UK plc 'against early euro entry'

The euro: British businesses still not convinced

Just one British firm in five wants the government to adopt the euro during the current parliament, according to a new survey from pollsters ICM.

The poll continues to show that ... there is no advantage to business as a whole from joining

GKN and Tate & Lyle chairman Sir David Lees

The survey, which comes on the tenth anniversary of the pound's ejection from the European exchange rate mechanism, suggests that Prime Minister Tony Blair may find it more difficult than expected to persuade businesses to embrace the single currency.

The ICM poll shows that while 20% of firms back early euro adoption, 29% rule out membership altogether, and a further 39% would prefer to keep their options open.

Anti-euro sentiment was strongest among small and medium-sized firms, but even among larger companies, support for early euro entry came in at just 25%.

Ominously for the pro-euro camp, 56% of chief executives questioned by ICM said they thought adopting the single currency would weaken the British economy.

Divided

Tate & Lyle and GKN chairman Sir David Lees, an anti-euro campaigner, said the survey highlighted sharp divisions within the business community on the single currency.

"The poll continues to show that ... there is no advantage to business as a whole from joining," he said.

Business supporters of the euro argue that adopting the single currency would protect British exporters from currency fluctuations, giving the hard-pressed manufacturing sector a much-needed boost.

But opponents claim that handing control over British monetary policy to the European Central Bank might result in interest rates being set at an inappropriate level, harming the economy.

Black Wednesday

British efforts to participate in European monetary union received an early setback on Wednesday 16 September 1992, when currency speculators forced the pound out of the European exchange rate mechanism.

Analysts said the rate at which the pound joined the ERM - a forerunner to monetary union under which European currencies were allowed to fluctuate only within strictly limited ranges - had been set too high.

The pound fell sharply after leaving the ERM, boosting Britain's export performance.

Sterling's exit also freed the government's hand to slash interest rates, giving the flagging economy a fillip.

But the episode, which became known as Black Wednesday, fatally undermined the credibility of the then Conservative government, which had spent billions vainly trying to prop up the pound.