Bank chief says euro could help UK manufacturing

Bank of England governor Sir Edward George said in Birmingham yesterday that the British manufacturing industry could benefit if the government opted to join the single European currency.

In the text of his speech, Sir Edward said that nominal exchange rate certainty with Britain's European trading partners would be of "considerable longer term benefit to many of the internationally exposed businesses ... that have suffered from the volatility and particularly the weakness of the euro in the past few years".

Sir Edward said he also saw other potential benefits from joining the euro, such as greater transparency of prices and costs relative to other euro-zone members, and from the integration of financial markets.

But Sir Edward, who has been reluctant to endorse entry into the single-currency project, has warned that ceding control of monetary policy presented a potential downside risk for the economy as well.

"Monetary policy would be decided collectively by the ECB [European Central Bank] ... so that the policy stance may not always necessarily be consistent with the particular macro-economic policy needs" of Britain, he said.

British Prime Minister Tony Blair's Labour government says it is in favour in principle of joining the euro, but insists that its five tests of economic convergence must be met before a referendum is held on the issue.

A decision on whether the tests have been met is due by next June.