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UPDATE 2-UK's Hammond rejects call to fund plans for `no deal' Brexit

(Recasts, adds quote)

LONDON, Oct 11 (Reuters) - British finance minister Philip Hammond rejected calls on Wednesday to start spending on plans for a "no deal" Brexit as a way to put pressure on the rest of the European Union.

Negotiations on the terms of Britain's exit from the EU and their future relationship have made slow progress before a March 2019 deadline. That has drawn calls from some British lawmakers to walk away from the talks and start preparing for a clean break with the bloc.

Hammond told a parliamentary committee the government was planning for all possibilities, including Britain's leaving with no agreement on the terms of its departure or how the two would build a new relationship. He urged Brussels to start talks on transitional and long-term arrangements.

But he rejected the idea that Britain should begin putting contingency arrangements in place, including a suggestion that it should start spending money to beef up border and customs capabilities.

"Some are urging me to spend money simply to send a message to the EU that we mean business. I think the EU knows that we mean business," Hammond said.

"I don't believe we should be in the business of making potentially nugatory expenditure until the very last moment when we need to do so."

Hammond is considered one of the most pro-EU members of Prime Minister Theresa May's cabinet, and pro-Brexit lawmakers and campaigners have accused him of trying to water down or even halt Britain's exit.

He said ministers were united behind May's plan to seek a transition period after March 2019 with a set time limit, to provide certainty for businesses while allowing new arrangements to be put in place.

However, he stressed the need for talks - which have stalled on issues like the bill Britain must pay to leave and the future of Northern Ireland's land border with the EU - to keep moving forward, and agree the terms of the transition.

"It is self-evident to me ... that a transitional arrangement is a wasting asset. It has a value today. It will still have a very high value at Christmas, early in the new year," Hammond said.

"But, as we move through 2018 its value to everybody will diminish significantly. And I think our European partners need to think very carefully about the need for speed in order to protect the potential value to all of us of having an interim period." (Additional reporting by William Schomberg, editing by Larry King)