In January of this year, euro cash became a reality for the 300m citizens of the 12 euro countries. It became a reality for businesses in those countries too. They now price in euro, issue invoices in euro, and pay suppliers in euro.
In principle the government is in favour of membership of the single currency; in practice, the economic conditions must be right. The determining factor underpinning any government decision on membership is the national economic interest and whether the economic case for joining is clear and unambiguous. In October 1997, the chancellor set out five economic tests that will define whether a clear and unambiguous case can be made. The government is committed to completing an assessment of the five tests within two years of the start of this parliament.Impact considerations
Regardless of whether Britain joins or not, and whatever your views on this may be, many British businesses are bound to be affected by the single currency. There is a greater need than ever for those firms that have not already done so to consider how the euro might impact on their operations. The effects are not limited to businesses that deal directly with the euro area. The euro also has implications for those with competitors in the euro area, and those that trade with overseas visitors, such as the tourism sector.
The arrival of euro cash in the 12 of the EU member states is not just a challenge for British business. It is an opportunity.
Putting the systems in place to buy and sell in euro could have a positive impact on future growth of UK companies. For exporting firms, the transparency of prices across the euro area could reveal that its products or services offer excellent value for money and are able to compete strongly with those of local companies. Some firms may as a result choose to think about expanding into potential suppliers. Whether companies pay in euro or sterling, the adoption of the euro makes it easier for them to compare different suppliers' prices directly, which could lead to savings on the cost of raw materials.Raising awareness
The accountancy profession worked successfully with government last year, in the run up to the introduction of euro notes and coins, to encourage British companies to prepare. Six months on, despite our best efforts, many companies have still to realise the full impact that the euro will have, and indeed may already be having, on their business. I would therefore urge the profession to continue to bring the impact of the euro on business to the attention of its clients at every opportunity.
The business opportunities of the euro, whether we join or not, are there now to be taken. We should continue to work together to ensure that British business does not waste those opportunities.
European markets that the shared currency makes more accessible. Relaunching its products in euro could unlock new marketing opportunities. UK firms exporting to several euro area countries could benefit from reduced costs, because they need only deal in one currency throughout most of Europe.
Likewise, for UK importing companies, accepting invoices in euro could widen their choice of
Companies wishing to receive further information can be directed to our website - www.euro.gov.uk or contact the euro helpline - 08456 010199.The government's five economic tests that will define whether a clear and unambiguous case for UK entry can be made are:
- Sustainable convergence between Britain and the economies of the single currency;
- Whether there is sufficient flexibility to cope with economic change;
- The effect on investment;
- The impact on the financial services industry;
- Whether it is good for employment.