Siemens warns of consequences of neglecting EMU preparation
15 Jan 2000
German control and electronics giant Siemens has warned that British companies must effectively join the European single currency regardless of whether or not the UK as a whole opts in. Those that do not will lose business to companies who are willing to quote in euros and who will pass on expected cost savings.
Siemens sees many advantages in trading in euros. Transaction costs and times will be reduced, and there will be no need for currency hedging. Moreover, calculations, planning and internal reporting will all be simplified. According to UK finance director Bernd Euler, the group expects annual savings of some DM30billion; Europe-wide, savings could reach DM90billion, he added.
This gives companies quoting prices in euros rather than national currencies an automatic head start, he said. 'If companies within the EMU are offered two identical deals from suppliers, one in sterling or dollars and the other in euros, the euro supplier has a competitive advantage because it offers extra benefit to the customer.'
Moreover, he added, companies will expect the cost savings associated with the use of the single currency to be passed on, 'whether or not the suppliers in question are capable of achieving these cost savings. They just have to squeeze their other costs harder in order to bridge the gap.' However, he added, Siemens will not force its suppliers to use the euro, and will remain flexible on payment. 'Any company that forces its customers to do anything is on a dangerous path.'
Nevertheless, Siemens is adopting the euro as its house currency from October 1999, and expects that other companies will do likewise. 'We and other UK companies who are exporting to the EMU zone will be paid by more and more of our customers in euros. To avoid foreign exchange currency risks, it will be more economic for us to pay our suppliers in euros as well.' This is effectively 'backdoor' EMU entry, he pointed out: 'The euro will be in use in the UK even before it's adopted by the UK government.'
