'Prepare for EMU or face financial risk,' warns DTI

‘Prepare for EMU or face financial risk,’ warns DTI
Alex Mayhew-Smith The Government has warned that small-to-medium sized businesses face financial risks if they fail to prepare for the first stage of European Monetary Union (EMU), to be introduced at the start of next year. Although Britain will not enter the single currency system until later, next year’s entry by 11 countries into the monetary system will affect 300,000 UK businesses, said Andrew Jackson of the DTI’s euro preparations unit. Speaking at the Engineering Council’s EMU seminar, Jackson warned that companies which had not yet started to look at how to prepare for EMU were probably too late to do so without outside help. “The business which bets that Britain will not be joining the EMU and does not do anything to prepare is taking a risk,” said Chris Rees, director of management consultants Charteris. Iain Sturrock, a director with Nortel’s global operations, pointed out that preparation for EMU by businesses needed to be treated separately from the larger debate over whether Britain should enter the economic arrangement. He added that Nortel had been preparing for the introduction of EMU for the past few years. A survey carried out by the market research company NOP last year, found that about 90 per cent of companies in its sample, which focused on small-to-medium sized engineering companies, believed that EMU would impact on their business. Despite this, less than half had made plans in preparation for EMU. Even if a company only deals within the UK, it may find itself having to work in euros – the proposed currency for EMU – by business association with UK companies that do have interests outside the country. This indirect, knock-on effect has become known as euro-creep in the business world. Jackson said that we would have to wait and see “how much by default the euro becomes the trading currency in the UK”. EMU timetable at a glance January 1, 1999: Introduction of the euro and the locking of exchange rates between the 11 first-entry companies 1999-2002: Transitional period January 2002: Introduction of euro notes and coins July 2002: Changeover complete Britain has expressed its wish to join and the final decision about entry is expected early in the next parliament.

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