THE Treasury is not the "enemy of Brexit" but will be Britain’s “champion of prosperity” outwith the European Union, Philip Hammond has insisted.

The Chancellor used his annual Mansion House speech to City figures in London to confront attacks from Brexiteer critics, who have condemned the financial department on his watch.

In front of an audience including Bank of England governor Mark Carney, Mr Hammond said the Treasury would be the "champion of prosperity for the British people" after Brexit but it would be "working and trading closely" with the EU.

His words followed a secret recording of Boris Johnson, the Foreign Secretary, who was heard describing the financial heart of the UK Government as "basically the heart of Remain".

As well as recognising Britain's EU membership since 1973 and the importance of trade, the Chancellor said the post-Brexit landscape should reflect the scale of goods travelling between Dover and Calais, continental defence and security co-operation and "centuries of shared history and culture".

He explained: "So as we leave the EU we need to forge a new relationship with our European neighbours that protects those patterns of trade; those business relationships that have been painstakingly built over decades...that maintains low friction borders and open markets.

"That does not make the Treasury, on my watch, 'the enemy of Brexit'; rather, it makes it the champion of prosperity for the British people outside the EU but working and trading closely with it.

"And part of that successful future partnership must be a mechanism that enables UK EU financial services trade to continue delivering the benefits of open markets and deep regulatory co-operation.

"Of course, we recognise that this will be a new kind of relationship, reflecting a new, and fair, balance of rights and responsibilities."

At the start of June, Theresa May said she had full confidence in Mr Johnson after he told a private dinner there was a risk Brexit "will not be the one we want" and would keep the UK "locked in orbit" around the EU.

At the gathering of the Conservative Way Forward, a Thatcherite campaign group, he claimed negotiations were approaching a "moment of truth" and warned of a Brexit "meltdown".

That followed criticism from Priti Patel, the former International Trade Secretary, who accused the Chancellor and the Prime Minister of "negativity" and urged a "better vision for the future" after Brexit.

Mr Carney used his own speech on Thursday night to say he believed an "ambitious" financial services relationship with the EU - founded on commitments to achieving equivalent outcomes and supervisory cooperation - remained "feasible".

Echoing the Government's mantra of a post-Brexit "global" Britain, he said: "Having put in place the pillars of responsible, open financial system, we are ready for deeper global financial partnerships with the emerging economies that will be the most important drivers of global growth in the decades ahead."

To this end, the Bank would deepen its supervisory co-operation with major emerging economies and develop infrastructure to support cross-border capital flows, he explained.

Mr Carney said it also wanted to help enable UK households and businesses to transact "anywhere, anytime with anyone whether around the corner or around the world".

The Canadian used the speech to say that financial services could serve as a template for broader services trade liberalisation.

Responding the Chancellor's £1.2 billion capital injection onto the Bank's balance sheet, alongside reforms to its framework, the Governor said: "We now have a balance sheet fit for purpose. One that reflects the Bank's much wider range of responsibilities including banking supervision, macro-prudential policy and resolution. And the framework enhances our independence, transparency and accountability."

The Chancellor also used his speech to announce the creation of a Green Finance Institute based in the capital, jointly funded by government and the City of London.

He also said a Financial Services Skills Taskforce would be set up by TheCityUK, led by former City Minister Mark Hoban, to "meet the long-term skills needs of the sector over the coming decades and creating opportunities for the next generation".