European businesses still confused over the introduction of the euro
New survey from Cap Gemini Ernst & Young and the Association for the Monetary Union of Europe announced on the eve of ECOFIN meeting, Brussels
22 November 2000
Businesses across Europe remain confused about the transition requirements for EMU and some risk missing the 1st January 2002 deadline for the currency change-over, according to a new survey commissioned by Cap Gemini Ernst & Young and the Association for the Monetary Union of Europe (AMUE).
The survey aims to gauge the extent of EMU preparedness of large organisations in the eurozone. In-depth interviews with 1,000 organisations across nine industry sectors were conducted by research specialist Infraforces in September and October 2000, revealing worryingly low levels of euro preparedness.
With thirteen months before the changes take effect, the survey found that out of the 23 per cent that have completed their euro-related projects, a third said it took them over 12 months to do so. Analysis by Cap Gemini Ernst & Young has found that industries like Insurance, Utilities and the Public Sector will require a change-over period of at least 12-18 months; the Banking industry may require even longer. One fifth of all respondents are still in the very early stages of their change-over, and worryingly 10 per cent of all the businesses have not initiated any IT changes whatsoever in preparation for the euro.
The survey found that low levels of preparedness can be linked to a lack of information or knowledge about the EMU transition rules. Indeed, a fourth of the businesses across Europe think that they can keep internal accounts and bookkeeping in present currency units after 1st January 2002, whereas a number of countries have announced that there will be penalties for not keeping internal accounts and records for taxation purposes in euro in 2002.
The survey also highlighted the frequently missed opportunity for organisations to link organisational changes, preparing for EMU and developing their e-business strategy; only 16 per cent of organisations had linked the two initiatives.
“Our survey shows two worrying trends,” said Stan Cozon, Director of euroTRANSFORMATION Services, Cap Gemini Ernst & Young. “Firstly, organisations seem to overlook the business impact and complexity of their euro change-over. We believe they need to move quicker if they are to be ready on 31st December 2001 and exploit the new opportunities.”
“Secondly, few companies have recognised that euro transformation and e-business programmes will impact the same areas. They could be overlooking the benefits of linking these large-scale projects, which both call for a major reassessment of existing processes.
“With the euro and the Internet both growing in acceptance, a new era of a true European Union online marketplace is beginning, and organisations will have to be part of it if they are to survive. Together with more effective treasury operations, transforming a business to the euro now could reap real rewards for the forward-thinking organisation,” Mr. Cozon said.
The survey found significant differences in readiness across the euro zone. In Austria, 454 per cent of the surveyed organisations said they already use the euro as their base currency, while only 9 per cent of organisations in Portugal reported the same.
A sector breakdown shows that only 5 per cent of the Administrative & Government sector is using the euro as base currency, compared to 30 per cent of the Banking and Manufacturing sectors.
“This is surprising,” said Mr. Cozon, “as we might have expected Governments to lead by example. It is particularly alarming because the Administrative & Government sector traditionally has old and complex IT systems that will take significantly longer to move to the euro.”
However, the survey does find positive news regarding business and the euro. “Larger businesses are recognising that they need to support their suppliers and customers, and we are seeing them take responsibility in some important areas. We might also expect to see a number of laggards accelerate their plans as more high-profile organisations complete their implementation in Q1 2001,” said Bertrand de Maigret, General Secretary of AMUE.
Leading on from the survey, Cap Gemini Ernst & Young and AMUE have written a letter to Finance Ministers and participants of the ECOFIN meeting in Brussels on 27 November 2000, identifying key issues and recommending suggesting initiatives that could be implemented to stop the confusion.
“The messages from this research are clear,” said Mr de Maigret. “The authorities responsible for the euro change-over need to confirm the agenda and remove uncertainty; push for an early euro change-over; lead through example by driving the process faster in the Administrative & Government sector; use the best practice developed by countries like Luxembourg, Belgium and Austria to help other members of the euro zone; and stimulate the use of euro between customers and suppliers.
“We would ask the public authorities to encourage an early use of the euro, which will trigger a timely adaptation by the business community and the public sector. Wait and see policies and fatalism could result in last minute change-overs at the end of 2001, which would be costly, counter productive and potentially politically harmful,” he said.
Note to Editors
- The sample covered 1,000 organisations in the euro zone: Austria; Belgium; Finland; France; Germany; Greece; Ireland; Italy; Luxembourg; Netherlands; Portugal; and Spain.
- Of those organisations, 15% had between 200 and 499 employees; 30% had 500-999 employees; and 55% employed more than 1000 employees.
- The organisations came from nine industry sectors: Administration and Government; Banking; Insurance; Manufacturing; Media/Communication; Retail; Telecommunications; Transportation; and Utilities.
The Association for the Monetary Union of Europe (AMUE) was founded in 1987 by European industrialists who agreed on the objectives of monetary stability and a Single Currency for the success of the single market. Companies and banks, which are members of the AMUE, employ about 8,000,000 people. The AMUE is a private, non-profit association located in Paris and active in all countries in the European Union. More information is available at www.amue.org.
About Cap Gemini Ernst & Young
Cap Gemini Ernst & Young is one of the largest management and IT consulting firms in the world. The company offers management and IT consulting services, systems integration, and technology development, design and outsourcing capabilities on a global scale to help traditional businesses and “dot companies” continue to implement growth strategies and leverage technology in the new economy. The organization employs more than 57,000 people worldwide and reports global revenues of about 7.7 billion euros (1999 pro forma).
More information about individual service lines, offices and research is available at www.capgemini.com
About Infraforces
Infraforces is a market research company that provides expertise in the running and co-ordination of a full range of European business-to-business surveys. Since 1985, its objective has been to assist companies in their understanding and anticipation of market trends and expectations. More information is available at www.infraforces.com
