In an interview with The Daily Telegraph he said the planned scale of reductions could not be achieved without the loss of some units. Under the plans set out in the Strategic Defence and Security Review, the Army is to be reduced from 102,000 soldiers to 82,000. The Telegraph reported that units with large numbers of soldiers recruited from the Commonwealth would be particularly vulnerable.
Currently around one in 10 infantry soldiers comes from outside the UK, although some units have significantly larger foreign contingents than others. "The Army is getting smaller," Mr Hammond said. "Clearly the Army can't get smaller by 17% without losing some units. I can't say to you that there will be no loss of battalions in the infantry as we downsize the Army. We are looking at the options in the Army and the armoured corps."
An MoD spokesman said: "A review of the future structure of the Army is ongoing and no conclusions have yet been reached. "As General Sir David Richards, Chief of the Defence Staff, has stated previously, the Army is confident it can meet its target of 82,000 by 2020.
"This is in line with the agreement between the Defence Secretary and the Chief of the General Staff for a gradual move towards the new Army structure so operations are not adversely affected by necessary changes."
Mr Hammond indicated that the units most likely to be abolished or merged included those which fail to recruit their full strength in Britain, and have to rely on soldiers from elsewhere in the Commonwealth.
"It is not the case that all Army units, as they once did, have strong geographical recruitment ties," the Defence Secretary told the Telegraph. "We have units that are significantly under-recruiting. We have units that are recruiting a significant part of their strength from foreign and Commonwealth countries."
His comments led to speculation that historic cap badges like the Black Watch, Green Howards or Argyll & Sutherland Highlanders may disappear.
Shadow defence secretary Jim Murphy said: "The defence community will be dismayed that history is being dismissed.
"Defence is about more than inputs, outputs and spreadsheets. It is also about people, tradition and pride.
"Philip Hammond seems either oblivious or uncaring about the historic ties that many communities have to Army units and vice versa.
"The country will want confidence the Defence Secretary is doing all possible to preserve important historic legacies. More has got to be done to end this uncertainty and worry.
"The Army is currently 'top heavy' and the Government must go further than planned to cut the numbers of senior officers to tackle imbalance.
"Savings have to be made and Army restructuring is required, but ministers must do so in way that makes our forces more efficient while respecting long-standing ties."