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Rt. Hon. Margaret Beckett - Former Secretary of State for Trade and Industry (May 1997 - Jul 1998)Seminar "Preparing Businesses for the euro" |
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I am delighted to be here today with my colleague, David Simon, Minister for Trade and Competitiveness in Europe, to launch the Government's programme of EMU preparedness seminars. The introduction of the single currency - the euro - across most of the European Union on 1 January next year will change the business environment not just in those 11 countries, but across the whole of Europe. Europe is going through some exciting changes which could bring real opportunities for businesses who plan and prepare properly, but potential costs and problems for those who put their heads in the sand right across the EU, but nowhere more so than in the UK. As you know, European Leaders agreed over the weekend that 11 countries: Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, Netherlands, Spain and Portugal will join the single currency on 1 January 1999. On that day just under eight months away the exchange rates of those 11 countries will be locked irreversibly, the European Central Bank will assume responsibility for their monetary policy and the euro will be born. Whatever the doubters have said over the years EMU is now fast becoming a reality. Britain must wake up to that fact. Many companies seem to believe that because the UK is not joining the euro in this first wave they do not need to take any action. This may be understandable given the very widely touted opinions of the previous administration and the lack of effort put into helping business prepare. But it is a dangerous and complacent attitude. The euro zone, operational from 1 January next year, will account for nearly 50% of British export and over 40% of British overseas direct investment. Business trading within the euro zone will have cheaper transaction costs, no exchange rate risk, and price transparency. This will mean substantial changes to the competitive environment. This is not just an issue for one or two sectors. All sectors need to think about it carefully, but clearly exporters and importers and those in supply chains will be particularly affected. As around 50% of UK trade is with the rest of the euro zone in itself this covers a wide range of firms, both large and small. Over 12000 firms in the Midlands are actively involved in export markets, ranging from Rover, Jaguar, JCB, Boots, Toyota, Raleigh, to a multitude of successful small firms. This morning we will be able to hear from Richard Brucciani of PAL, a successful exporter, what he is doing to deal with the euro. If you are an exporter, you have to be ready to deal in euro. A large number of exporters currently price in sterling; and as more and more of their competitors deal in one single currency the pressure will mount for them to do likewise - or lose the business. Similarly, if your competitors come from within the euro zone and are quoting in euro, it will be you that has to take the exchange rate risk; are you prepared? UK firms in supply chains involving multinationals may soon find themselves being asked to deal in euro, even if they haven't been asked already - and even if they don't trade overseas. 500 West Midland companies are owned by companies based elsewhere in the EU. They will be among the first to notice the changes. My advice to you is to take the initiative and talk to the companies you deal with to find out their plans. Lucy Neville-Rolfe will be able to provide to suppliers some advice from Tesco's perspective as well as her views on the impact of the euro on her business. Finally, there are those businesses trading solely in the UK. Many may feel that as firms that do not currently export they are immune. But the transparency of prices that the euro will bring will affect them too. Competitors from elsewhere in the EU may well emerge. Or they may discover that they have opportunities to get into new markets themselves. What effects will the euro have on their rivals' competitive strategy and how if need be should they counter this? Transparent pricing offers some threats, which firms need to be ready for, but also - for competitive UK firms - it offers huge opportunities. Every management and every board in every firm in the country should be thinking through, now, what the euro will mean for them both practically and strategically. That's just a quick summary of some of the issues raised. I know that Roger Pedley from KPMG can talk more fully about the practical issues industry needs to address. But as I say EMU is not just a challenge. If I have one clear message today it is that you do remember that it is a real opportunity too. Cheaper transaction costs, transparent pricing where goods are competitive and the simplicity of dealing in one currency can bring real benefits to UK companies who trade in the euro zone. So please think strategically about what the euro means for you and then prepare. Of course that preparation ultimately goes far beyond the practical issues already discussed. In reality only truly competitive companies, embodying the latest in good practice, bench-marking themselves against their competitors, innovating and training, can expect to compete in the ever stronger markets which EMU will bring. You may rightly ask what is the public sector doing to help? We are working both to facilitate the use of the euro by business and to help provide the information and advice industry needs in order to prepare. When it comes to the use of the euro, from 1 January 1999, businesses and individuals will be able to pay their taxes to the Inland Revenue in euro. Firms will be able to pay VAT in euro. Accounts can be filed in euro. Some EU grants will be available in euro. Our aim in all this is to ensure that businesses which find it most convenient to work in euro are able to do so. We also have a key role in providing information on what business needs to do by 1 January 1999, but this has to be as part of an effective communication campaign where we are responsive to industry's needs and listen to what you are saying. Throughout April, David Simon held a number of discussion groups across the UK with representatives from small and medium sized businesses to ask them how well they had prepared for the euro and what they needed and expected from Government. These discussions have been used by the Treasury's Euro Preparations Unit to develop a communications campaign to raise business awareness. Although there is a mass of excellent information available from a number of organisations, companies have told us they need a clear starting point in their search for help. From today therefore there will be a dedicated euro preparations telephone line through which to request literature on the euro, which includes details on where to go for further information. [Number 08456-01-01-99 on screen] That number should be fairly easy to remember. In addition we have a new website [http://www.euro.gov.uk on screen] - again an address that we hope should stick in your minds! - which contains further strategic and practical information for businesses on the euro. We also heard clear views from industry on the literature they need. Clear short fact sheets on key issues like exchange rate risk and IT requirements. Available today are copies of our booklet "The Euro and your business", but from the end of the month we will be able to send all of you copies of our key fact sheets. But central Government knows it cannot do all of this on its own. Excellent information is already being made available from Banks, Accountants, Chambers of Commerce. We want to continue to work alongside these bodies and encourage their efforts and developing. Regional and local partnerships are also key. In the West Midlands, David Ritchie, who is chairing this event, heads the Government Office which will coordinate and catalyse regional activities. In the East Midlands, Dennis Morrison will soon be taking over from Mark Lanyon. We want to work alongside regional networks throughout the UK. But for small businesses I want to make special mention of the DTI's Business Link network, which has established itself as the first port of call for many companies seeking outside help on a wide range of business issues. Business Links provides an invaluable resource, especially for smaller and less established companies, and we hope they will be an essential part of our euro preparations advice network. The Government is serious about preparing businesses for the euro. We are also committed to partnership and to helping British companies compete in world markets. Our Competitiveness White Paper due in the Autumn will outline our plans for a range of proposals to promote competition across UK industry. In short we are determined to ensure that when the single currency is introduced in 11 European countries next year, we are all in a position to benefit from it. While the focus of business - and Government - is rightly on the changes that will take place in January, we are not ignoring the longer term. Business has made clear to us that if they are to plan properly they need to know as soon as possible what further changes there would be if the UK was to join EMU. As you know the UK is committed to joining a successful single currency provided the economic circumstances are right. Planning something of this scale requires time and good preparation. That is why we will publish - before the end of the year - an outline changeover plan, a document which will explain to business and to the general public, what steps would need to be followed if we were to adopt the single currency. We will produce the changeover plan by working closely with business and other key organisations including the unions. To really succeed needs your active support. Talk to your professional advisers and your local business networks, whether TECs, Chambers of Commerce or Business Links. As one manager of a small company has said to us "we need to talk up and down the supply chain". In particular I would recommend that you talk to your own staff so they can start getting involved. I think it was Bill Gates who said "my best ideas come from my most junior staff - the executives are too busy to think!" His business does not seem to be doing too badly. Together we can take our companies forward to ensure Britain's place, not only in Europe but in the world as the enterprising nation that we all know it is. Thank you very much and good luck! |
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Other speeches by Rt. Hon. Margaret Beckett - Former Secretary of State for Trade and Industry (May 1997 - Jul 1998)
(the following are available from the archive) |
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