Even before last week’s pivotal prime ministerial statement on the is determined business and government will be ready for the euro. euro, civil servants had long been fighting to persuade British businesses to take the single currency seriously.
Already, the government has mailed 1.6 million small and medium-sized businesses direct in an attempt to spread the euro gospel: ‘Prepare – or else’ – whether or not the UK abandons the pound. Already, press and radio advertising campaigns have espoused the same message and telephone helplines staffed to win over dissenters.
But in the same way that these preparations have hardly changed in the days since Tony Blair’s address to the Commons – and outlined in more detail in the Treasury’s outline national changeover plan – neither has the scepticism prevalent among smaller organisations over the vexed question of the euro.
Small and medium-sized businesses have reacted with particular dismay to Blair’s plans to make companies account in dual currencies for at least six months following any decision to join the euro.
The Federation of Small Businesses, which represents 130,000 smaller companies, says this would be immensely burdensome for its members to comply with and is demanding a minimum three-year period in which companies can keep their open-ledger accounts in sterling.
The FSB argues that smaller companies have enough concerns relating to the millennium and new EU regulations without the additional problems of making provisions for possible euro conversion.
‘We need as much time as possible, and our members will not act until the referendum is passed, so telling them to start making changes by 2007 is not on,’ says FSB head of press and parliamentary affairs Stephen Alambritis.
Instead, he calls on larger companies and the government to provide funds to help small and medium-sized enterprises cope with any changes, but adds FSB members would rather adopt a wait-and-see approach in order to learn lessons from countries already involved with the euro.
It’s not just an FSB concern. Accountancy bodies are well aware that many smaller companies have yet to make any provision for the euro.
ACCA estimates that 50% of the UK export business is already with customers in euroland. Pledging to provide its members with technical support to help this process, ACCA is urging these companies to start thinking now about their attitudes and start conducting corporate health checks in order to analyse how entry will affect them.
‘Consider the euro’
Grant Thornton also agrees that smaller companies should beware of falling into the trap of believing they can defer their preparations for three to five years in line with the current changeover plan.
Like many others, the firm broadly welcomes the announcement for going some way to allay uncertainty, but head of growth and development services Andrew Godfrey says: ‘Whether we like it or not, most of us will be affected by the euro before the changeover plan is implemented. I would urge all companies that have not considered the currency to do so now, particularly those which either export or supply services to businesses that trade overseas.’
For small and medium-sized firms seeking guidance from government, the Treasury offers plenty of support to those firms keen to meet the euro challenge. The department also plans to extend this support to public bodies in the form of ‘checklists’, so that each department knows what they should be aware of in terms of IT, salaries and pensions.
Legislation to raise public funds to pay for organisations which will oversee the transition to the euro of both public and private institutions is the next step.
But whether even this will be enough to allay suspicion among euro-sceptics – who say Britain is spending too much to prepare for something the public doesn’t want – and europhobes – who say Britain is not doing enough to prepare – is doubtful.
TAX – WE MUST AVOID A REPEAT OF PAST MISTAKES
By Chris Quick
Tax experts are calling for as much money as possible to be given to the Inland Revenue to help it prepare for the euro to prevent a recurrence of the IT problems that continue to cause problems for self-assessment taxpayers.
The Inland Revenue has spent #1.5m on a study on preparations needed for the UK’s possible entry into the euro, and will incur more costs as the study into staff-training requirements progresses.
But, despite welcoming Tony Blair’s announcement last week that tens of millions would be provided to the Revenue and Customs & Excise to help them prepare, ACCA tax technical officer Chas Roy-Chowdhury says investment needs to be sufficient to ensure problems do not arise if and when the euro is introduced.
Many practitioners hold no such fears. ‘The Revenue has already published quite a lot on how it is reacting to the euro and is generally making a very smooth transition,’ says Debbie Anthony, an Arthur Andersen tax partner.
In the longer term, Tony Blair’s euro announcement has also been seen as accelerating moves to European tax convergence. ‘This is a further plank down the harmonisation road,’ says Frank Haskew, English ICA tax technical manager.
IT – SYSTEMS STILL NEED TO BE ADAPTED
By John Stokdyk
Information technology, rather than politics, was probably the key driver behind Tony Blair’s euro strategy statement.
UK high-street banks and major retail shops have been closely involved with Bank of England and Treasury euro working parties for several years.
But the banks, which have accounting systems that date back to the 1960s, face a huge task in making them ready for the euro, says Richard Tyson-Davies, head of public affairs at the Association of Payment Clearing Services.
‘Currently, around 247,000 companies have indicated they intend to open euro accounts, which banks can cope with in their existing foreign currency systems. But they are not equipped to cope with millions of customers and billions of transactions.’ The banks’ message is that even in advance of a referendum, they need firm confirmation the government is going ahead with serious euro preparations before they embark on their massive upgrade projects.
‘There’s nothing firm in the national changeover plan,’ says Tyson-Davies.
‘But there’s a real understanding of the practical difficulties facing banks and others. And that is good.’
Dennis Keeling, Business and Accounting Software Development Association chief executive, agrees the strategy statement is a signal that preparations could start in earnest. Even with the forewarning, he says, companies face resourcing problems in converting their accounting systems.
‘Large companies have worked out that 30 months only gives them a few weekends to do the changeover – either at the end of the first or second financial year,’ says Keeling. ‘With so many companies on the same year-ends, the most popular weekends are already taken.’
RETAIL – EURO WILL MAKE IT HARD TO RETAIN CONSUMER CONFIDENCE
Retailers, particularly those with branches already operating within euroland, are the best placed of British businesses to offer first-hand experience of the single currency.
Of the retailers themselves, Marks & Spencer is widely held to be the industry leader, writes Lucinda Kemeny.
Group FD Robert Colvill says financial reporting systems should not be the greatest concern for euro newcomers. ‘Financial reporting is an end product which can be changed into euros. It is the structural systems which are customer-facing and maintaining consumer confidence which are far more important.’
He says Marks & Spencer has been fortunate in that its point-of-sale systems have been recently replaced and are now euro-compliant. But from the experience of the company, according to Colvill, the key issue is to avoid customers’ confusion when faced with new prices.
‘As consumers, we all know what to expect in terms of prices far more than we might think and if the currency is changed, the customer loses that sense and that can make it hard to maintain consumer confidence,’ he says. ‘As the retailer, the responsibility is to make sure that the consumer does not lose that sense of value and Marks & Spencer is not unique in that.’
PUBLIC SECTOR – UNLIKELY TO LEAD THE WAY
By Ben Griffiths
The public sector still has a long way to go before it is fully euro-compliant, despite claims by the prime minister that it will lead other organisations in any transition to the European single currency.
With the public sector spending around 40% of the UK’s income, it would have a major influence on the approach taken by other sectors of the economy, Tony Blair told the Commons last week.
John Blundell, Local Government Association chief economist, says there is no reason why local authorities should be any slower or cause any particular problems. ‘We can work within the time frame but we need to be given the signal about the changeover as soon as possible,’ says Blundell.
But while preparatory work is underway – the LGA and others have published guidance on euro compliance – councils and other public bodies have some way to go before they are fully compliant.
Most affected would be organisations whose core activities involve dealing with business. Customs and the Revenue will take longest to change over, according to the government.
Bedfordshire County Council euro co-ordinator Bill Hamilton says: ‘Euro conversion is a strategic issue, the implications of which run through all of our services. We need to identify what those required changes are and prepare for them. But we are not anticipating any decision. We are simply planning prudently.’
The three main issues facing councils are adapting or replacing IT systems, operational matters such as policy and pricing, and briefing members and officers so that they can operate in euros.
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