British Trade and Industry Secretary Ms Patricia Hewitt said yesterday that investors trying to locate in Britain could be influenced by its position outside the euro zone.

Testifying to the British parliament's industry select committee, Ms Hewitt stuck to the government's long-held policy that it would only recommend joining if it judged membership of Europe's single currency to be in Britain's economic interests. Prime Minister Mr Tony Blair has promised a decision will be made by mid 2003.

She added if that judgment was made positively, the government would move "speedily and decisively" to a referendum.

"The problem of the exchange rate and the whole issue of the single currency is undoubtedly a factor in investment decisions," Ms Hewitt said. "We are part of an enormous single market but not at the moment part of the single currency."

Inward investment projects into Britain dropped by 12 per cent in the latest financial year, government agency Invest.UK reported in July.

Last week, Ford Motor president Mr Nick Scheele said Britain should make a commitment soon to join the euro to help businesses like his.

"Foreign investors have warned again and again that Britain is a less attractive location if we remain outside the euro," said Mr Philippe Legrain, chief economist of Britain in Europe. "The longer Britain remains isolated from the euro, the higher that price will be."

Ms Hewitt said some of Britain's slippage was due to its previous dominance of inward investment from the US, and the telecoms and other high-tech sectors in particular.