Companies not ready for single currency

Less than a quarter of engineering firms support UK membership of the single currency within the next five years, according to research published yesterday.

A MORI survey of 500 members of the Engineering Employers’ Federation showed that while 74% broadly supported the euro, only 21% said they were in favour of the government’s timetable for entry during the next Parliament.

Tony Blair is likely to have trouble persuading them to join, with 51% saying that strong government support for the single currency would make no difference to their opinion.

Reacting to the survey, Janet Bush, director of euro-sceptic campaign body New Europe, told The Engineer that as the UK’s prosperity grows, companies are less inclined to join the euro.

‘The more obvious it becomes that Britain is doing well outside the euro, the less companies are prepared to take a leap in the dark. It will be deeply disappointing to the government that even a strong recommendation by them would leave companies unimpressed.’

However, Bill Rammell MP, chairman of the Labour Movement for Europe, said the poll showed companies wanted to be persuaded on the euro.

‘Once the economic tests are met and the government is in favour, that will be a powerful persuader. And it will not just be the government arguing for membership — it will include trade unions, businesses, the Liberal Democrats, and well-known Conservatives. That is a fairly powerful coalition.’

The numbers of EEF members expressing caution about joining the euro has risen by 10% since they were last surveyed in 1999.

The change has occurred since the currency was launched and is at the expense of single currency supporters. The number of euro opponents has stayed the same.Although three quarters of engineering bosses support the euro in principle they want the UK to wait and see how the currency develops.

Almost 60% of companies said they would be more likely to support UK membership if the euro strengthened against the pound. But if the European Commission gained greater powers over taxation, particularly income tax and national insurance, 49% of those surveyed would be less likely to support entry.

Bosses were also asked what they were doing to avoid exchange rate difficulties. As many as 62% said they bought more parts abroad, 34% said they requested suppliers to invoice in other currencies and 25% said they located some production abroad.

Almost half of all companies also said they would move some production abroad in the next five years. EEF chief economist Stephen Radley said: ‘Anecdotal evidence shows that relocation means moving production to the eurozone, eastern Europe and the Far East.’

Meanwhile, more than 60% of companies expect to increase their invoicing and buying in foreign currencies. The abolition of currencies such as the franc, peseta and Deutschmark on 1 January 2002 is expected to boost euro use by UK firms.

Overall the survey found that 80% of companies were involved in exporting and 75% sold some of their output to the EU. Respondents said that the benefits of EU membership were a larger market, reduced trade barriers, ease of trading and common technical standards. Overwhelmingly 58% saw the EU as their main opportunity for growth, compared to only 24% for North America.

In the survey’s conclusion, the EEF says that if the government is to increase business support for the euro, it should resist European Commission influence on taxation; reduce the EU’s involvement in social and employment affairs; continue to complete the single market; raise business awareness of the euro; and work with financial institutions to make euro transactions easier.

The MORI survey was based on 500 interviews with randomly chosen executives. A third of companies taking part had no more than 49 employees, while 25% had a staff of more than 200.

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