US business leader counsels UK to wait before entering single currency

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One of the most powerful voices in American business gave a strong hint yesterday that the UK should stay out of the euro until the Continent had sorted out its economic problems.

Tom Donohue, president of the US Chamber of Commerce, also indicated that American companies would continue to invest in Britain despite the government's decision last week to stay out of the single currency for at least another year.

He was speaking in London during a trip to Europe to restore relations in the wake of the political fall-out from the clash between the US and France and Germany.

Asked about the euro decision, Mr Donohue said that the British electorate should be watchful of a number of issues, such as European Union enlargement, the trial of the Italian Prime Minister, Silvio Berlusconi, and the new European Constitution.

Mr Donohue said the UK was faced with a choice of joining the euro or staying as an independent economy. "You will have to make that decision, and I'm sure that Tony Blair would love to have some of the answers to those questions," he said. "I would suggest that you are best off in the team, but right now you are not doing too bad."

He pointed out that the UK was the largest investor into the US and the largest recipient of American investment. "We have a common language, we have a common system of finance and we have a similar judicial system," he said.

He added that much of the current investment into Europe would continue at similar levels, mainly because of the attraction of new EU members such as Poland.

Digby Jones, director general of the Confederation of British Industry, who met Mr Donohue yesterday, said the Continent's rigid labour markets made Britain a good destination for inward investment.

"Our labour market flexibility and tax competitiveness feature large in the reasons why they come here rather than Germany or France," he said.

Mr Jones and Mr Donohue presented a united front in their opposition to a proposed EU directive on chemical testing that critics say would force companies to get new approvals for a range of products.

Mr Jones said it threatened to harm drugs companies in the UK, US and Germany, saying it was a "classic example of the law of unintended consequences'". Mr Donohue added: "This is an effort to seriously constrain the ability to compete with the EU."

The US business chief pledged to oppose a bill before Congress that would exclude non-US companies from defence procurement contracts. "It's a stupid idea and I'm absolutely opposed to it," he said.