20000128

Euro costs seen at 34 mln stg per company survey

LONDON: Europe's largest companies could face costs of 34.2 million pounds ($56.19 million) each in adopting the euro, according to a survey by KPMG Consulting published on Thursday.

Firms forecast on average that just the IT-related costs of Economic and Monetary Union (EMU) would be five times those of Y2K preparations, the survey said.

British anti-euro pressure groups seized on the survey, saying the costs of joining the European single currency for British businesses would run into "tens of billions of pounds".

While EMU may prove expensive for business, it appears to be benefiting consumers. KPMG said three out of four companies believed the euro was forcing them to cut prices on products and services sold across the European Union.

Seventy-four percent of respondents with variable prices across Europe thought the gap would narrow further between the lowest and highest prices.

Four out of 10 said they had reduced prices in the last year, against just one in 10 able to increase them. Thirty-nine percent thought average prices would continue to fall.

The survey covered 307 companies in European Union countries and Switzerland with 5,000 employees or more.

Sixty percent of firms believed pay levels for their employees would rise, compared with 30 percent in last year's report.

COMPANIES OPTIMISTIC THEIR STRUCTURES RIGHT FOR EUROPE

Despite this, 82 percent of companies said they were confident their current structure was optimal for expected market conditions in Europe. Sixty percent said EMU would have a positive effect in the long term on their profitability.

KPMG was less optimistic, however.

"Achieving greater profitability against a background of falling prices and rising wages, along with the other threats that EMU poses such as rising international competition and increasing consolidation will take dramatic action," said Vicky Pryce, chief economist at KPMG.

"It is astonishing, therefore, that the companies we've surveyed have little sense of urgency or direction in combating these threats," she said.

"And it is clear that their priorities have been in the changes needed to IT systems instead of the structural changes to distribution, sales and marketing for example vital for adjustment to a totally new business environment."

The survey showed that UK-based companies were not markedly behind those in the euro zone in their single currency preparations.

However, it said there was an increasing polarisation of views on Emu. Thirty-six percent of UK respondents placed EMU towards the top of their corporate agendas up from 29 percent in 1998 while exactly the same percentage put it towards the bottom, up from 25 percent in 1998.

Sixteen percent of all companies believed spending on IT systems for EMU would jeopardise investment in new technologies, with one out of 10 referring specifically to e-business as an area that may suffer.

Business for Sterling, a UK group opposed to Britain joining the single currency, said the survey undermined many of the pro-euro campaign key arguments.

The group said it would cost tens of billions of pounds to convert the British economy, and euro preparations would divert resources from the "much more important issue" of developing e-commerce and Internet strategies.

The survey came at a time when pro-euro groups were admitting that British public opinion had become increasingly hostile to the single currency.

"In the last six months there's been a hardening in euroscepticism in this country," Simon Buckby, campaign director for the pro-euo Britain in Europe group, told a news conference on Wednesday.-Reuters