LONDON (REUTERS) - The UK needs a plan for a transitional trade deal with the European Union. That's the message from the House of Lords on Tuesday (Dec 14).

A committee urging the government to set out plans for an interim deal before beginning formal divorce talks next year.

The House of Lords' EU External Affairs Committee is not convinced a bespoke EU trade agreement can be struck within Article 50's two-year deadline.

It says a temporary deal is vital to protect UK trade and jobs, and suggests staying in the EU customs union.

The committee also suggesting a stop-gap agreement could take the pressure off Brexit negotiations.

Speaking on Monday, Chancellor Philip Hammond agreed.

"There is an emerging view amongst businesses, among regulators and thoughtful politicians that having a longer period to manage the adjustment between where we are now as full members of the European Union and where we get to in the future as a result of the negotiations that we will be conducting would be generally helpful," said Hammond.

Banks and businesses have repeatedly argued the government should agree to a transition period, to avoid a damaging 'cliff edge' or abrupt exit from the bloc.