Swedish euro vote disappoints Arla
negative effect on one of Sweden's biggest food companies, Arla
Foods, which has operations in the UK, Denmark and Sweden.
Arla Foods, one of Sweden's biggest food producers, has said it is disappointed by the results of last Sunday's referendum on joining the single European currency.
The vote, which was overshadowed by the murder of foreign minister Anna Lindh, confirmed that the majority of Swedes remain sceptical about joining the euro, and it could be at least another decade before the Scandinavian country even considers entering the eurozone.
While the 'no' vote will not be disastrous for Arla, the company's deputy managing director Ake Modig said that joining the single currency would undoubtedly have benefited the dairy group.
"The best scenario for Arla Foods would be for all EU countries to join the euro," he said. "First and foremost, it would be beneficial to have a common currency in the countries where most of Arla Foods' business is centred, i.e. the UK, Sweden and Denmark [the three EU nations which are not currently part of the euro zone].
"The second best scenario would be if these countries followed a fixed exchange rate policy and tied their currencies to the euro as Denmark has done. This would make it easier for us to operate the business and manage a common price for milk producers," said Modig.
"We want to see long-term stability. When the Swedish krona floats, there are short-term gains. But that's what they are - short-term. The disadvantages outweigh the advantages. When the Swedish krona falls, it means rising packaging and energy costs in Sweden and this affects both the business and the individual milk producer in Sweden. Danish farmers are also affected by rising imported feed."
But Modig also said it was important to put the 'no' vote into context. "Arla Foods does significant business in US dollars and pounds sterling, and the turnover in sterling will increase following the merger with Express Dairies. In this way, the milk price for Arla Foods' Swedish and Danish co-operative members will be affected by the exchange rate fluctuations in USD and GBP. The exchange rate risk is substantial regardless of whether Sweden is in the single currency or not, but a Swedish 'yes' would have lessened the risk and made it easier to handle."
Modig's comments will resonate with many UK companies - including some of the largest food producing and retailing companies in Europe such as Unilever, Diageo or Tesco - whose increasing internationalisation is being hampered by the strength of the euro against sterling. Niall FitzGerald, co-chairman of Unilever, has been one of the most vociferous supporters of Britain's entry into the single currency.
