will look to negotiate those in parallel.
"I think that is what makes sense," she added.
The EU's chief Brexit negotiator Michel Barnier earlier this month said the deal on Britain's departure should be brokered by October 2018 to allow for ratification times on the EU side.
He also said the EU "needs to know" the full details of Britain's plans for its long-term relationship with the EU before any interim deal was possible.
"As we don't know what the UK wants and is waiting for, it's difficult to imagine a transitional period," he said.
May also on Tuesday dismissed questions about whether the British parliament would be allowed to vote on the final Brexit deal that is negotiated, saying only it would be given time to discuss the issues.
She said she would give a speech on Brexit next month with more details of the government's plans and planned to stick to the timetable of beginning the formal procedure for Brexit by March at the latest.
"We will meet that timetable," she said.
Britain's Supreme Court is set to rule in January on whether parliament's approval is required for May to trigger the Article 50 exit process, which gives a two-year timetable for negotiating a deal unless both Britain and the EU agree to an extension.