George: City not hurt by euro

Sterling or the euro: the debate goes on

Bank of England governor Eddie George says the City of London has not been hurt by the UK's delay in joining the euro.

Mr George told the London Chamber of Commerce that despite Britain's decision not to join in the first wave, the City had continued to prosper.

He said those who had predicted that the financial sector would suffer if Britain failed to sign up to the European single currency when it was launched in 1999 had been proved wrong.

Eddie George: sceptical on benefits of euro

"That clearly has not so far happened, quite the reverse," he said.

There was no obvious reason why the City should not continue to do well outside the euro, he said.

"The argument now is that we will suffer if we don't join reasonably soon. That's not something you can actually prove either way," he said.

However, the Bank of England was continuing to work with the government and the financial sector on the technical arrangements to ensure a smooth transition if Britain did decide to join the euro.

The comments are in line with a survey by the London Chamber of Commerce which shows that foreign banks do not see the UK's membership of the European single currency as a factor in deciding to locate in London.

Economies converge

The issue of whether or when to join the single currency is back in the political spotlight as parties gear up for an expected General Election in 2001.

Mr George's comments are of particular importance as one of Chancellor Gordon Brown's five economic tests for judging whether the UK should join the euro include an assessment of the impact on the financial services sector.

Last week, the Paris-based think tank, the Organisation for Economic Cooperation and Development, said the UK economy had much more in common with the eurozone than some of the single currency's existing members.

It said existing differences between the UK and eurozone economies were shrinking, bringing the UK economy closer and closer to that of the eurozone.

Some key members of the Labour government, including Trade Secretary Stephen Byers and Northern Ireland Secretary Peter Mandelson, have been urging the government to explain to the public the advantages of euro membership.

On Thursday, Chancellor Gordon Brown is expected to use his annual Mansion House speech to reject those calls, arguing that the government should wait until it makes a full economic assessment before deciding on whether or not to join the euro.