'Join the euro or we'll quit Britain'

Head of world's biggest electronics firm delivers stark warning to Blair

Tony Blair's policy on the euro suffered a fresh attack yesterday when the world's biggest electronics firm warned it would quit the country unless Britain joins the single currency.

Tony Blair's policy on the euro suffered a fresh attack yesterday when the world's biggest electronics firm warned it would quit the country unless Britain joins the single currency.

Kunio Nakamura, president of the Japanese giant Matsushita, which makes Panasonic and Technics products, said the strength of the pound was crippling his company.

In the starkest warning yet that foreign investors are preparing to move production out of Britain, Mr Nakamura said his firms and others were frustrated by the Government's stance. "The immediate question is when the pound will be included in the euro," he said.

"If Britain does nothing to solve the problem, foreign companies, regardless of whether they are Japanese, American or whatever nationality, may exit the country."

Matsushita Electric Industrial Co Ltd is the world's biggest consumer electronics manufacturer and has seven factories in Britain employing 4,500 people. The firm, which makes Panasonic TVs, faxes, computers and videos as well as Technics hi-fis, has sites in Cardiff, Newport, Reading and East Kilbride. The firm has already shifted most of its television set production from England to the Czech Republic.

Mr Nakamura said in Japan yesterday: "We would like to do as Nissan President [Carlos] Ghosn did and visit the country to complain that a strong pound is making it difficult for us to continue production in the country, although there would be a lot of confusion if all the firms did so." Observers assumed he would want to speak to Mr Blair directly.

Mr Nakamura's remarks were seized on by pro-euro campaigners and some Labour MPs as proof of the need for a more positive message from the Government on euro membership. Jon Owen Jones, in whose Cardiff constituency Panasonic employs 2,300 people, said he was extremely worried about the pull-out threat.

"I have been concerned for some time that Panasonic may switch production to the eurozone because of over-valuation of the pound against the euro," he said. "This news today shows how important it is for Britain to join a successful single currency as soon as the economic conditions are right."

Simon Buckby, Britain In Europe campaign director, said the Japanese manufacturer's concerns proved foreign investors were ready to leave Britain over the euro uncertainty. "The high pound is a symptom of sterling's volatility outside the euro," he added.

"Every week there are new warnings of the damage the over-valued pound is doing to British manufacturing. Thousands of jobs have been lost, new investment is at risk. Inward investment is one of the cornerstones of Britain's economic success. This is a warning that our prosperity is at risk if we rule out the single currency."

Nissan told Mr Blair that the strength of the pound was forcing it to consider making its new model of the Micra in France instead of Britain, threatening thousands of job losses. The Prime Minister acknowledged the problems but refused to budge from his policy of recommending a referendum on the euro only when economic conditions were right.

The Government was warned last month by the Department of Trade and Industry's Invest in Britain Bureau that Britain faced a "meltdown" of manufacturing if it remained outside the euro.