US firms gear up for euro as UK dithers

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The Independent Online
COMPANIES FROM Britain and other European countries struggling to adapt to Economic and Monetary Union face a fresh threat from US businesses, according to research from KPMG Management Consulting.

The discovery that US organisations are ahead of their European counterparts in such key areas as readiness for pricing issues and company location comes as British scepticism toward the euro appears to be hardening.

The past week has seen Paul Sykes, the millionaire businessman, take up the late Sir James Goldsmith's campaign against British membership of the single European currency, even as Tony Blair, the Prime Minister, is reportedly urging ministers to make a big push for entry.

Mr Sykes, who has given financial backing to anti-Emu Tory candidates, will run his campaign alongside the "Business for Sterling" group that includes Lord Hanson among its members.

Meanwhile, research by the financial recruitment consultancy Robert Half International, published yesterday, says UK businesses are "burying their heads in the sand" and not preparing for the euro.

"Most companies are running away from the issue," one executive told the consultancy. "If it was viewed simply as a new currency they should cope, as most deal in foreign currencies. However, it is seen as something totally alien and they seem frightened by it all."

Another added: "UK businesses have their heads buried in the sand. They believe that Emu won't happen in the current format and hope for special conditions to be attached to how we join."

Jeff Grout, the consultancy's managing director, found the results of the survey shocking but not surprising. "Businesses have got to realise that even though they may not be trading in Europe, their customers or suppliers are - and could insist on trading in euros. If businesses aren't geared up to cope with even basic changes to their finance systems, they're going to have a rude awakening in 1999."

One of the organisations leading the way in seeking to convince European companies that Emu will bring opportunities as well as threats is Citibank, the giant US financial organisation that is currently in the process of merging with Travelers Group.

Likewise, Chase Manhattan Bank was last week reported to have been seeking to gain a lead by adopting the euro for all internal operations previously conducted within the countries of the 11 states taking part in the first phase of Emu. And the securities firm Merrill Lynch is opening new offices in a bid to cash in on the new market.

Such moves back up the findings of the KPMG survey that 31 per cent of US companies, compared with 46 per cent of those in Europe, still have to start their review of the effects of Emu on their pricing structures, and that 62 per cent of US organisations, against 55 per cent of Europeans, have started or completed a review of international business procedures.

Nearly half of US companies thought Emu would make intra-European trade easier, against a quarter of European companies, said Vicky Pryce, chief economist with KPMG Management Consulting.

"Ironically, European companies that are not prepared even for increased competition within the EU once Emu starts are now facing additional threats from the US. They must act quickly to get ahead or risk losing ground," she added.