Business chiefs turn heat on Blair over sterling and EMU

Senior industrialists will today tell Tony Blair that business is being hurt by the strength of sterling and the lack of commitment to entering a single currency when they attend a working breakfast in Downing Street. In return, the Prime Minister will tell his guests that he wants to see more job swaps between business and Whitehall.
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The Independent Online
Jobs, investment and profits are all being undermined by the rise in the value of the pound, according to businessmen invited to this morning's breakfast briefing at Number 10. Among the 17 industrialists attending are the chief executives of some of Britain's largest inward investors who are also anxious to see the Government commit itself to economic and monetary union even if the pound does not join the first wave in 1999.

Others present will include the chairmen of several large firms that have issued profit warnings because of the strength of sterling. One of those attending, Dr Walter Hasselkus, the chairman and chief executive of the Rover car group, said it would have to review its purchasing arrangements and export plans if the pound remained at its current levels of DM2.87.

Rover, now owned by the German car maker BMW, spends pounds 4bn a year on components of which 85 per cent is sourced in Britain. In addition, it is Britain's biggest car exporter and expects overseas sales of the new small Land-Rover, the Freelander, to contribute pounds 1bn to the balance of payments when full production is reached.

"At the end of the day we have a responsibility to make Rover a profitable business and the strength of the pound does not help that," said Dr Hasselkus.

He added that if the Government were to give a firm commitment to EMU then that might ease the situation by bringing sterling down to a more manageable and competitive exchange rate in the region of DM2.30 to DM2.40.

The meeting is also being attended by Jurgen Gehrels, chief executive of Siemens UK which is investing pounds 1bn in a microchip plant in the North- east. Mr Gehrels, one of the most prominent supporters or EMU, and has said that Siemens might not have taken the decision to invest so heavily had it known at the time that the UK might not join a single currency.

Among those attending from companies hit by sterling's strength are Sir Ronnie Hampel, chairman of ICI, which estimates the strong pound will knock pounds 90m from profits this year, and Tony Greener, chairman of Guinness, which puts exchange rate losses at pounds 60m this year and a further pounds 60m in 1998.

Ian Gibson, chief executive of Nissan Motor Manufacturing, which will also see its profit recovery held in check this year by sterling, is another of the business chiefs attending. Nissan exports about 70 per cent of the cars made at its Sunderland plant.

Mr Blair will respond to the industrialists by telling them he wants more high-flyers from business to swap between jobs in the Civil Service and industry. At present, job swaps only take place at Civil Service grade 5 and above, but Mr Blair wants to extend the arrangement to cover lower grades and make the appointments for shorter periods. The meeting is the first in a series of working breakfasts. Other sessions are planned covering the retail sector, the City and finance and small business.

In her first speech on manufacturing since taking office, Margaret Beckett, President of the Board of Trade, last night pledged to help revitalise Britain's manufacturing base by encouraging exports and supporting a campaign to benchmark UK companies against overseas competitors and providing a stable economic framework. But she gave no promises on exchange rates or EMU.

However, John Redwood, her Conservative shadow, attacked Mrs Beckett for failing Britain's exporters, saying the Department of Trade and Industry had a lamentable record on dealing with export licences and competition inquiries. He urged her to hurry up and make a decision on the P&O-Stena, ferry merger, about which Mrs Beckett held talks yesterday with the European Union Competition Commissioner, Karel Van Miert.

The talks also covered the British Airways-American Airlines alliance. A DTI spokesman said the meeting had been constructive" but would not say whether either deal was nearer to being cleared.

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