French car manufacturer Peugeot, which has a strong presence in the West Midlands, employing more than 3,000 people, is the latest manufacturer to suggest that it may have to cut back investment and jobs because of the strength of the pound.
A senior source at Peugeot said jobs were at risk because the pound's high value, particularly against the euro, was making UK investment decisions 'hard to predict'.
The news comes at a time when Nissan, Toyota and Ford have all recently admitted struggling in the current high exchange rate climate. Last month, BMW cited sterling's strength as a reason for selling Rover, a move which threatens to ravage the the West Midlands economy.
In January, Peugeot, the majority of whose 4,000 UK workers are employed in Coventry, announced plans to produce a new Citroën car there to build on the success of its 206 model. The plant now produces the 206 model at the rate of 160,000 a year.
While the Peugeot source stopped short of saying this plan was now on hold, he did say that components would probably be sourced abroad rather than in Britain.
He urged the Government to state once and for all whether Britain would enter the single currency. 'Two-thirds of our production is for export,' he said. 'It's a big concern not just now but for the future, because the high level of the pound against sterling makes future investment difficult.'
Peugeot's managing director, Tod Martin, recently visited Prime Minister Tony Blair with other leading motor industry executives to express these concerns.
The French carmaker's warning comes as traditional manufacturing industries in Labour heartlands are struggling to maintain a market share in Europe.
Other industries are also feeling the pinch. Neil Eisberg of the Chemical Industries Association, whose members employ 250,000 UK workers, said: 'The EU is our largest export market, so, yes, the high exchange rate against the euro does effect our business.
'The vast majority of the UK chemical industry is run by overseas companies. So we run the real risk of them pulling investments or not even considering us in the future. We made that point to Treasury officials earlier this year, but these concerns were simply not addressed in last month's Budget.'
Industry sources fear that the country's leading chemicals companies - such as German-based BASF and Rhodia of France - could relocate plants if the current situation continues.
And last week, Leicester-based textile union KFAT said that in the past year clothing manufacturers had axed 40,000 jobs. Current losses are running at 650 a week, the union says.
