UK rejection of euro could cost it dear

Date: 01/05/1997

RIVALS have seized on the single currency as a weapon to challenge the UK's position as the most attractive location for foreign investment in the Union.

The UK accounts for around 40&percent; of all inward investment into the EU and attracts more foreign investors than any other country in the world except the United States.

But British disdain for the euro could cost it dear as multinationals plan their investment strategies for the next decade.

Toyota boss Hiroshi Okuda sounded the alarm earlier this year when he warned that the Japanese auto giant might shun the UK, where it has already invested 1.3 billion ecu in a factory, if it does not adopt the single currency.

Other top executives delivered similar warnings, including Niall Fitzgerald, chairman of Anglo-Dutch consumer goods giant Unilever; Umberto Oudrino, chief executive of New Holland, the Fiat-controlled tractor manufacturer whose biggest plant is located in the UK; and Jürgen Gehrels, boss of Siemens, who said his company would not have built its 1.7- billion-ecu semiconductor plant on British soil if it had been certain that the country would not participate in EMU.

The UK may already be beginning to pay the price, with reports that Toyota is considering Lens in northern France as the site for its next 0.87-billion-ecu plant.

These reports however, are likely to prove no more than skirmishes in the war of nerves which multinationals wage to get the best possible terms from inward investment agencies.

Most observers believe that the UK's cheap and flexible work force, its deregulated telecommunications sector and its long history of welcoming foreign investment will keep it ahead of the pack.

They point to the fact that over the past year, a new country has joined the United States and Japan as a major investor in the UK - Germany.