The Euro: A Threat to British Industry

Strategic Insights -

In recent days, the issue of the euro has become a contentious one, but for business leaders like those at Nestle, the reality is clear: Britain's decision to forgo the euro is a competitive disadvantage that threatens jobs and the future of British manufacturing. As the multinational food manufacturing company has invested heavily in the UK, it is now facing significant challenges in exporting to the euro-zone due to the strength of the pound. If trends continue, the cost of Britain's failure to participate in Europe will be far greater than people imagine.

Key Takeaways:

  • British goods exports account for 58% of the country's total exports, with the majority going to EU countries, highlighting the importance of the single market.
  • Nestle has made massive investments in its British factories, but its exports to the euro-zone have declined significantly due to the overvalued pound.
  • The company's production has shifted from the UK to other European countries, resulting in job losses and factory closures.
  • In 1999, Britain's share of new inward investor projects in the EU fell from 28% to 24%, while France's share increased from 12% to 18%, highlighting the growing competitiveness of the euro-zone.
  • 70% of UK production by inward investors is exported to the euro-zone, making currency volatility a critical concern for these businesses.
  • Recent inward investment figures are positive, but the trend behind these statistics reveals a decline in Britain's share of EU investment, with a corresponding increase in investment in France, Spain, and other EU countries.

Statistics:

  • 58% of British goods exports go to EU countries.
  • $X billion in investments have been made by Nestle in the UK over the past decade.
  • 291m people form the market for a manufacturer in Germany, providing a seamless trading environment without currency risk.
  • In 1999, EUR 25 billion was invested in Britain, with UK's share of investment projects falling from 28% to 24%.
  • 70% of UK production by inward investors is exported to the euro-zone.
  • Britain's share of inward investment in the EU has decreased from 28% to 24% between 1998 and 1999.

Sources:

  • [1] Report by Ernst & Young, May 1999.
  • [2] 'The Euro: A Threat to British Industry?' interview with the chairman and chief executive of Nestle UK.