* UK ready to counter economic turbulence
* Sterling falls after PM May’s speech
* Hammond to set out “pragmatic” fiscal plan on Nov. 23
* PM May to trigger Article 50 by end of March 2017
* To start EU divorce ahead of French, German elections
* UK pledges to plug EU funding gap, new homebuilding spend
By William James and Kylie MacLellan
BIRMINGHAM, England, Oct 3 (Reuters) - British finance minister Philip Hammond vowed on Monday to protect the economy from any turbulence during negotiations to leave the EU, as sterling fell on worries the country is heading towards a disruptive divorce with its biggest trading partner.
Hammond made his promise to the ruling Conservative Party after Prime Minister Theresa May said she would trigger the process to leave the European Union by the end of March, offering the first glimpse of a timetable for one of the most complex negotiations in recent European history.
Britons’ vote for Brexit on June 23 took many investors and chief executives by surprise, triggering the biggest ever one-day fall in sterling against the dollar.
Although the economy appears to have largely weathered the initial shock, Hammond sought to reassure businesses and consumers - whose continued investment and spending fuels economic growth - that he would act to if needed.
“Throughout the negotiating process, we are ready to take whatever steps are necessary to protect this economy from turbulence,” Hammond told the Conservatives’ annual conference in the city of Birmingham.
“And when the process is over we are ready to provide support to British businesses as they adjust to life outside the EU,” he added, pledging to guarantee any EU funding secured before Britain’s exit.
Britain must start the formal negotiation process by invoking Article 50 of the EU’s Lisbon Treaty, giving the sides two years to clinch a deal.
Hammond’s address was watched by May, whose speech to the conference on Sunday convinced some investors that Britain could be heading towards a “hard Brexit”.
Sterling, having just posted its worst run of quarterly losses since 1984, skidded more than 1 percent against the dollar to as low as $1.2845. That left it less than half a cent away from the 31-year low it reached in early July, shortly after the referendum.
While May dismissed the idea that Britain faced a choice between a “soft” or “hard” Brexit, economists at the JPMorgan investment bank said her comments indicated the latter - meaning the country could abandon the EU’s customs union, give up on seeking preferential access to the single market and impose controls on immigration from the bloc.
“Although May does not like the ‘hard-soft’ distinction, this looks pretty ‘hard’ to us,” JPMorgan, which supported the Remain campaign, said in a note to clients.
May’s comments were welcomed by the EU, with Donald Tusk, the president of the European Council, saying the statement had brought “welcome clarity” to the situation.
But the European Commission said it would start negotiating Brexit only after Britain sent its formal notification under Article 50 that it would leave the bloc it joined in 1973.
Lawmakers in German Chancellor Angela Merkel’s conservative party made similar remarks to Tusk, but some expressed frustration at the lack of detail on the timetable.
“Finally there is a position,” lawmaker Elmar Brok said. “It would be important that the Brexit is done before the next election for the European parliament”, due in early 2019.
“The British government has shown that it is clueless about what to do,” said Gunther Krichbaum, leader of the European committee in the Bundestag lower house.
One senior German official said: “It is beyond comprehension that the politicians who campaigned for Brexit for months have no idea what they want, they have no plan at all.”
Hammond, who campaigned for Britain to remain in the EU before the referendum, said the government would ensure the best possible access to EU markets.
His support for the remain campaign has raised suspicions among Conservative eurosceptics who fear the government may water down the terms of Britain’s exit.
Hammond tried to counter that view. “No ifs, no buts, no second referendums. We are leaving the European Union,” he said. “But it is equally clear to me that the British people did not vote on June 23rd to become poorer, or less secure.”
Hammond repeated his decision to push back the government’s target for turning the budget deficit - which at 4 percent of gross domestic product in the 2015/16 financial year is proportionately among the biggest among the rich economies - into a surplus. His predecessor George Osborne had targeted 2020 but Hammond has yet to set a new target date.
He said budget consolidation plans would be balanced with infrastructure investment and improvements to productivity to cope with the uncertainty caused by Brexit.
“The British people elected us on a promise to restore fiscal discipline,” he said. “And that is exactly what we are going to do. But we will do it in a pragmatic way that reflects the new circumstances we face.”
“The deficit remains unsustainable and the decision to leave the EU has introduced new fiscal uncertainty,” he said, promising to set out his full plan on Nov. 23.
He has previously played down expectations of a surge in public spending to offset any economic hit from the Brexit vote, but said he could fund modest infrastructure projects if needed.
Hammond’s spokeswoman declined to comment on the pound’s fall or talk of exiting the EU single market but said he has been keen to underscore how he was listening to the concerns of British businesses.
But for some, May’s reluctance to offer what she describes as a “running commentary” on her strategy has deepened fears that they could end up paying higher costs if operating from Britain.
The tone of May’s speech even suggested Britain would lose preferential access to the single market, said Royal Bank of Canada. “The inference from her comments is that Brexit will also mean ‘Smexit’,” it said in a research note. “That is Single-Market-exit.” (Writing by Guy Faulconbridge; editing by David Stamp)