The pound is likely to fall below 80p against sterling in the coming months, the chief economist at Barclays has said.
Mr Brian Martin, raised in Castleknock and one of the most senior Irish economists in London, also believes the UK will not join the euro until at least 2005, and possibly far later.
In Dublin to address an Irish Association of Corporate Treasurer's breakfast, Mr Martin said the UK economy was set for a complete turnaround. The UK economy "snapped back" from the financial markets shock of last year in a much more convincing way than either Europe or Japan.
"The risk is that the UK economy will be even stronger for longer and more balanced than we are predicting," he said. "While this is great news for the UK, it is hard to square with membership of the euro."
With unemployment low, all negative equity gone and household wealth increasing, consumer confidence is high. Even exporter confidence is rising despite sterling's strength.
"The only thing we need is confirmation of the investment cycle." Mr Martin says annual investment growth is likely to be close to 8 per cent, despite consensus forecasts of a 2 per cent rise.
As a result, the UK is likely to grow at 2.5 to 3 per cent over the next few years and this will make it difficult to cut interest rates to European levels as euro rates are likely to remain low.
"It will be very difficult to cut rates without creating inflation in housing or in real wage growth. So the only way to do it is to raise taxes significantly," he said.
The Labour government is unlikely to find that a price worth paying and euro membership will be pushed back until at least 2005, if not 2009.
He added that sterling was also likely to stay stronger for longer than most had anticipated. In the short term, it could rise to 3.25 deutschmarks or 61p against the euro which would leave the pound at 78p sterling or even below.
Overall, said Mr Martin, Europe's economies would benefit from this further depreciation of the euro, although in the very short term it was likely to be reasonably stable before the G8 meetings and the Federal Reserve policy meeting on June 30th.
