WITH no bond market and little foreign currency business, small financial centres like Dublin could be squeezed in a post EMU Europe, the head of a major British bank said yesterday. The Irish authorities had clearly recognised this fact, he added, and had diversified well.

"Life is going to get tough for small financial markets in a common currency," Mr Martin Taylor, the group chief executive of Barclays Bank, told a press briefing yesterday.

But the centralising effect of economic and monetary union would be offset by advances in technology, allowing expertise to be concentrated in locations further from Frankfurt, he added.

Dublin was also less likely to see business seep away after the introduction of the euro because the cost of operations was significantly lower than London, Paris or Frankfurt, Mr Taylor said.

Barclays had made a working assumption that EMU would go ahead, on time, but without Britain in the first batch of countries. The bank would continue to operate on this basis despite recent doubts about the project, he added, because no business could afford to take a gamble that the project would stall.

"It is really foolish to speculate on whether or not it will happen. You might as well ask me who is going to win the three thirty at Leopardstown," Mr Taylor added.

Preparing the bank's computers for the introduction of the euro, even with Britain staying out, was costing "tens of millions of pounds", Mr Taylor said, while the price of dealing with the year 2000 "Millennium Bug" could rise to as much as £100 million.

If Britain were to join EMU, the cost to Barclays, because of its large retail network, would be in the order of £300 million Mr Taylor added.

Britain should not join the single currency in the first wave, he said, stressing that since the oil crisis the cycles of the British economy were not in sync with those of the other major European nations. There had been two recent attempts to peg sterling to the deutschmark, he said, and both had failed.

Also, he said, for Britain to adopt the euro there would have to be a public debate and a consensus on the issue.

For the last few years, British people have received a constant stream of anti EMU propaganda, he added, and it would take quite some time to reverse their perception.

Mr Taylor said he expected that EMU would hasten a shakeout in the European banking sector, but would not comment on whether or not Barclays was considering acquisitions in Ireland or elsewhere.

However, he ruled out buying Woodchester, the investment company now put up for sale by the troubled French state bank, Credit Lyonnais, which has a 53 per cent stake in it.

Barclays announced yesterday that it would locate its new loan protection insurance operation in Dublin's International Financial Services Centre, creating a total of around 60 new jobs. The company has some 14 per cent of the British market for such policies.

The company's Ireland director, Mr Paul Shovlin, said Dublin was chosen for its efficiency, pool of qualified labour and good communications links. The bank would not receive any grants from Irish state agencies, he said, but he expected that some of the companies to which work would be outsourced to receive assistance.