Motor industry piles on pressure for euro entry

Motor industry leaders yesterday increased pressure on the Government to take Britain into the euro, warning that jobs and investments were at risk if the country remained outside the single currency.

Speaking on the opening day of the British International Motor Show in Birmingham, Nick Scheele, the chief operating officer of Ford, said the timing of UK entry was a "very critical decision" for the company.

He disclosed that Ford, which also owns Jaguar, Land Rover and Aston Martin, had based its UK investment plans on the assumption that Britain enters the euro in 2004 at a rate of about€1.41 to €1.46.

"We export 80 per cent of everything we manufacture here and if we are not in the same currency as our competitors we are at a disadvantage," Mr Scheele said. "If we don't fix this you are going to see future investment decisions taking account of a different paradigm," he added.

Vauxhall and MG Rover joined in the call for Tony Blair to give a firm indication that the Government was committed to euro membership.

Kevin Wale, the managing director of Vauxhall Motors, said: "The euro is a factor in a lot of investment decisions. Over time, if Britain remains outside, it will make those decisions more difficult and the hurdle that bit higher to jump. When you are competing against car makers in other countries you do not need extra obstacles put in your path."

Mr Wale also said that Vauxhall, which is owned by General Motors, is cutting 500 to 600 jobs at its Ellesmere Port plant on Merseyside over the next six to 12 months. The cutbacks are part of a plan to turn the plant into the most efficient GM manufacturing site in Europe. The target is to raise productivity by 15 per cent over the next two years.

Kevin Howe, the chief executive of MG Rover, said that the company had stopped selling some models on the Continent because the strength of sterling against the euro meant that it was trading at a loss.

The result is that production and sales from the company's Longbridge plant in Birmingham will fall this year from last year's total of 170,000. The delay in British entry into the euro has also hit MG Rover's target of breaking even this year. It now expects to make a significant loss although it will be less than £100m compared with last year's lost of £180m.

"Any manufacturing base with a large slug of sales in the eurozone really needs to be in the euro itself," Mr Howe said. He added, however, that Britain should not enter at the current exchange rate of €1.59 to the pound, saying the rate needed to be below €1.50 to make UK manufacturing industry competitive.