Preparations for the euro by UK SMEs with trading links with the euro currency area

Abstract

This paper examines euro preparations by U.K. SMEs with trading links with the euro currency area. It suggests, notwithstanding the U.K.'s decision not to join the euro in the first wave, that SMEs with euro area trade links are particularly likely to have had to make some adjustments for the introduction of the euro. The paper assesses this level of preparation and seeks to understand if it is contingent upon the characteristics of the business, its geographic location, its business orientation and the type of trade link (e.g. importer/exporter). The paper finds, contrary to previous research, that business characteristics, geographic location and business orientation are, on the whole, of limited value in explaining euro preparation. What, instead, seems more significant is the type of link with the euro area: importers, exporters and those with subsidiary businesses in the euro area appear more likely to have made preparations for the euro than U.K. SMEs that are part of a euro supply-chain or are a subsidiary of a euro area business.