This year could prove a challenge for local small firms as they face getting to grips with the millennium bug, new late-payment laws, minimum-wage changes as well as the economic slow-down. And as if that is not enough, the euro - the single European currency - has now kicked in and many small firms have not yet worked out how it will affect them. Business Correspondent

John Bellerby reports

Local businesses will ignore the euro at their peril, warns Keighley Business Forum chairman Tim Parr.

"Increasingly for trade within Europe, and probably also in the rest of the world, the preferred currency of many customers will be the euro," he says. "If the customer does not want to take the risk of adverse currency movements, he will insist on the contract being concluded in euros. So it will be necessary for local businesses to be adept at dealing with them.

"While it is early days at present, it will be very interesting to see how the relationship between sterling and the euro develops. Currently, sterling interest rates are very much higher than euro interest rates. It may be that sterling interest rates come down to rates near the euro rate, or alternatively sterling weakens against the euro.

"Uncertainties like this make it all the more likely that international businesses will insist on dealing in euros to avoid any currency risk resting with them."

Clive Crayston, business manager at NatWest in Keighley, agrees. He says many of his customers have already opened euro accounts, though the vast majority of small firms will not actually need one.

"If you think you'll only make the odd payment in euro the best option is to use your normal account and deal with euro transactions in exactly the same way as you would any other foreign currency," he says.

"If a British firm trading in the UK wants to be paid in sterling that is still their right. If a customer goes ahead and pays in euro without discussing it first, it is up to the firm to decide whether to accept it or not. But by rejecting payment they could upset an important customer, so finding a way to accommodate euro transactions would make sense."

Anyone involved in business with one of the 11 countries taking part in the euro could be asked to issue invoices or receive payments in euro. Exporters and importers especially will be affected, but use of the euro could also filter through to others, such as firms that are part of a UK supply chain where a large UK company plans to use euro to settle invoices.

"If you think you will be one of those firms dealing with the euro on a regular basis through trading, borrowing or maintaining credit balances, you'll need to cater for this," says Mr Crayston. "Don't forget, a cheque in euro from a UK-based business is like any other cheque from a UK-based bank account - it can't be used to make payment abroad without incurring additional costs to both parties in the transaction. Electronic transfer is the fastest way to be paid in euro.

"British firms dealing in the euro should be aware that they will be exposed to exchange rate risk. This is because sterling will not have a fixed exchange rate against the euro, and so will fluctuate in the same way it does against other currencies. If the exchange rate moves adversely during the time between sending out an invoice and receiving payment, the business will lose out.

"Firms need to find out now exactly what their suppliers and customers are intending to do. Don't wait until the first euro bill comes in and then panic. Once you know how your supply chain will be affected, talk to your bank or financial adviser about the action you should take.

"Business customers may have different needs, dependent on the levels of trade they have with countries participating in Economic and Monetary Union."

As a guide it is likely to be those involved in:

both receipts and payments, needing to hold funds in euro

regular trade with EU countries

trade with another UK company that imports/exports goods within Europe

trade with another company that has a parent in Europe

staff frequently travelling to Europe.

The countries participating in the euro are Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, Netherlands, Portugal and Spain.

Those not yet taking part are UK, which is expected to join early in the next century, Denmark, Greece and Sweden.

Converted for the new archive on 30 June 2000. Some images and formatting may have been lost in the conversion.