Chris Godsmark, Business Correspondent, assesses how businesses are switching to the single currency.
The review of accounting policy by BP is the clearest indication yet of the way British businesses are moving towards the single currency regardless of the Government's policy. Gordon Brown, the Chancellor of the Exchequer, last week pledged that Britain would probably sign up to the euro, but not until early in the next Parliament.
BP, the UK's largest company by its market value of pounds 51bn, uses the dollar as its main group-wide currency but restates its financial results in pounds every quarter. John Browne, chief executive, said yesterday the company was considering adopting the euro in place of the pound before the UK joins.
Under the transition plans, the euro will become legal tender alongside existing currencies from 1999 to 2002, when the new currency takes over.
BP is one of the first large British-based multinationals to suggest it could ditch the pound before the millennium. Marks & Spencer has said its British tills will probably accept euros as well as pounds from 1999, while suppliers and customers of the UK operations of Siemens, the German electrical engineering giant, are being asked to use the single currency.
Mr Browne revealed that BP was already spending $100m (pounds 63m) on new computer systems to prepare for the single currency and was investing the same amount on top to cope with the millennium computer bug. BP said its policy would depend on the demands of investors, customers and suppliers. Though only 3 per cent of its shares were held by continental institutions, the figure was rising fast and some big London-based investors could also prefer to deal in euros.
John Buchanan, BP's chief financial officer, said: "If the big continental companies report in euros then we would have to look at that. Some of our customers will want to pay us in euros and if that's what customers want then we'll do it."
Under Lord Simon of Highbury, its former chairman, BP had been one of the most pro-European of UK companies. The approach has continued under Peter Sutherland, its new chairman, who was a former European Commissioner and one of the best-known campaigners for the euro.
Mr Buchanan said BP would prefer the UK to join the single currency in the first wave in 1999. "We'd be happy going into monetary union at a faster pace. It has an inevitability about it, so why don't we get on with it?"
BP yesterday revealed another record set of profits, with replacement cost earnings before exceptional items rising by 11 per cent between July and September to pounds 691m. Mr Browne said the group had already achieved cost savings of $450m so far this year, 50 per cent more than the $300m target for the whole of 1997.
A $2-a-barrel drop in oil prices hit third-quarter profits from oil exploration and production businesses, which fell by pounds 87m to $674m. BP said delays to its deepwater Foinaven field to the west of Shetland had cost the company up to $300m.
Mr Browne said no decisions would be taken on further share buybacks until the Government finalised its policy on dividend tax credits.Reuse content