Preparations for UK Membership
of the Euro
48. Some witnesses expressed broad confidence that
they would be prepared for UK membership of Stage Three of EMU,
were a decision to join taken.
Shell International Ltd wrote that "in terms of systems and
equipment, it is not thought that the implementation of the euro
will cause any significant problems. The major issue remains the
manner and timing of any potential handover and the issues of
staff training, public education and working capital requirements".
Corus said "entry of the UK into Stage Three of EMU is not
expected to cause problems, because the systems and expertise
to deal with this are available in our company".
The International Underwriting Association of London said that
it was already "operating simultaneously in the euro zone,
the dollar zone and the sterling zone".
49. The British Chambers of Commerce's survey showed
that only 16 per cent of its members had "already made the
majority of the preparations that would be needed" for UK
membership of Stage Three during the next Parliament; 31 per cent
had made some preparations; and 51 per cent had made no preparations
A number of witnesses shared the concerns of the Federation of
Small Businesses that, given the uncertainty about whether or
not the UK might join Stage Three in future, "the business
community cannot make any long-term investment decisions in regard
to the single currency and it is not surprising that small businesses
in particular are unwilling to consider the potential impact that
the euro could have on their business, let along actually make
any preparations for it".
Ms Lea, in oral evidence, did not envisage firms which had yet
to prepare for possible UK membership of Stage Three of EMU "lifting
a finger until they have got a definite date" of entry.
Mr Sweeney thought that "ideally" banks would wish to
prepare for possible UK entry, and particularly the transitional
period when both sterling and euro would be legal currency in
the UK, before the decision to join was taken, but "it would
be very difficult for banks to justify to their shareholders expenditure
of £1 billion plus ... before they are pretty confident that
it is actually going to be needed because the Government is going
to take a decision to go in".
The BBA's written evidence described how banks mostly process
euro transactions on paper at the moment and said that investment
would be required to automate systems if the UK joined Stage Three.
The Economic Secretary, however, perceived "no evidence of
anything other than continuing progress".
It is clear that many small- and medium-sized firms are waiting
for the Government to decide before preparing for possible UK
membership of the single currency.
The National Changeover Plans
50. The Government has published two National Changeover
Plans since Stage Three of EMU was launched, following a recommendation
of our 1998 Report,
the first in February 1999 and the second in March 2000. The first
National Changeover Plan was "a consultative document",
which represented "a snapshot of where preparations stand
today on the practical aspects of possible UK entry; [and] a summary
of issues identified, conclusions reached and work to be done".
The second Plan was intended to "provide a framework against
which organisations can plan, to provide a picture of what the
different phases of a changeover might look like, to facilitate
dialogue on changeover planning issues as well as to report on
It is noticeable that the Second Outline National Changeover
Plan focuses on the preparations which the public sector could
undertake for possible UK membership of Stage Three of EMU, rather
than on private sector preparations, which were a focus of the
51. Witnesses expressed a broad range of views about
the usefulness of the National Changeover Plans. Ms Barker thought
that the Plans had provided "helpful information" which
enabled businesses to have a "better understanding of what
would be required" during the changeover process, but speculated
that business preparations for possible UK membership of the single
currency had slowed because the Plans showed how far off was the
introduction of euro notes and coins, even if a decision to join
was made early in the next Parliament.
The British Retail Consortium welcomed the Plans in general but
criticised the latest one for giving "little indication of
the size, cost and urgency of preparing for the euro".
Mr Cushnaghan described the Plans as "not terribly relevant
to us because we have been driven by the commercial world".
The Forum for Private Business had "found very little evidence
to suggest that SME owner/managers have read the document".
The Business and Accounting Software Development Association (BASDA)
said that the Plans "demonstrate that the Government is aware
of most of the issues" but argued that "its proposals
for how the work should be tackled and the amount of money which
will be required by the public sector, demonstrate a complete
lack of understanding of the complexities of the task involved".
52. An important aspect of the Changeover Plans is
an illustrative timetable for the steps that would need to be
taken from the Government's decision to recommend joining Stage
Three to the withdrawal of sterling as a unit of currency.
It is envisaged that the whole transitional period would span
between 34 and 40 months. The Economic Secretary told us that
the timetable was "a result of the discussions that we have
had with a number of bodies, both public and private sector, to
map out what seemed realistic" and she said that she had
received no representations that the timescale was either too
long or too short.
Most witnesses questioned about the timetable were content for
there to be a transitional period of around 40 months.
Mr Williams, of Canford Group plc, thought that "it could
be done a lot quicker than 40 months. Inevitably there are going
to be a large number of businesses who leave it until the last
BASDA concluded that the "proposed UK transition period is
likely to be inadequate" without greater Government commitment,
including extra funding, to public sector changeover issues.
232 App 31 Back
App 26 Back
App 2 Back
App 15, section 3.5 Back
App 14 Back
App 12 Back
App 9, section 7 Back
App 10, paragraphs 10, 12-14 Back
App 6, section 5 Back
App 4; and see App 16 paragraph 59 Back
App 17, paragraph 1.3 Back
Second Outline National Changeover Plan, HM Treasury, Mar
00 (hereafter NCP2), annex 1 Back
App 28; and see Ev, p52 Back
App 7, table 2 Back
Q176; see App 4 Back
App 13 Back
App 6 Back
App 26; and see App 31 on views of LIFFE Back
App 7, table 2 Back
App 17, paragraph 1.9; also Ev, pp74-5; App 16 paragraph 62 Back
Q353; and Q175; Ev, p77 Back
Q346; also Ev, p70, paragraph 11 Back
Ev, pp68-70 Back
EMU98, paragraph 67 Back
First Outline National Changeover Plan, HM Treasury, Feb
99, p13 Back
NCP2, p13 Back
Q266; and Ev, p74 Back
App 21, paragraphs 1 and 6 Back
App 4 Back
App 20, section 1 Back
See NCP2, pp7, 15, 19, 43, and the supplement to chapter
App 20, section 1 Back