LONDON: Britain would need to spend all its existing, 27 billion-pound "fiscal headroom" and more to offset the impact on the economy of a no-deal Brexit, finance minister Philip Hammond said on Tuesday.

The comments represented a latest warning by Hammond to the two candidates seeking to replace Prime Minister Theresa May who have promised higher spending and tax cuts while also saying they are prepared to take Britain out of the European Union without a transition deal.

Hammond said Britain's next prime minister will have to decide whether to carry out a review of public spending needs for the next three years or do a shorter, one-year review to respond to the uncertainty about Brexit.