Pound the Euro Group 7

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• Pound the Euro Group 7

Alice Bretherton Benito Martinez Gaurang
Chadha Raluca Simuic Stefano DellOrto
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The Key Benefits
Benefits to British Business
Benefits to British Economy
Easier access to consolidated market
Reduced unemployment
Cheaper costs of production
Lower inflation
No exchange rate risk
Increased Foreign Direct Investment
Consumers and firms are better off
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Benefit 1- British Business

• Simpler and cheaper to sell to 300mio customers
• Increasing competition from EU will force UK
  businesses to be more efficient and productive
• Eliminating exchange-rate risk allows businesses
  (especially SMEs1) to rationalise production and
  logistics across EU buy from the cheapest
  source

1 - 40 of business in the UK is generated by
small and medium sized enterprises or SMEs
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Benefit 2 Foreign Trade

• Separate currencies are a barrier to trade
• Conversion costs
• Currency Volatility
• Trade numbers with the EU Britain is suffering!
• Euro has raised member countries trade with each
  other by 15 in last 3 years

Trade With EU ( of GNP)
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Benefit 3 - FDI

• Britains share of FDI has fallen from 29 to 7!
  (last 25 years) Eurostat 2003
• Our future investment plans for the UK will not
  be easy as long as the UK stays outside the
  euro. H.Panke, CEO BMW
• UK share of European FDI Projects collapsing

of total FDI projects secured by Britain
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Benefit 4 Price Stability

• Average eurozone inflation was the same (2.3) in
  2002, the year after euro notes and coins were
  introduced, as in 2001
• Introduction of euro has led to a price rise at
  most of 0.29 Eurostat 2003
• Success of ECB in keeping inflation low
  throughout the life of the euro Increased price
  stability

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Benefit 5 Employment

• Since launch of EURO volatility of has led to
  3500 job losses / month in manufacturing sector
  
• Eurostat 2003
• Massey Ferguson moved tractor factory from
  Coventry, UK to Beauvais, France so as to
  eliminate negative impact of currency factors
  Robert Ratliff, CEO, Massey Ferguson
• Loss in Agricultural Sector from staying out of
  EURO 850mio per year NFU Economics Papers EMU
  and the Agricultural Sector
  January 2003.

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Benefit 6 - British Better-off

• Lower interest rates will lead to a cut in
  personal mortgage bills r ultimately leads
  to Y
• Y due to higher productivity levels
• 9 in 30 years Average Briton will be 1700
  richer!!
• Euro makes it harder for firms to charge higher
  prices in some countries better for the
  consumer
• G - govt. spending in eurozone has risen
  from 47 of GDP in 2000 to 50 of GDP in 2004
• - leads to Y

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Last but not least!More Love for Your Money!

• A cheaper Valentines Day in the EURO

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False Arguments

• Expensive to convert
• Savings in transaction costs will allow cost of
  conversion to be paid back in 2.5years
• Current costs of converting to EUR 12mio/day
• Losing control Sovereignty
• Currently national governments of member states
  still retain control of their own economies
• Domestic opposition
• 74 of SMEs would like to have a referendum for
  going to EURO

1 - 40 of business in the UK is generated by
small and medium sized enterprises or SMEs