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Wednesday, November 11, 1998 Published at 18:53 GMT

Surviving in euro land

Are you ready to give some change?

So what should a company do when it suddenly finds itself with a bill in euros, or with a large customer who insists on paying with the new single currency?

Most large companies are ready to face the challenge. Phillips, the Dutch electronic giant, for example, has been getting ready since 1994.

Some, like ICI and Boots, can afford to set up special "euro preparation units" to make sure that their international operations are ready to deal in euros.

But what about the small Yorkshire firm exporting wooden furniture? And what about the engine parts supplier who until now believed that all its business was British?

Grant Phillips of Barclays Bank has this advice: "Don't panic! This is not rocket science."

There is still time to go before January 1999, and anyway, says Mr Phillips, companies which are not ready by then will not drop dead.

[ image: Bank notes and coins won't come until 2002 - but the euro will become a reality before then]
Bank notes and coins won't come until 2002 - but the euro will become a reality before then
In the short term, most companies will be able to deal with a 'euro crisis'. A manual accounting and budgeting fix will get payments flowing.

But in the longer term all companies will have to face up to the fact that "there is no hiding from the euro", warns Mr Phillips.

The customer is King

Both the CBI and Barclays recommend that businesses should first and foremost talk to their customers and large suppliers and ask them how they want to conduct their business.

Eunice Lau says that "gathering information is crucial."

Based on that knowledge a company can then decide whether it would make economic sense to switch the whole accounting system from Sterling to euro.

It is a big step, no doubt. For many companies it will not be necessary. For some it will be vital.

Nonetheless, all managers should ask themselves a few fundamental questions:

  • How much of my business will be in euros?
  • Are my contracts 'euro-compliant' or do they have to be re-written?
  • Can my bank support my euro dealings?
  • Can I print invoices in euro?
  • Are my accounting system and my financial software able to cope with the single currency?
  • Is my marketing and distribution geared up to sell my company's products in the euro zone?
  • Should I persuade my own suppliers to trade in euro?
  • What will improve my exchange risk and cost: trading in euro or staying with sterling?
  • If I switch to the euro - how will I keep my historical data?
  • How can I train my staff to be ready for the euro?
  • And if I decide to switch to the euro, have I got the costs covered?
Of course, any serious analysis will have to be more thorough than this.

The Treasury and finance ministries across Europe have prepared fact sheets to help companies cope. And many banks have experts who will give advise to their customers.

Companies should always remember: Legally they are not obliged to deal in euros, whether inside or outside the eurozone.

The reality or hard economics, however, may look different.

The euro investment

Grant Phillips warns that nobody should be in any doubt that switching to the euro is a costly investment.

Of course, there are political considerations about sovereignty, and worries about different economic cycles in the UK and on the continent.

But there is one big consideration which no company can afford to ignore. From January 1999 onwards, 20% of the world's Gross Domestic Product will be produced in the euro zone.

Ultimately, it will be irrelevant whether the UK joins European Monetary Union or not, because hardly any UK company will be able to ignore the euro.

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