Britain Prepares for Euro
CAMBRIDGE, England (AP) _ Months before the January launch of Europe’s single currency, Sian Wicklow opened a euro bank account for Giorgio, the clothing store where she oversees logistics.
The Cambridge store sells exclusive European brands such as Gucci, Armani, Jil Sander and Versace, and Ms. Wicklow wanted to be able to pay her suppliers in the new currency. That way, she could take advantage of fixed exchange rates between other European currencies and the euro.
``Although no one is billing us in euros yet, I can now pay for Jil Sander from Germany in euros and know where I stand,″ she said. ``We are being pro-active.″
The British government is also trying to be pro-active.
Prime Minister Tony Blair announced Tuesday that although his government’s policy is still to wait and see how the new European currency works before making a decision to join, the government has started preparing for a changeover.
He indicated a decision to convert the pound to the euro would be made soon after the next national elections, which must be held by 2002, but said preparations had to begin now in order to provide a valid choice.
``Britain should join a successful single currency, providing the economic conditions are met,″ Blair said in the House of Commons. ``If we wish to have the option of joining, we must prepare.″
Euro supporters say that although Britain has not adopted the new currency, British companies who use it will gain better access to increasingly competitive markets across the English Channel.
Still, it has been nearly two months since the euro became legal currency in 11 of the 15 European Union nations, and there is no sign of a British euro rush.
A telephone survey conducted for the Treasury in October of 1,768 small and medium-sized British companies _ those with less than 250 employees _ showed that while 45 percent had trading links with Europe, only 13 percent had made specific preparations for the euro, including converting prices and adapting computer systems.
Traders in London’s financial district worked round-the-clock to prepare for the euro’s launch, and the government has set up a euro Web site and offers an information packet that proclaims ``U.K. firms cannot afford to ignore the euro.″
But there is little movement toward the euro outside the financial sector, and certainly no slew of corporate announcements.
``British excitement followed by a shrug of indifference″ was The Financial Times’ take at the end of January.
A phone poll of 753 executives conducted for the newspaper in September found that 26 percent wanted to join the euro as soon as possible and 37 percent favored entry after the next national elections.
``But it’s early days yet,″ said Douglas Godden, senior policy adviser at the Confederation of British Industry. ``To some extent, people are waiting to see how it works.″
The study, conducted by the polling and research company MORI, had a margin of error of 3 percentage points.
Although many of Britain’s 1.6 million small- and medium-sized businesses are still finding their way, major groups such as Imperial Chemical Industries, British Petroleum and the automaker Rover, familiar with international markets, have been quick to set up euro bank accounts and ask suppliers to invoice them in euros.
In January, Packard BioScience of the United States completed its takeover of AEA Technology’s British-based instrumentation division in euros, paying 9.8 million euros, or $11.4 million.
British businesses who don’t use the euro risk losing ground to continental competitors, who share the same currency with their clients and whose prices are therefore not subject to rate fluctuations.
The reluctance to embrace the single currency is baffling to Richard Brucciani, chairman of Pal International, a small company in the central England town of Oadby that manufactures disinfectant wipes and hygienic headwear for the food and drug industries.
Pal International sells 44 percent of its products to other European countries and has started pricing its goods in euros.
``When you deal purely in euros, you blow the mist away, prices become clear and you let yourself into a major marketplace,″ Brucciani said.
He conceded price harmonization can reduce prices and eat into profit margins, ``but that will increase competition,″ he said.
Stacking aromatic French, Swiss and German cheeses in his deli in a winding Cambridge alleyway, Paul Sutton-Adam said his foreign suppliers still bill him in pounds sterling, ``so I’ve not had to change anything yet.″
But when euro notes and coins are issued in two years, he said, the currency ``will become much more real and Britain will have to accept it.″
``By 2002,″ he said, ``I think we’ll be on board.″