Euro Change: The United Kingdom: Sitting Out the Euro Dance for Now
Sitting just offshore, both physically and philosophically, an island,removed from the European common market, the United Kingdom is destined to be a wallflowerwhen the Euro party begins in earnest next year. I wanted to get some understanding of howthat feels. So recently, I visited with Martin Ryan, who is Director of the SolutionsDivision for IMI's European operation, ICT.
The division delivers solutions in software testing, software deployment and help deskservices. In addition to his six-year stint with ICT, Ryan has extensive experience in IT,holding positions with Reuters, Manufacturers Hanover Trust Bank (now part of CHASE) andAmerican Express. IMI is involved with the Euro because of its software testing focus."We are moving with a number of our clients from extensive Year 2000 software testingto software testing for the Euro," Mr. Ryan explains.
To my surprise, regarding reprogramming for the currency change, Ryan indicated thatcompanies have not made very much progress in Europe, and the business community in the UKis not an exception. "The banks have done the bare minimum to get through 1999.Others have done nothing. From our vantage point, the Euro is not seen as an absolutebusiness necessity, and is therefore not the same kind of project as the Year 2000."
Euro conversion efforts for most UK firms, it would seem, will take on a lower priorityand be seen as a medium- or long-term objective.
According to Ryan, the UK-based companies that are now becoming interested in Euroconversion efforts are insurance firms. This is because they are competing with Europeaninsurance providers for Euro-based products just now being introduced into the market."We are seeing, for example, pensions, life insurance and even home equity loansbeing offered in Euros. European firms offer products that are one to three percentagepoints lower than identical UK products based on Sterling."
Why is it, we wondered, that the Euro has gotten off to such a generally poor start?"From a timing standpoint," Ryan responded, "getting started in 1999couldn't have been a worse time. In IT terms, it was a disastrous time to start such acomplex project. People in most IT organizations are still quite concerned about what mayhappen January 1, 2000."
Potential market share and the possible loss of it at this point are difficult conceptsto measure, Ryan believes. An opportunity not yet grasped is certainly a less fearfuloption than a threat to a firm's business continuation. Most executives, Ryan suggests,have made the obvious choice.
"It's fairly simple, when you examine your options," Ryan explains, "Theworst case scenario is that if you do not take care of Y2K code, you get ABENDS. But ifyou don't take action to begin the Euro conversion project, certainly here in the UK, theconsequences are the 'possible' loss of market share."
"Remember that the Euro is a three-year window of opportunity," Ryan says."Although the Euro is a legal currency, it doesn't physically exist in Europe andwon't exist for another three years. You can open a Euro bank account and you can havecredit cards billed in Euros, but you can't physically get your hands on coins andnotes."
With such a low level of general interest at this point, besides the already mentionedinsurance and banking firms, are there any other motivated companies who are making theEuro conversion effort? "Yes, there are companies who have a stake in getting intobusiness leveraging the stability of the Euro. UK firms that purchase raw materials, aswell as firms that sell into European markets, have good reason to convert from adependence on British Sterling with local European currencies. Manufacturing firms, forexample, are interested in managing a Euro bank account. Using Euros helps insulate thesecompanies against changing exchange rates."
The lynch pin securing the eleven nations, as well as those who are deemed eligible tojoin the system, hinges on the stability of the interest rates during the next threeyears. "The Euro, despite the stresses and strains imposed by its member countries,does not appear that it will fail easily. The eleven nations are invested in its successin more than one way. One of the criteria for joining the Euro is the requirement to placea large amount of a nation's gold reserves in the European Bank in Frankfurt,Germany," Ryan said.
Bill Pike, President of PIKE Communica-tions (a Los Angeles business communicationsfirm), can be reached at (310) 391-1862 or via e-mail at Pikecom@earthlink.net.