The Chancellor's five euro tests

Better for jobs Better for investment Better for the City Flexible labour markets Economic cycles compatible

But, said David Page at Investec Bank UK: "The manufacturing sector has made tremendous productivity gains over the past few years of sterling strength.

"This has left it able to compete at levels around 0.65 [pounds to the euro]."

Cautioning against early entry

Following the Labour party's victory in the general election last week, the pound has already moved lower against the euro in anticipation of a referendum during the new parliament on joining the euro.

But economists are cautioning that UK membership of the euro should not be expected any time soon.

Aside from exchange rates, the government would have to turn around public opinion, with polls suggesting that a majority of voters is opposed to early entry into the eurozone.

It would also have to be satisfied that Chancellor Gordon Brown's five economic tests had been met.

When will public opinion like the euro?

Merrill Lynch - not until Spring 2003 Barclays Capital - not for at least two years RBS - not during the new parliament

In a recent report, US investment bank Merrill Lynch said a referendum this year was "unlikely" given the scale of public opposition to the euro.

It said Spring 2003 was the most likely date for the referendum, with - assuming a "yes" vote - euro notes and coins being introduced in the UK in 2005.

Ross Walker at RBS Financial Markets said he did not expect a referendum on euro entry at all during the parliament.

"Public opinion is unlikely to move in favour of the single currency and the prime minister will not risk a plebiscite under such circumstances," he said.

Lack of alignment

Barclays Capital, focusing on Mr Brown's tests, is also pessimistic about the chances of early euro entry.

Its economists believe that only one of the tests - the one on inward investment - has so far been met.

More depressingly for the UK's euro enthusiasts, they say the other four tests will not be passed for at least five years.

The main reason cited is the lack of alignment in economic cycles between the UK and Germany, powerhouse of the eurozone.

Others disagree with this assessment.

While admitting that judging the tests is a subjective business, the Liberal Democrats are among those saying all five tests have already been met.

They have campaigned for early entry to the euro while the Conservatives promised before the election that they would rule out joining the euro for the duration of the coming parliament.