Heseltine: UK must decide over euro

Mr Heseltine, left, wants Mr Blair to act

British industry is facing "carnage" because of the strength of the pound - and the UK must make it clear that it plans to join the euro, former deputy prime minister Michael Heseltine has warned.

Mr Heseltine said the problems facing Rover's Longbridge plant in Birmingham and Ford in Dagenham were the "tip of the iceberg" of what could happen if Britain does not join the single European currency.

Today at Longbridge and at Dagenham one can see just the tip of the iceberg of what the price could actually amount to

Michael Heseltine

The Tory MP, who last week announced he was standing down from the House of Commons, urged Prime Minister Tony Blair to reaffirm the government's intention to join the euro.

Speaking at a news conference organised by the Britain in Europe campaign, he said Mr Blair must end the uncertainty about the government's plans.

He said doubts about the UK's intentions were making it increasingly difficult for British exporters to compete against their European rivals.

"Of course we can delay but these are not options without a price. We will pay the price the longer we delay," he said.

He said Mr Blair should make it clear that with sterling at a "unrealistically" high value against the euro, the UK would not join while the pound is so strong.

Such a statement, he said, would have a beneficial effect on the exchange rate.

But failing to act could lead to a spread of the problems being faced by UK car factories.

He said: "Today at Longbridge and at Dagenham one can see just the tip of the iceberg of what the price could actually amount to."

Mr Heseltine stressed that coming to the aid of manufacturing industry would be in the government's interests, with 120 Labour-held seats in marginal constituencies where two-fifths of the jobs were in manufacturing.

'Serious judgment'

He said: "The danger of that to the government to its parliamentary majority is self-evident. The urgency of the problem must be all too apparent to them.

"For the government there is a serious political judgment."

Mr Heseltine welcomed the merger between the London and Frankfurt stock exchanges, saying it was an "absolute model" of what Britain should be doing to preserve and enhance its economic interests.

And he rejected complaints that it could mean firms on the London Stock Exchange being quoted in euros rather than sterling, saying: "As most of the business will be in the euro-zone, what would you expect them to be quoted in? Pounds?"

Mr Heseltine accepted that differences in interest rates - which are currently 6% in Britain compared to 3.75% in the euro-zone - posed problems if Britain was to join the euro.

But he said Chancellor Gordon Brown could ease the pressure on UK rates by reining back public spending.