Euro may cause problems for companies in North

The advent of the euro creates a new barrier to cross-Border trade and may cause difficulties for companies in the North, industry experts believe.

The key factor for the North is not the potential volatility between sterling and the euro, but rather the simple fact that the North is not a member of the euro zone, according to Mr Geoff McEnroe, director of the IBEC-CBI business development programme. "I would be quite concerned regarding the impact for Northern Ireland," he said. Some multinationals were now pursuing a policy of considering their raw material purchases in the euro zone, he said. It could also damage the North's desire to attract inward investment, as companies from countries like Japan would be likely to want to locate in a euro state.

Mr Ray Nulty, chief executive of PA Consulting in the Republic, agreed that the advent of the euro would be a factor pushing inward investment away from the North and towards the Republic. He said that companies in the North were far behind those in the Republic in terms of preparedness.

While there was a level of awareness at managing director level, heads of department appeared to have little knowledge and most of the information available was coming from the banks, he said.

It also raised financial issues for many companies in the North with operations in the Republic, he said, such as whether to pay employees in the South in euros and how to route financial transactions.

The low level of euro interest rates is also an issue for Northern business. Northern Ireland companies will find themselves at a disadvantage following the launch of the euro, according to the economy spokesman for the SDLP, Mr Sean Farren. He said that although last week's launch of the euro was to be welcomed, it set serious challenges to the local business community. "Unless interest rates in Northern Ireland are brought down to match those in the euro zone," he said, "businesses here will find themselves at a cost disadvantage from the outset."

Mr Farren said that other costs, such as labour, transport, and energy, would have to become more competitive.

"Given Northern Ireland's distance from many markets and the present high cost of energy, this will be no easy task. Such pressures are not new, but they will be intensified by the introduction of the euro. Much of the increased pressure will be felt by Northern Ireland companies which do business with firms in the South."

He also reiterated the warning that inward investment could be affected because of a reluctance by potential investors to locate their European bases outside the single currency area, thereby incurring the problems and uncertainties of an exchange rate.

"Tourism will be faced with a similar challenge," Mr Farren said, "and will have to become much more imaginative and aggressive in marketing its products."