Hammond was addressing parliament in a regular question and answer session while Prime Minister Theresa May set out her strategy for leaving the EU at a separate event.
"Britain wants to remain in the European mainstream with its economic and social model, but that can only happen if we get a sensible Brexit deal for continued access to the European market," echoing comments in a German newspaper on Sunday.
"If we don't the people of this country are not simply going to lie down and accept that they will be poorer. We will do whatever it takes to maintain our competitiveness and protect our standard of living," he added.
Britain has previously raised the prospect of reducing its corporation tax rates further below the average of other major European countries.
(Reporting by Andy Bruce, writing by David Milliken)
