Siemens asks suppliers to switch to euro

More than 14,000 British companies which supply the UK businesses of Siemens, the German electrical giant, are to be asked to switch from the pound to the European single currency in two years.

Siemens UK, which conducts business largely in sterling and had sales last year of pounds 1.5bn, will make presentations and hold seminars with suppliers from October to explain the change. The shift in Siemens' accounting policy will be implemented across the EU, regardless of whether the British government stays out of European monetary union (EMU).

Planning for EMU began at Siemens in 1995 and is now at an advanced stage. The German board has decided that from1 October 1999 the group will adopt the currency in all its European operations and draw up its accounts exclusively in euros.

The currency itself is due to start from 1 January 1999, though companies are not obliged to use it until 2002.

Bernd Euler, Siemens' UK finance director, will continue the seminars intermittently until 1999. Suppliers, many of which are small or medium- sized companies, will be given advice on changing their payments systems and dealing with the banks.

Siemens' British businesses, which make everything from traffic control systems to electricity meters, spent around pounds 1.3bn in the UK on goods and services last year.

Only prices of products which are generally internationally quoted in dollars, such as computer memory chips, are likely to be excluded.

"If they want the business then suppliers will probably be prepared to price things in euros, but we won't discriminate against them if they want to keep using sterling," a spokesman said.

One of the biggest advantages of the single currency for large groups is that it would make it easy to switch suppliers, allowing much clearer price comparisons.

However for the suppliers themselves it could make life harder, given the likelihood of continued sharp swings in sterling's value.

Despite the move to the euro, Jurgen Gehrels, chief executive of Siemens in the UK, is expected to avoid attacking Labour's detached policy on EMU.

Mr Gehrels was an outspoken critic of the previous government's reluctance to commit itself to closer European integration, warning that it could affect future investment decisions.

However, he has indicated since the election that the currency will be introduced "through the back door" by other European multinationals.

A Siemens spokesman said the accounting change was not a way of the company "trying to blackmail governments".