Would the UK automotive industry benefit from entering the European Monetary Union? A drive too far?

Abstract

This paper originated from empirical research conducted by the authors whilst researching into the success factors for high technology SMEs in the Central Technology Belt (CTB) during 2004. The CTB is an area designated by central government for a range of investment and assistance through ‘Advantage West Midlands’, the relevant regional development agency. The region, from Central Birmingham through Redditch and Bromsgrove to Worcester and Malvern, is the location for numerous automotive component companies, the Rover Group and the Longbridge sites. This paper addresses how these SMEs, and indeed the rest of the UK automotive industry, could be affected by EMU. Our initial analysis suggests that on balance their concerns may actually be unfounded and that the benefits would outweigh the costs. Now that there are no longer separate national automotive industries (merely the European market), our continued use of sterling actually inhibits activity in the UK. We would also benefit from lower, more stable interest rates, improved access to market financing, the removal of exchange rate risk and, depending on the entry rate, a more stable operating environment. Copyright © 2005 John Wiley & Sons, Ltd.