FEARS were raised for British manufacturers after Japanese car maker Toyota announced it wanted to deal in euros rather than sterling.

Saying that its UK operations were suffering "severely" by not being in the European single currency, the car giant asked part makers to start using euros when quoting for business.

Unions accused Toyota of shifting the euro burden to the shoulders of its suppliers and warned the move would leave the motor components industry bearing the brunt of currency fluctuations.

Suppliers said they were forced to agree to the request or lose the business.

Toyota's senior managing director, Yoshio Ishizaka, said the company was telling the UK Government its business condition was "severe."

The company saw its UK profits wiped out last year because the strong pound made its exports to continental Europe so expensive.

But Sir Ken Jackson, general secretary of the AEEU union, said: "We can sympathise with Toyota's decision but this will have a huge impact on the motor components sector, who will have to bear the brunt of currency fluctuations. Our major European exporters do not want the uncertainty of exchange rate fluctuations.''

A Toyota UK spokeswoman said: "As we have said before, Toyota UK seeks opportunities to achieve cost reductions wherever possible and appropriate.''

She said there was no "active programme" of transferring the supplier base to the euro zone but confirmed that supplies were increasingly being sourced from there because they were cheaper.

One of Toyota's North-East suppliers, Sumitomo, announced last month it will close its factory in Sunderland with the loss of 400 jobs.

The company will close the site in the first half of 2001, indicating that the strength of the pound against the euro was a factor in its decision