The main advantage for normal people is that if we were to join the Euro, it would allow easier travel between countries. This would lead to people spending more throughout Europe and with a more integrated economy running all the way through Europe, this increased spending would mean that more money would reach all businesses based in EU counties, as well as aiding normal holidaymakers when they do go away.
Also, with more trade throughout Europe, it may well cause prices over here to lower to the same rate as that in the rest of Europe as at this time, they are, on average, considerably higher. This would increase spending leading to higher profits to companies. This may also help new London based companies, as it would make it easier for them to start up.
There would also be an advantage to London as a whole as if we were to in the Euro, we would most likely retake our position as the financial centre of Europe (a title taken from us by Frankfurt in 2000). This effect would lead to an increase in how much money everyone in the surrounding area has, helping the local economy.
Aside from the issues surrounding government spending, the next problem for normal people is that there is a risk of businesses may have to put up their prices in the short term to combat the costs they have encountered from having to develop or replace their tills and retraining their staff. This could cause a loss in consumer spending, a big problem for businesses.
Another problem for Londoners is that they will have to deal with an increased amount of integration with the rest of Europe. Up until now, most of the time Britain has kept a degree of independence from the rest of Europe. Joining the Euro would cause Britain to become, increasingly, a part of Europe, as our independent control of the economy would cease to exist. This is a major issue, as many Britons want to retain our sovereignty. Any unwanted integration might well cause dissatisfaction amongst the population of London, which may in turn cause a decrease in customer spending. This sort of drop in spending may well lead to a downturn in the British economy. This brings us onto the next point…
Is this a positive or negative move for small London businesses?
All the effects on the general population of London of course have knock-on effects on all London businesses, but this section is all about the specific effects on those businesses. Joining the euro will affect everyone, but businesses will be in the front line. Importers and exporters will be greatly affected by the merging of our currency with Europe's. All businesses will have to make changes, from the accounts department to the tills, and will be indirectly affected by the changes in interest rates. It is for this reason that groups such as the Confederation of British Industry, the Institute of Directors, and the Trades Union Congress have such a vested interest in the debate. The majority of companies will be affected. Examples can be found in my appendix.
Of all the sectors of business that will be affected the most, small retailers, the tourist industry (hotels, car rentals, etc) and import/exporters will be the most affected. In my appendix there is also an individual report on each of these areas, but I have included a summary here…
Retailers;
- Increased possibility for sales overseas.
- Increased availability of overseas goods.
- Costs of changing all catalogues, other price mechanisms to Euros.
- Adapting payment mechanisms to allow for Euro usage.
- Difficulty in competing with European counterparts.
So it is obvious that retailers will be affected a lot by any change in currency, however, it would seem that the effects seem to be both positive and negative.
The Tourist Industry;
- Increased travel will lead to more demand.
- Easier for foreign tourists to determine how much things cost will lead to increased demand.
- Loss of opportunity for money exchanging.
So although it would appear that this currency swap would make no change to a lot of businesses, this example shows how something will happen to every business and how it operates.
Import/Exporters;
- Increased opportunity for dynamism through ease of pricing.
- Decreased likelihood of being competed out of the market.
- Dangers surrounding large increases/decreases in prices.
So overall this means that our acceptance of the Euro would lead to importers and exporters finding it far easier to do their work, and also it allows for customers to easily discern between prices, rather than having to change from one currency to another.
However, we must also consider how well off these businesses are now. It appears that at the moment, with the pound sterling, small businesses are very well off. The government gives plenty of aid to help get businesses started and stop them going under where possible. Will small businesses really be better off under the Euro? I believe that, in general, they will not, but it all depends on specific cases – some businesses wont be able to handle the initial costs, some wont be able to take advantage of a single currency. Others will be in a better position to gain an upper hand, and will find their profits increase significantly. In my appendix there are several examples of what owners of small businesses think. The situation for large business, however, would be far more likely to change, especially with the larger multinational corporations…
Is this a positive or negative move for large businesses?
This section is rather different to the other two. In the other ones, those who are affected have little choice about what they do as they are based solely in London and cannot move to another country in order to escape any bad consequences. However, multinationals will quite likely be based overseas in America or will be able to simply sell off any connections they have in Britain and ignore the country entirely if they wish to. However, this does not mean that the companies will be unaffected, as drastic changes to any company will entail large costs. This means my first consideration will be how exactly the Euro will affect these companies, and then I will explain just how these effects on the companies will change their actions in the UK, and how that will affect the UK as a whole…
Effects on the Company
These companies will find they are affected in most of the same ways as the smaller businesses, but on a larger scale. However, all multinationals will find themselves affected in the same way as import/exporters as they have to move between countries all the time (that’s why they are called multinationals). This means that they will find it easier to obtain goods at the cheapest prices as they can choose from anywhere in Europe, and will also find it easier to benefit from economies of scale. There is also the point that the Euro is a considerably weaker currency than the pound, a point that will encourage trade between companies here and in the US (there is also an issue as to how volatile the Euro is against the dollar, as the two have been constantly changing over the last year).
These companies will also have to cover the costs of changing over to the Euro, and will have to pay even more due to the increased scale they work on.
Knock-on effects on the UK
This is where there is a real debate. Some people follow the train of thought that says that if a company can pay it’s workers in fewer currencies it will prefer that over the other option where they have to change large amounts. However, the counter argument says that the majority of multinationals are based in the US, so they will always have to change the money once, so it is the fact that Britain is part of the European Union, which ensures resources can be easily moved around Europe that means companies choose to invest in a country rather than that country being part of the Euro which is, essentially, irrelevant to the decision.
Many people also think that another way in which we could attract more multinational companies is that if London were to regain it’s status as the centre of European commerce as this would, undoubtedly be beneficial to companies – if there are lots of companies with branches in one city, then they will find it easier to trade with each other, so will attract yet more companies, with obvious advantages to both local populations and businesses.
Conclusion
In conclusion, the Euro would have both advantages and disadvantages for every company in London, making it impossible to give a conclusive answer – even the professionals at Large London banks are remaining neutral on the issue- but it seems that the economic side suggests the Euro would be beneficial for businesses. However, there is a political side to the debate, and that means that when we consider public opinion and how well-informed the public are. My questionnaire (see appendix) implies that the people, at the moment, don’t feel they are aware of the Euro and it’s effects, and I feel that a more in-depth report, detailing properly how exactly people would be affected is vital so that people can understand what joining the Euro would mean for them before any decisions are made.
