While Gordon Brown’s statement on Monday ruled out joining the euro before 2002, what he seems to have ruled in is a scenario where British industry will have to live with a pound sterling close to DM3 for the foreseeable future.
The old trick of watching from the sidelines before committing ourselves to joining is nothing new for Britain in its dealings with Europe. But in the run-up to the formation of a single European currency, uncertainty over whether it will be a success can only make the pound seem like a reasonably safe haven for currency speculators.
With no mention of any return of the pound to within the exchange rate mechanism to try to bring about eventual currency convergence, the message for British exporters is simple. The uncomfortably high pound now looks more likely to be sustained. Any attempts by business to cut costs will now have to be both robust and permanent.