Ministers are worried that Britain could be vulnerable to claims by European Union countries that it is turning its back on the EU because it will not join the single currency at its launch in January.
Peter Mandelson, Secretary of State for Trade and Industry, admitted he was concerned about the problem yesterday after returning from a week- long visit to the United States, where he met business leaders.
"There is a slight concern that Britain may lose out if we don't eventually sign up to the single currency," he told BBC Television's Breakfast with Frost programme. He said some competitors in the international race for inward investment were putting it around that Britain was "losing interest in Europe" and was not as committed as its EU partners.
"That is dangerous talk from our rivals because if American investors and others get the idea that we're not going to be right at the heart of Europe, they may think twice about the investment they bring to Britain because it's not just investment in Britain they're concerned about, it's access to the whole European single market," he said.
When 11 of the EU's 15 countries launch the euro in January, the Government will seek to assure companies in America and the Far East that Britain will still enjoy full access to the European market.
Mr Mandelson's comments will re-ignite a debate in the Cabinet about whether the Government should adopt a more positive stance on the single currency. After deciding not to join before the next general election, it is under fire from pro-EU businessmen and politicians for not preparing the ground for membership.
Trade unions that support the euro welcomed Mr Mandelson's remarks as a sign that the Government may relax its caution. They have been warned privately that foreign investment, particularly new car factories, may be won by France and Germany because Britain is not joining the single currency on day one.
"We should jump in before we are pushed," said Ken Jackson, the general secretary of the AEEU engineering union. "The single currency is all about jobs and if we stand on the sidelines we will miss out. I would like a clearer signal of the Government's intentions."
An international property company warns in a report today that London could become less attractive to investors because Britain will not be among the first countries to join the single currency.
Healey & Baker said London was still the favourite city in Europe for business. But its latest survey of 500 top executives from across the Continent found a widespread belief that Frankfurt could become Europe's financial capital.Reuse content