Joining euro 'would cost less than £12bn'

Britain would recoup the cost of joining the European single currency in less than three years, an independent report claimed yesterday.

Britain would recoup the cost of joining the European single currency in less than three years, an independent report claimed yesterday.

The cost to business and government of abolishing the pound and adopting the euro would be £11.7bn, according to research by Bannock, a consultancy firm. This is more than one-third lower than the findings of a similar report commissioned by Business for Sterling (BfS), an anti-euro lobby group.

The pro-euro membership lobby sized on yesterday's report. Kitty Ussher, chief economist for Britain in Europe, said: "This report shows that the estimates of the cost of euro conversion put about by the anti-Europeans are entirely bogus." But Dominic Cummings, co-director of the No campaign that superseded Business for Sterling, said the precise figure did not alter the arguments over the euro. "The key issue is the 'one size fits all' interest rate," he said. "It is nonsense to base a decision [to join] on transaction costs."

Bannock said it calculated joining the euro would cost businesses £10.3bn. It used a British Bankers' Association estimate of a £1bn cost to the banking sector and estimated a £400m cost to the Government. The total of £11.7bn was equivalent to 1.26 per cent of annual economic output. Chantrey Vellacott, an accountancy firm working for BfS, estimated the cost at £34.4bn to £36.2bn, or 4.2 per cent of GDP.

Bannock said businesses invoicing in euroland currencies would save £4.5bn a year thanks to the elimination of exchange rate risks when importing or exporting.

It said that the "payback period" for joining the euro for the UK would be slightly more than two and half years, although this would vary across sectors.