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The City in February 2001 gave a strong vote in favour of joining the euro even though Britain's largest companies say it will make relatively little difference to profits. The European currency is seen as beneficial by 63% of larger companies and 68% of British fund managers, in an annual survey for the information group Reuters. The main advantage of joining the euro lies in its impact on the cost of financing and valuations, said respondents to the survey compiled by Tempest Consultants. A quarter of big companies questioned said being in the system would reduce financing costs while only 3% thought it would make things more difficult. For 42%, euro entry would enhance company valuations while 4% thought they would be reduced. Fund managers were bullish about prospects of improving sales and profits through the euro: 54% said joining would improve sales and 45% said it would help profits. The study shows views on the euro vary between business sectors. Car and component manufacturers were firmly positive while electricity and metals firms were negative. Those responses reflected different sectors' existing exposure to the European currency, said Stephen Parker, chief executive at Tempest. Larger companies were already increasingly thinking outside their national boundaries when communicating with financial audiences. Respondents said they planned to spend far more time talking to foreign fund managers and brokers. "Together with fund management groups' views on the euro and the declining role of UK equities in global portfolios, this is leading to the adoption of a more international investment perspective," Tempest said. The UK equities market has underperformed other European markets and now accounts for less than 10% of a neutral global portfolio. Tempest argues it is difficult to see how the British market can stand alone. "All three parts of our Equity Triangle (quoted companies, fund managers and sell-side analysts) are telling us that the future of UK equities market is inextricably linked to the global market place and to a European equity market in particular. These are important signals for regulatory authorities and stock exchanges alike - in the UK, in continental Europe and elsewhere." The Reuters survey was carried out over three months with the participation of 254 companies representing 94% of the £1.7bn equity market value of the 350 largest quoted companies in Britain. |