Eurozone SMEs dragging their feet in euro changeover

With less than 500 days to go before euro notes and coins replace national currencies in the 11-member eurozone, the European Commission has voiced concerns that the SME sector hasn't done enough to prepare for the changeover. Those left behind will find themselves at a competitive disadvantage, the institution is warning.

Small businesses are lagging behind in their preparation for the final stage of the changeover to the single European currency.

The European Commission is warning that with less than 500 days to go before the introduction of euro notes and coins, SMEs throughout the eurozone are still dragging their feet when it comes to using the new currency.

Economic and Monetary Affairs Commissioner Pedro Solbes believes that although small companies are increasingly switching to the euro, the pace of change is not fast enough. The number of payments in euro for example has gone up but still represents only 2.4 per cent of all transactions.

A recent survey by EU pollsters Eurobarometer of nearly 3,000 SMEs in the 11 eurozone countries and Greece showed that only ten per cent of them already invoice in euros, and that the remainder are awaiting the end of the transitional period in 2002 before doing so. While 20 per cent of large firms in the eurozone have switched over entirely to the euro, and a further 40 per cent intend to do so in the coming year, only 15 per cent of small eurozone companies already carry out operations in the new currency, according to a report by consultants KPMG.

A quarter of SMEs plan to make the change next year, but 50 per cent doubt they will be able to switch before January 1 2002, when euro notes and coins will become available. The Commission says the trend is in the right direction, but still not good enough. Solbes believes a big effort is needed to ensure that the final stage of the changeover to the single currency passes off smoothly. He is urging SMEs to start preparing now, so as to avoid a last minute rush in December 2001.

SMEs have everything to gain by preparing rapidly for the euro? those which are ready before their competitors will be able to take advantage of the possibilities offered by a vast European market free of exchange rate risks.

In order to be fully prepared for the advent of euro notes and coins, businesses will have to adapt their pricing policy, accounting systems, train their staff and devise a way of informing their clients and suppliers, according to the Commission. Most firms will also have to invest in euro-compatible accounting and invoicing software.

But 30 per cent of eurozone SMEs think it is not yet time to prepare and 48 per cent say they have an action plan but have yet to put it into effect.

There are several theories why SMEs have yet to adapt to the euro in large numbers. The Commission believes they are either simply delaying, taking a long-term view, or are relying on a changeover strategy focused on the 1st January 2002.

The Commission fears that some small businesses even mistakenly believe that the transitional period will carry on until June 2002 - not realizing that the cut-off date is January.

It says that as a rule of thumb small businesses should have a strategy for the switch in place before the end of 2000.

And it warns that SMEs who delay preparing could end up paying over the odds for IT help and accounting services to help them switch over in time.

A number of organisations representing small businesses including UEAPME, the European Crafts and SME Federation is urging public authorities to invest in information campaigns and training systems for small firms so that they can adapt to the euro as smoothly as possible.