UK: POLITICAL MANAGERS - Promise behind the euro threat - When the familiar currencies are supplanted by the ...

UK: POLITICAL MANAGERS - Promise behind the euro threat - When the familiar currencies are supplanted by the ... - POLITICAL MANAGERS - Promise behind the euro threat - When the familiar currencies are supplanted by the new one, a tide of transparency wi

by MICHAEL HESELTINE.
Last Updated: 31 Aug 2010

POLITICAL MANAGERS - Promise behind the euro threat - When the familiar currencies are supplanted by the new one, a tide of transparency will sweep Europe - and UK firms will be forced to compete in euros.

I remember with a wry smile my first encounter with public opinion and British attitudes to Europe in the 1960s. I was working at the time for a TV company producing a documentary about our possible membership of the Common Market. Wandering the streets of London in search of vox pop, I caught sight of a voluminous stallholder who gave promise of an instant view about more or less any subject under the sun.

'Good morning,' I began. 'I wonder if you would like to give me your view of the Common Market.' Without hesitation she replied: 'I'm against these supermarkets. They are putting little people like me out of business, aren't they?' No doubt which way she would have voted in a referendum.

Little doubt either that today there are hundreds of thousands like her nodding emphatically as they read the daily diet of Eurosceptic reporting that characterises much of our national press. To be fair to the press - a gesture unlikely to be reciprocated - they point to a ready-to-quote range of politicians available to feed their increasingly voracious appetite. Certainly in my party, the language is assuming a new permanence. While once the argument was for caution, consideration and decision, today the arguments increasingly sound as though hurdles are being replaced by brick walls, open minds by deaf ears. 'Britain out' is no longer off the agenda, but more an agenda working its way on to the list of options.

Nothing I have heard has yet shaken my view that the last five Conservative prime ministers were right when, in office, they told us that our self-interest was inextricably interwoven with that of our European neighbours.

Macmillan, Home, Heath, Thatcher and Major articulated the practical concepts that reflected a judgment I certainly have held for 50 years or so.

For the small and medium sized businesses that have sprung up and flourished since the mid-1980s, the arrival of the single currency presents perhaps the greatest threat and the greatest opportunity. Which of these two options it will turn out to be is in the hands of each of them. Their future will rest on the extent to which they anticipate and prepare for the changes that are coming. Those changes will come whether we adopt the single currency or not. And that is why it is right for managers now to prepare for probably the greatest overnight change in our trading conditions that we have ever faced.

You can see the dawning of what it all means in industry. No, I'm not talking about the clearly expounded warnings from Jack Nasser, the head of Ford, that investment planning, with all the job implications that means, could be diverted from the UK to the mainland if Britain distances itself from Europe. That is dangerous enough - but alongside that, and adding to it, is the threat to our smaller companies. Just one example: one euro, one stable currency. One pound, differing value euro. Every day a new VAT calculation to reflect the fluctuating exchange rate to keep Customs and Excise rules. Wait till the small companies take that on board.

We have heard incessantly about high-cost Europe, unemployed Europe, over-regulated Europe, and there is much in those arguments. What we are only now beginning to hear is about cheaper Europe. For all their high social costs, regulations and protective instincts, they manage to provide for their consumers products at least the equal of ours in quality but at cheaper prices. They do so, of course, because they have invested more and achieved higher productivity. They have a better long-term inflation record than we do and consequently interest rates are close to half ours, making investment easier to justify. And most of their economies are faster-growing than ours.

Put all that on one side. The single currency is going to open the floodgates of consumer choice. Hidden today behind the familiar currencies of their own countries, consumers buy where they understand. But when, in a couple of years' time, these national currencies disappear and one single currency replaces them, a tide of transparency will sweep the continent. British companies will have to compete in euros. That means pricing in euros and being paid in euros. The market will demand it. Companies that resist will swiftly lose business.

The process will accelerate the progress of the winners and hasten decline of the laggards. The additional burden for British companies outside the euro will be the exchange-rate costs and risks which the market - enhanced by pressure from large international companies - will force onto their smaller suppliers.

As the process accelerates, competition will intensify within the single market, enabling yet more successful companies to build a larger share of the market with all the economies and competitive advantage that will follow.

Our best companies will be up there with the winners. At the other end of the spectrum will be those uttering that same familiar criticism of politicians: 'Why didn't you warn us?' Why weren't we told.'

Well - you were.

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