Toyota tells UK suppliers to use euro

The Toyota Corolla is assembled in the UK, but more of its parts will soon come from the continent

The Japanese car maker Toyota will tell its UK suppliers to settle all bills using Europe's single currency, the euro.

Toyota Japan told the BBC that it wants to minimise its "currency risk exposure", but has not set a date for the change-over yet.

The move could herald a creeping euro-isation of parts of the UK economy, and threatens UK jobs as British suppliers could be forced to source raw materials and components from the eurozone, where they are cheaper.

Yoshio Ishizaka, senior managing director in charge of international sales, said: "Business with suppliers in continental Europe is not a problem. But we are now asking our suppliers in the UK to do business with us in euros [instead of pounds], so we can minimise currency risk exposure."

Mr Ishizaka also said his company would try to cut costs by buying more from suppliers on the continent. He said the shift would not be "drastic", but is likely to have some impact on UK jobs.

Union leaders in the manufacturing sector said the move was one more reason why British workers would suffer outside the eurozone.

"This is further evidence that business as a whole is moving towards the euro," said John Edmonds, the general secretary of the GMB union.

"It is quite clear the economic case for joining the single currency is mounting by the day."

But Nick Herbert of the Business for Sterling campaign warned that "every company would suffer if we get the wrong interest rate, higher taxes and more red tape" by joining the euro.

Profit wipe-out

Hit by the strong pound, UK component makers are finding it difficult to compete on price with their continental rivals.

There have been reports suggesting that Toyota Motor Manufacturing (UK) plans to buy up to 30% of components from the continent, up from 20% now. However, Mr Ishizaka did not confirm these figures.

Jobs at Toyota's UK suppliers are under threat

Toyota, the world's third-largest car maker, has two factories in the UK. At Burnaston 2,800 workers build the Avensis and Corolla, while at Deeside in Flintshire 300 staff make car engines.

In 1998 they produced just over 170,000 cars, with more than two-thirds of production destined for export to the eurozone.

As the euro weakens many foreign car firms that set up shop in the UK are suffering.

In 1999, the strong pound wiped out all profits at Toyota's UK car operations.

Toyota is now planning to set up production in France and Poland.

Companies like car maker Nissan and Matsushita, the world's biggest consumer electronics manufacturer, have told the UK government they may move production to continental Europe if Britain does not adopt the single currency.

Since its launch 20 months ago, the euro has plunged about 25% against the yen and 16% against sterling.

Investment drive

Despite the threats from firms like Nissan and Matsushita, foreign direct investment is still pouring into the UK.

Euro-sceptics say this shows the country can prosper outside the eurozone.

Euro-fans, though, warn of a meltdown of UK industry, with investors staying away once they realise that the country is unlikely to join the eurozone.

Toyota has obviously decided to stay in the UK, but is simply shifting the currency risk to its British suppliers.

Industry experts have told the BBC that other car makers, such as Ford and General Motors (Vauxhall) are likely to follow.

This would shift parts of the economy into the eurozone, regardless of whether the UK adopts the single currency or not.

Edward Roberts, chief executive of component supplier Peterson Springs, said suppliers had to do what customers wanted.

Talking to BBC Radio 5Live, he said suppliers could be forced to source more raw material from the eurozone, or move on some of the risk to their suppliers.