% share of euro area national output: germany 34, france 22, italy 18, spain 8, netherlands 6, belgium 4, austria 3, finland 2, portugal 2, ireland 1
Arguments for UK entry into the single

Lower transactions costs

Joining the Euro would reduce exchange rate uncertainty for businesses and lower
transactions costs for companies and tourists. Nearly 60% of our trade is conducted with
other members of the European Union - a figure that is likely to grow in future years

Increased trade and investment

The Euro is vital to the success of the Single European Market. This should lead to an
increase in intra-European trade flows and higher inward investment within the EU region.
Britain stands to gain from this, particularly if she can maintain low inflation and raise
productivity in European markets. Britain's flexible labour and product markets would be
highly effective inside a single currency area and would help to attract even more inward
investment from outside the European Union

Lower inflation and long term interest rates

Britain might gain from a period of sustained low-inflation delivered by an independent
European Central Bank. If inflation falls, this will lead to lower long-term interest rates
and stimulate faster growth and improved competitiveness. The currency union will
eventually be more resilient than the Exchange Rate Mechanism. The Euro will be less
susceptible to speculative attacks in the global foreign exchanges once growth picks up
combined with low inflation

The Euro may become a key global reserve currency as part of a new order of currency
stability between the Euro, the US dollar and the Japanese Yen " Britain has been a major
recipient and beneficiary of foreign direct investment in recent years. Some
commentators believe this would be threatened if the UK remained outside the system in
the long run.

Political Influence
Britain stands to lose political and economic influence in shaping future economic
integration if it remains outside the monetary system.

The Euro is a key component in completing the single market

Economic gains for consumers
- lower prices due to increased competitive pressure/greater price transparency (more
likely with easily transportable goods)
- Reduction in transaction costs of travelling within Europe
- Cheaper mortgages if interest rates lower and homebuyers can take out mortgages at
longer fixed term rates

Gains for British Business
- Invoicing can be done with just one currency in one centre
- Lower transaction costs- no costs in currency conversion - staying out of Euro is
equivalent to British exporters facing a tariff
- Cheaper sourcing of inputs at wholesale level
- Particular gains for UK industry
- Businesses might be able to fund capital investment at lower real interest rates

- lower profit margins for some businesses (due to greater competitive pressure and less
scope for price discrimination)
- But higher profit margins for other companies that can make savings through increased
cost transparency