UK manufacturing sector stands to lose out in the Euro zone

Citation

(2000), "UK manufacturing sector stands to lose out in the Euro zone", European Business Review, Vol. 12 No. 2. https://doi.org/10.1108/ebr.2000.05412bab.015

UK manufacturing sector stands to lose out in the Euro zone

UK manufacturing sector stands to lose out in the Euro zone

Keywords: Manufacturing, Ecu

Bull report reveals manufacturers' attitudes to the Euro and e-commerce

Unique research into UK plc's attitudes to and readiness for the Euro reveals how the UK manufacturing sector has made more changes than the average business in preparation for the new currency. The impetus for change comes from the fact that manufacturing is significantly more import/export dependent than other industries and is therefore more exposed to economic changes outside of the UK.

Just under one quarter (21 per cent) of the manufacturing companies surveyed stated that they believe the Euro will open up new market opportunities to their business. The other benefits of the Euro identified by the manufacturing sector were increased price transparency (57 per cent), removal of exchange rate uncertainty (70 per cent) and the creation of a single European capital market (25 per cent) (see Figure 1).

The manufacturing industry is more likely to be trading in the "eurozone" than any other sector. Of manufacturing companies, 97 per cent have suppliers in the "eurozone" and 93 per cent have customers. Manufacturing is highly dependant on its "eurozone" customers for sales in particular (44 per cent rely on the "eurozone" for 20+ per cent of their sales turnover). In no other industry does the proportion of companies reliant on the "eurozone" for this much of their turnover exceed 30 per cent.

Benefits of joining the Euro

It is therefore interesting to see who the highest proportion of respondents that are opposed to the UK signing up for the Euro (38 per cent) are within the manufacturing sector, despite the fact that this very group are the most heavily dependent on its "eurozone" customers.

A third (33 per cent) believe that the Euro will have a positive impact on their business. According to the survey although 67 per cent stated that up to 20 per cent of their suppliers were in the "eurozone", more than half (53 per cent) of UK manufacturers do not currently trade or settle any payments in Euros.

Richard Baldwin, ERP Consulting Marketing Manager, Systems Integration, Bull said: "For a sector that is so dependant on European customers and suppliers, UK manufacturers seem to be surprisingly complacent about the new competitive threat arising from the Euro. It is also disappointing to see that relative to other sectors, manufacturers appear to be the least optimistic about the potential opportunities the Euro brings".

Only 36 per cent of the manufacturers surveyed use e-commerce to trade with suppliers and customers, with 41 per cent of those conducting up to 9 per cent of trade electronically. When asked what impact e-commerce will have on trading in Europe, 18 per cent of the manufacturers surveyed felt it is likely to increase European trade, with 21 per cent believing it increases the need for trading in Euros.

Surprisingly, despite their dependance on the "eurozone", manufacturing companies are more likely than average to believe that the US dollar will continue to dominate international trade (74 per cent held this view). This compares to 58 per cent of finance companies and only 30 per cent of utilities and telecommunications companies. The continued importance of the dollar is recognised in the UK and Ireland, although in both instances it would appear that the Euro is seen to be in a position to challenge the dollar in a significant minority of cases.

Over half of the respondents (52 per cent) stated that they view Euro integration as a business rather than IT issue, with respondents from the manufacturing sector believing it to be primarily a sales issue. That said, 38 per cent believe that Euro compliance presents an equal or greater IT challenge than the Millennium bug.

The research was undertaken by independent market research consultancy Benchmark Research; 250 interviews were conducted by telephone among those with overall responsibility for the Euro within an organisation, within the private sector during the summer of 1999. Almost one quarter of the interviews were conducted within the manufacturing sector.

Bull has already successfully undertaken a number of Euro consultancy projects for major organisations across Europe utilising its unique EuroEdge methodology. EuroEdge covers all aspects of a Euro project from consultancy and auditing, through strategy and planning, to implementation, inspection and testing. Furthermore, EuroEdge encompasses corporate systems, the desktop and the supply chain.