Why Britain must join the eurozone

A conspiracy of silence surrounds the battle over British membership of Europe's single currency.

Nobody wants to tackle the question: 'How is it that over the long term, the British economy is still performing so badly?'

You can understand why. Our euro-enthusiast Prime Minister Tony Blair can't mention this without inviting the rejoinder that if the economy is in trouble, it's his fault.

As for Tory eurosceptics, to imply there is anything wrong with Margaret Thatcher's economic legacy is heresy. Anyway, they are busy trying to persuade us that the Continental partners we would be teaming up with are a bunch of economic basket cases. This is nonsense.

Ray Barrell, of the National Institute of Economic and Social Research, says Britain's productivity has lagged behind the eurozone's for 35 years. He says Britons have to work 10% harder just to achieve broadly similar living standards. We are still poorer than nine of the 12 eurozone countries.

So the eurozone is far from being a club of poverty- stricken deadbeats. Not only is the pace of economic reform there quickening, it also has a breadth and depth of corporate dynamism that leaves the UK gasping.

Think of the motor industry. Giants such as DaimlerChrysler, BMW and Volkswagen of Germany; or PSA Peugeot Citroen and especially Renault of France are all world-class businesses now. The British motor industry died years ago.

What about electronics and telecommunications? We have a couple of top-class but tiny computer chip-designing companies such as ARM Holdings.

We have nothing that compares with Infineon or Siemens of Germany, Alcatel of France, Nokia of Finland (the world's top mobile communications firm), or Philips, the Netherlands' resurgent electrical giant.

Marconi? Enough said. But isn't Britain's Vodafone a world leader? Yes, it is. But it is spending the princely sum of £110m a year on research and development to sharpen its competitive edge. Siemens spends £4.3bn a year on R&D.

Does Britain's narrow industrial base and relatively low spending on the technologies of the future matter? Michael Porter, the Harvard professor who is the world's leading authority on international competitiveness, says the acknowledged turnaround in Britain's economic performance in the last 20 years has reached a stage of diminishing returns.

To keep up internationally we have to raise our game in innovation, marketing and R&D - now seen as crucial to economic dynamism, competitiveness and growth.

Hasn't the British economy been growing faster than its eurozone rivals since 1997? Yes - but according to Professor Wynne Godley of Cambridge University, this has been driven by increased debt and consumption today at the expense of investment for the future.

So it is time to start taking seriously the warnings from giant hi-tech companies such as Ford, Unilever, Siemens and Nissan that they will rethink their British investment plans if we look like staying out of the eurozone and clinging to a volatile currency like the pound.