Mercedes warns UK is scaring away investors

Britain's lack of commitment to European Monetary Union is scaring away potential investors, claims Helmut Werner, chief-executive of the German car giant Mercedes-Benz.

Mr Werner said yesterday: "We can't plan to invest in Britain within the next few years. But I am totally convinced that if the UK takes part in a single European currency, Britain will be a very, very interesting country for Mercedes to invest in."

He warned that earnings on investments in Britain, if it stayed out of the single currency, would become much more unpredictable than in countries belonging to EMU.

This would have damaging consequences for British companies as well, he believes. "UK suppliers would become incalculable to us. Due to possible ups and downs of the pound we would not know how much their products will cost us over a longer period. A free floating pound wouldn't support the British economy."

Since last year he, like a lot of other German managers, has become sensitised to currency-risks. The big losses Daimler-Benz, the Mercedes parent, had to face last year were influenced to an extent by the strong mark.

Mr Werner said: "We Germans suffer from a strong mark for 11 months of the year. It is only in the 12th month when we go for cheap holidays in Italy that we are happy about our hard currency."

Mr Werner began to "globalise" Mercedes production in 1993, starting with its commercial vehicle division. The company plans to do the same with its passenger cars side.

He would prefer a united European money policy. France, pushing strongly towards monetary union, has already profited. Mercedes has decided to manufacture its new low-priced "smart-car" in France.

But Mr Werner, boss of nearly 200,000 Mercedes employees, emphasised what Britain can offer inward investors. "In the last 10 years the deregulated British economy has undergone some very positive developments, which have made it a very interesting market for us to invest in."

His remarks coincided with the release of new research showing that a quarter of Britain's manufacturing output is produced by foreign-owned companies, up from less than one-fifth in 1986. The increase has been driven by European investment, with EU, Swiss and Swedish firms accounting for two-fifths of the total.

The research, by Professor Steve Davies at the University of East Anglia, shows Japan accounts for only 7 per cent of total manufacturing output, and is heavily concentrated in a few industries. US multinationals remain most significant.

The number of big EU multinationals producing in Britain increased from 13 to 27 between 1986 and 1993. There are now 15 European firms in Britain's top 100 companies.

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