Warnings of a UK `manufacturing meltdown’ if the government does not commit to joining the euro have been exaggerated, industry experts said this week.
A leaked memo on Monday from Andrew Fraser, head of the Invest in Britain bureau, warned of potential high profile foreign-owned plant closures if the UK decides against joining the single currency.
His views were apparently borne out by figures from the Engineering Employers’ Federation, which showed that output, investment and export orders in the sector have all fallen over the past three months.
But the organisation is upbeat about prospects for the future. `I think the next set of results will see a bounce-back,’ said EEF chief economist Stephen Radley.
Radley added that the 10% fall in the value of sterling against the euro since its high point earlier in the year had come just in time to avert a manufacturing recession. `There are very real concerns about the health of the sector and if the stories about inward investors are true, then the overall impact could be very significant. But using the phrase “manufacturing meltdown” is overly dramatic,’ he concluded
The EEF expects the pound to fall further against the euro, making UK manufacturers more competitive. It also believes UK companies will start to benefit from lower raw materials prices due to a weaker US dollar.
Vernon Holt, manufacturing director of Lancashire-based papermaking machinery manufacturer Voith Sulzer, said that many UK-based suppliers were suffering because they could not compete with European companies on price.
As a German-owned business, Voith Sulzer would benefit from early UK entry to the euro, but it was by no means clear that this would be the case for all manufacturers, said Holt.
Some companies may have overstated their currency problems in order to secure additional government funding, and used the phrase `meltdown’ to exaggerate their plight, he added.
The EEF’s Radley called on the government to stop the recent leaks and government in-fighting over the euro which was creating damaging uncertainty in the manufacturing sector.
On top of the Invest in Britain memo, a leaked message sent by Sir Stephen Gomersall, the British ambassador to Japan, warned that many Japanese businesses felt investment in the UK would involve unnecessary risks until there was a commitment to join the euro.
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