Euro decision: The business verdict

Euro uncertainty persists

News that a decision on Britain's entry into the single European currency is to be further delayed will be met with dismay by many UK businesses.

Manufacturers, in particular, will be cursing Chancellor Gordon Brown and his famous five economic tests.

They have long complained that the vagaries of the exchange rate ruin their competitiveness abroad.

But is it really is bad as some firms have claimed?

Surely the chancellor would not deliberately put thousands of jobs at risk. Would he?

Unspoken assumption

Alan Wood, chief executive of electronics group Siemens UK, says: "I don't think we will see an immediate pulling out of investment.

It isn't a do or die issue as far as making investment decisions

Rick Wagoner, General Motors

"But it is seriously bad news for internationally active manufacturing companies."

A lot of companies located in the UK in the 1980s and 1990s because they were keen to have a European base.

The unspoken assumption among firms that located in Britain in those decades was that it would one day join the single currency.

Crying wolf?

The longer the delay, Mr Wood argues, the more likely these firms are to look elsewhere when they are planning new investment.

And he says the recent success of the UK economy in comparison with the economies of Germany and France is not a valid argument for keeping the pound.

"The UK has been doing well recently because it has been going through a consumer-driven boom.

"It has nothing to do with being in the euro or out of the euro."

But are the multinationals crying wolf?

Closure threat

Car maker Nissan has repeatedly warned it will switch production of new models to mainland Europe if the UK fails to join the single currency.

Such a move would cost 1,500 UK jobs and threaten the long-term future of Nissan's Sunderland plant.

"We want our main cost base in Europe to be the same currency as our receipts," Mr Ghosn recently told a French newspaper.

But a few days later, the cost-conscious Brazilian was suggesting a firm commitment to joining the euro was not necessarily so important.

"It is better for Nissan to have its costs in the same currency as its revenues, and I don't like making profits only because of luck with exchange rates," said Mr Ghosn.

Not 'do or die'

But the most important thing was to have "clear visibility" over the health and future direction of the economy, he added.

The psychological barriers to doing business with a company in Britain which insists on trading in sterling is very counter-productive

Anthony Ulmann, Autofil Worldwide

This was a point echoed by Rick Wagoner, chairman and chief executive of General Motors.

On a visit to London earlier this week, Mr Wagoner said if the government's five tests were met, adopting the euro "would take some uncertainty off the table" but it would not affect investment plans.

"I want to make clear that it isn't a do or die issue as far as making investment decisions," Mr Wagoner said as he announced an £80m investment in a GM Vauxhall assembly plant near Liverpool.

His comments will have infuriated other manufacturers, not least those in the automotive business.

Margin erosion

For many of these companies and their suppliers, the euro is already a reality.

Sheffield company Autofil Worldwide, which employs 180 people, already invoices in euros, both within the UK and in continental Europe.

Although it still has to produce accounts in sterling by law.

Chief executive Anthony Ulmann says: "As a business, we will suffer margin erosion if sterling gains in value and we will suffer the vagaries of not being within the system."

Mr Ulmann, whose company supplies yarn to automotive trim makers, is a passionate advocate of monetary union.

"We cannot afford to be seen as a race apart.

"The psychological barriers to doing business with a company in Britain which insists on trading in sterling is very counter-productive."

Deep suspicion

But there remains deep suspicion about the euro among many UK businesspeople, echoing the scepticism felt by large sections of the public.

The benefits of entry are either poorly understood or not clear cut enough to be self-evident.

While for others, monetary union means more EU-generated regulation, threatening to choke Britain's flexible labour market with red tape.

According to George Eustice, director of the anti-euro No campaign, the latest polls show 65% of businesses are opposed to the euro.

And only one in five business leaders wants to see a referendum in this parliament, he adds.

'Federal Europe'

Robert Sutherland, managing director of Parkland Engineering, a Newcastle-based industrial hose maker, says: "I am concerned about the further implications of joining the euro and the impact of that on legislation.

"I am very much against a move towards a federal Europe."

He says his company's exports are increasing despite the relative strength of the pound.

"Being outside the eurozone is a nuisance but it hasn't held us back."

Service sector

The service sector, which is now the dominant force in the UK economy, arguably has little to gain from monetary union.

The decision to grant independence to the Bank of England appears to have finally tamed inflation, leading to historically low interest rates.

This in turn has led to a boom in consumer spending and the lowest unemployment for 20 years.

'Britain is different'

Why put all this at risk - sceptics argue - by giving up control over interest rates and signing up to an inflexible and unresponsive European Central Bank.

Peter Barton, deputy chairman of the Alliance & Leicester bank, says: "Getting the balance right in the economy is not easy at the best of times.

"It would be far harder without an independent monetary policy.

"It is not just that we have more home ownership, it is the scale of mortgage and consumer debt and the fact that so much of it is variable rate borrowing that makes Britain different."