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Tuesday, March 2, 1999 Published at 16:10 GMT

UK business and the euro debate

Britain's debate on membership in Europe's Economic and Monetary Union will hinge on the country's business leaders, but some of them are getting it wrong, argues Rodney Smith:

[ image: Rodney Smith]
Rodney Smith
Britain used to be proud of leading on many issues; nationalisation, much later, privatisation, a free health service, and so on _ but all that has changed.

Where the euro was the subject on everyone's lips in the homes, corporate dining rooms and cafes of continental Europe last year, it's only just become the big issue in the United Kingdom.

With good reason. The British government initiative at the end of February to launch a National Changeover Plan has revealed the real depth of the opposition to the euro.

When Britain voted by referendum to join the then European Economic Community in the mid-1970s, the "yes" campaign was backed by politicians on all sides, funded by business eager for a slice of the European market, and extolled in every newspaper, television and radio discussion.

How that has changed. The ranks of the antis are being swollen by some very influential figures from politics and business - many of them may have voted 'yes' a quarter of a century ago.

Even more worrying for the pro-Europeans is the power of some of the business interests backing the anti campaign: Dixons chairman Sir Stanley Kalms, Lord Sainsbury of Candover, (not to be confused with the government minister David Sainsbury; they are cousins), the Institute of Directors and others.

When the next referendum comes round, as it could by the year 2003, the pure commercial push behind the "no" lobby could overwhelm what is clearly going to be a concerted push by the government to get Britain in.

This business component is the one to watch. Unlike the traditionalist, nationalistic tub-thumping of Sir James Goldsmith's Referendum Party, it's not concerned with the loss of the pound.

It is concerned that the European Union model is falling apart.

That was built on a loose model of the Union's most successful economy, Germany. But it is in serious danger of being a model for bad economic management rather than good. Germany is close to serious recession, inflation trends are rising (a 4% wage deal with the huge IG Metall engineering union), unemployment is at record levels, and a spending government with a fixed focus on taxes.

As a result, business is leaving in size. Not only manufacturers. Europe's biggest insurer, Allianz, has give the government until the middle of the month to quit hammering on about taxation, or it will decamp, probably to London.

Meanwhile in an aggressively expansionist France, the economy, primed by some government spending on job creation programmes and an upturn partly inherited from the previous regime, is moving ahead strongly.

Very few in Europe want to adopt the French way of doing things; the interventionism which seems inherent to French economic management, and above all, the rule that French is right.

The problem that is worrying those powerful forces in British business who want Britain OUT, is that the European single currency lies on top of a European economy which is heaving and straining to develop a coherent shape, and looking increasingly dangerous. The much vaunted euro weakens by the day, now regularly below $1.10.

That, ironically, is one of the best reasons why Britain should be IN, as all Euro-pros will happily support. Because a Britain IN rather than a Britain OUT could then become part of the solution, could take a lead, rather than being a mere observer of the problem.

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