A letter to the Editor of the Daily Telegraph which was published on 6th July 2000.
Your correspondents (July 3rd) are right to suspect that some foreign car industry owners are using spurious arguments about the strength of the pound as an excuse for closing UK plants or squeezing subsidies out of the UK taxpayer. For instance, BMW’s claim that it was “losing” £750 million a year was more than double the whole wage bill at Longbridge.
In round terms, only about £3,000 of a £10,000 ex-works price of a car is accounted for by car makers themselves. Allowing for the import content of bought-in materials and components means that only about 50-55 per cent of the ex-works cost of a UK car exported to Euroland is subject to the UK/euro exchange rate.
Since launch, the euro has declined 11 per cent against sterling, making an adverse euro price difference of about 5.5 per cent – hardly commensurate with the huge noise currently being generated. Moreover, the Nissan Sunderland plant last year had a commendable 20 car per man-year output advantage over competitive Continental plants, which translates to an offsetting advantage of about three per cent on a £10,000 car.
Before we all get swept along by the current furore from the foreign car lobby (from which Honda is notably absent) we should remember that the biggest market for most British goods is right here in the United Kingdom where, in many cases, the decline in the euro/£ rate has meant a welcome 11 per cent reduction in input costs.
While the Government has no control over exchange rates, it could control the proposed fuel cost levy.
A letter to the Business & City Editor of the Times which was published on 7th October 1998.
As a director of an SME [small or medium-size enterprise] – a technology transfer and consultancy company “spun out” of university research – I see the Treasury’s euro message which Rachel Bridge reported (September 23rd) as hype.
Over the years my company has invoiced clients in different parts of the world in sterling and they have found no difficulty in remitting payments in that currency. Pari passu, if I purchase a service in the US I expect to be invoiced in dollars.
What is so different about the euro? For those companies already invoicing their euroland customers in marks, francs, etc. life after next January 1st will automatically be easier since they will need to take notice of only one rate of exchange instead of 11. Companies know that. If they invoice in pounds, why should euroland customers not continue to remit payment in pounds?
If British companies such as ICI and Rover try to insist that their suppliers in the UK invoice them in euros rather than in pounds, the legal tender of our country, they may well be breaking the law. In any case such companies will stand accused of abusing their buying power to impose an exchange risk on British suppliers which their euroland suppliers will not be subject to, a gratuitous, unpatriotic act that will be scorned and resented. They will also get short shrift if they try to impose euro-accounting on US suppliers.
One would think that the management of both these and other large companies with Europhile chairmen would be better employed in concentrating on improving their companies’ performance, rather than doing the present Government’s work for it.
