Small firms ill-prepared for euro.

SMEs across Europe need to wake up to the implications of the euro if they are to avoid serious disruption to business in 2002.

With under six months to go until the introduction of the euro, fewer than 20 per cent of continental European firms are fully prepared, according to a survey by IBM. Almost 80 per cent of French and Spanish firms anticipate conversion in early 2002, but Italy and Germany are not expected to be ready until the middle of next year.

"This shows the large amount of work that organisations across Europe still need to do," said Mike Mawtus, vice-president of IBM Global Initiatives. "If they fail to meet the January 2002 target they run the risk of serious disruption."

British businesses are lagging even further behind. While large firms that trade globally, such as Shell and Unilever, have been operating with euros for some time, small businesses are less prepared. "Many SMEs are not ready, with cost and a lack of resources being the main inhibitors," said Vicky Price, chief economist at KPMG.

Harry Savage, euro information manager at the NorthWest Euro Forum, agrees. "SMEs could be a lot better prepared," he said. "In December many will face a sudden demand for invoices in euros that they will not be able to cope with."

SMEs are calling for more support to help them cope with the switchover. "Support could be a lot better, particularly for small businesses with limited resources," said Roslyn Penn, partner at Luton-based Bell Packaging. "My bank has been the most helpful, particularly with advice on opening a euro account."

But some medium-sized UK firms are euro ready. John Kingsley, director at ribbon manufacturer Cole Fabrics, said that, in terms of systems and support, he was fully prepared for the euro. "It works well for us as we buy and sell in euros in fairly similar amounts which balances the currency exchange rate issues."

But simply changing systems is not enough, according to Howard Oyns, operations manager at IBM Euro Global Initiatives. "Too many firms are looking at the implications in a limited way. But the euro is like a Russian doll -- it's a lot more complex than at first sight," he said. "There are marketing implications, particularly for psychological pricing, that haven't been thought through." For example, a business might have based its marketing on a product being 9.99 [pounds sterling] but, once converted to the euro, it will end up at 14.48 euros which could cause problems.

There are also fears that the introduction will lead to forgery on a massive scale. The change of currency will affect around 300 million people and there will be different designs for different countries. OLAF, the European anti-fraud office, set up to monitor euro problems, predicts that millions of forged euro notes will appear across Europe in the first few weeks of 2002.

KPMG's Price agrees. "Retailers know little about the euro and many won't be able to check authenticity," she said. "This will inevitably lead to confusion with retailers who, out of ignorance, may refuse to accept the euro in the same way that some English retailers refuse to accept Scottish notes."