Lord Mayor says City can prosper without euro

TONY BLAIR'S hopes of winning public support for British membership of the single currency suffered a setback yesterday when the Lord Mayor of London said there was "no indication" that the City would be damaged by remaining outside it.

Lord Levene of Portsoken revised the views he expressed in February when, after a tour of European capitals, he warned that there could be adverse consequences if Britain remained out of the euro for four or five years. Yesterday he said: "You have to ask when that process will start. After ten or eleven months there is no sign of that. Quite the contrary. There are increasing investments in the City."

The outgoing Lord Mayor, who stands down on Friday, saw no sign of that changing "unless and until there is an absolute decision that the UK is not going to join. It's not going to happen until then." He added: "At the moment, the potential downside of the UK not joining has not happened at all."

Lord Levene said that after the first 11 months since the birth of the Euro showed that London trading in corporate bonds issued in the Euro was now projected to show an increase by 25 per cent over trading last year in equivalent European currencies.

The business was projected to be worth $1,500bn (pounds 950bn) compared with $1,200bn last year. The latest figures also show that trading on Euroland stocks on the London Stock Exchange had increased by 59 per cent in the first half of this year compared to the first half of last. Lord Levene stressed that his judgement was on the basis of only 10 or 11 months trading, and that a decision not to enter the euro could significantly change the potential impact on City trading. Nor was he trying to influence the political decision of whether to join.

But he insisted that the question of British entry appeared "less and less core" to the issue of the City's ability to trade successfully as a financial centre. "The decision is no more core than having the UN in New York" he added.

The Tories seized on Lord Levene's remarks last night. "This knocks on the head, once and for all, the idea that the City of London would suffer if the UK didn't join the single currency," said Francis Maude, the Shadow Chancellor. "It's about time that Tony Blair admitted that Britain can prosper in Europe but keep the pound." Lord Levene's comments came as Gordon Brown, the Chancellor, extolled the virtues of the US "enterprise economy" and the benefits of importing these ideas into Britain. Mr Brown's remarks will be seen as a rejection of the more heavily regulated European economic model and will fuel speculation that he is cooling on early membership of the single currency.

The Chancellor announced that the Massachusetts Institute of Technology, which has a world-wide reputation for research, is to link up with Cambridge University to create a new institute aimed at improving competitiveness and ensuring a new generation of British entrepreneurs.

Mr Brown presented the move as completing a hat-trick of major US investments in Britain, following Wal-Mart's take-over of the supermarket chain Asda and last week's decision by Nasdaq, the hi-tech stock exchange, to open up shop in London.

The Chancellor said: "It is of great advantage to Britain's future development that we are able to attract to Britain these dynamic institutions of the US economy. The British economy benefits from these transatlantic alliances."

The link up between the two seats of learning was Mr Brown's idea and he suggested it to the Massachusetts institute 16 months ago. The British Government will contribute pounds 14m a year over the next five years, with the two centres raising another pounds 16m from the private sector.

"I believe this will lead to the establishment of hundreds of thousands of new jobs in the UK," said Mr Brown.