Dateline: 10 March 1999[QQ] 9.20am The managing director of Metmax Components Ltd receives a letter from Otto Motiv (UK) Ltd, the West Midlands-based subsidiary of the giant German engineering group. The letter says that, because price transparency in the European motor trade is squeezing margins throughout the supply chain, Otto Motiv is seeking to consolidate its European supplier-base. Hence, the company is inviting all seven of its current European gear component providers to tender for a single-source, pan-European supply contract. The Metmax MD crumples the letter in disgust: Otto Motiv isn’t his biggest client, but Metmax lacks the capacity to meet all of Otto Motiv’s requirements. 10.00am MorganBank announces another wave of redundancies in its foreign exchange operations, the third this year. Freshly redundant, black-humoured forex dealers empty the contents of a coffee jar into the bin and attach a sign that says: “Please donate any spare holiday change”. 10.17am A confused and ranting American tourist pays for some CDs at the Right-1 music mega-store in London’s Oxford Street with a travellers cheque worth euro 100, which is gladly accepted (the retailer has accepted dollars, francs, lira, pesetas and yen for several years). But the tourist fails to understand why he is given his change as £34.27 rather than euro 52.45. The assistant sales manager explains that Britain is not in the single currency yet and that, in any event, euro-cash isn’t going to be available for several years. “We’re going to see Belgium this afternoon,” the tourist says. “What the hell am I supposed to do with £34.27?” The assistant sales manager says nothing. 12.15pm At a press conference called by the Sainsway supermarket chain, the company shows how its customer-use scanners have been programmed to show prices in both sterling and euros. There are a dozen such scanner units throughout the flagship store enabling shoppers to check prices in either currency. When asked why the retailer doesn’t simply ‘double-ticket’ every item the way high street retailer Spence & Mercer does, Sainsway’s chairman says, “Do you know the profit margin in a parsnip? I would prefer not to have to re-price every blessed carrot, pork chop and tin of mushy peas every day. Our scanner system can do that automatically.” 2.17pm The chief executive of Dunstable Switchgear asks his finance director what he knows about the euro. “Not much,” he replies. “French-German stitch-up, British electorate will never support it regardless of what Blair & Co may think, and all our customers are in the Midlands so it doesn’t affect us. Why?” “Because British Zinc Corporation has just called to ask us to resubmit our tender in euros,” the chief exec replies. “British Zinc Corporation?” says the astonished FD. “What the bloody hell has the euro got to do with them?” 2.30pm The start of Euroroute plc’s agm. The London-based but highly acquisitive budget hotel chain asks its shareholders to pass a resolution redenominating the company’s share capital into euros. The 1999 annual report for the year to 9 January presents the results in euros. Next year, the company intends to declare dividends in euros, though payments to non-euro-zone investors will be made in the sterling equivalent. The company will also seek a share listing on Easdaq and comply with international accounting standards, not UK GAAP. “These measures will make our shares even more attractive when making acquisitions,” the chairman says. A small shareholder action group promises to launch a legal challenge to these plans. 3.00pm Dutch electronics group KVV presents a plan to pay its entire 800-strong UK workforce in euros. The company says that all of its customers are either within the euro-zone, or are invoiced in euros. “Our only significant non-euro cost is our UK wage bill,” it says. Under the terms of the deal, employees will not have to repay any foreign exchange gains if the euro appreciates against sterling. If the euro falls, employees will receive a bonus each quarter equal to 75% of what they have lost. “Heads you win, tails you only lose a little bit,” the management argues. The company also puts forward a special deal with a Dutch bank which is offering to open euro bank accounts, though employees may still elect to be paid in the sterling equivalent every month. The bank is also offering to remortgage employees’ house loans in euros and to open euro-denominated credit card and bank loan facilities, thereby easing domestic budgeting and providing a partial currency hedge. KVV also announces that the Swindon-based accounts department is to be closed and moved to a new pan-European shared service centre in Rotterdam. 3.26pm The FD of Dunstable Switchgear asks his computer systems department if they can handle euros. “Sure,” comes the reply. “Just as soon as we get this millennium bug fixed.” “When will that be?” asks the FD. “About 18 months from now,” says the systems head. 4.30pm Newswires report on a new research circular by economists at First Capital Securities on the effect of price transparency in the wake of the introduction of the single European currency. It argues that, for retail products, there is convergence of prices including VAT. For intermediate goods, prices are converging excluding VAT. Among other observations, First Capital concludes that the “euro-winners” are companies which have retail operations biased towards low-VAT countries, since they will be experiencing least impact on their gross profits. 5.45pm Rumours circulating in New York say that European Central Bank president Wim Duisenberg has missed a meeting with US Federal Reserve chairman Alan Greenspan. The health scare sends the euro down 3p against sterling and 5cent against the dollar on fears that Frenchman Jean-Claude Trichet will assume the ECB presidency three years earlier than expected. Duisenberg’s absence is blamed on “an administrative diary error” as he shows up precisely one hour late.
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