A leaked memo from a senior civil servant has predicted a "manufacturing meltdown" if the government does not embrace the euro, the European single currency.

The memo argues that inward investment from foreign companies into the UK is likely to dry up unless they can be assured of a stable exchange rate.

Hugh Morgan Williams is chairman of Camford Audio, an engineering company in the North East of England, and he is worried about the declining prospects for investment in his region.

But Dominic Cummings, head of research at Business for Sterling, says that the joining the euro would just make things worse for UK companies.

CBI North East region vice president Hugh Morgan Williams:

The North East of England has more manufacturing exporting activity than any other region of the UK, and has been the most successful European region in attracting inward investment.

Much of that investment is now threatened by the instability in the exchange rate between the pound and the euro.

Unless and until business is able to plan on the basis of stable exchange rates this problem will persist. There will be more casualties and jobs and manufacturing capacity will be lost.

Some £16bn of investment has come to the North East which has created or safeguarded 75,000 jobs in the last 20 years.

Now major inward investors like Nissan, Toyota, Komatsu, and Toshiba have all stated that new investment projects are threatened.

It is not only inward investors that feel the chill blast of this threat. Hundreds of UK companies, and thousands of UK workers, are dependent on these inward investors for a majority of their business.

Inward investment agencies all report that enquiries for manufacturing projects to be placed in the UK are depressed. It's not surprising when Cologne is cited as a more competitive location than the North East, and Nissan say that because of the exchange rate they lose money on every car exported to the eurozone.

Although figures to be released by the DTI will show that inward investment levels were up on last year, they will also reveal that we are starting to lose out to mainland Europe, and forecasts for this year show that trend is continuing.

Business for Sterling's Dominic Cummings:

The strength of British inward investment has been confirmed by company after company and survey after survey this year. British inward investment is at record levels and the future is bright. Britain attracts more inward investment than Germany and France put together, and Europe is not the most important source. 50% comes from the USA, 27% from the whole of the EU and only 3.6% from Japan.

The heads of the world's 1,000 companies were recently asked to rate every country in the world for its attractiveness for future inward investment. Britain came second in the world, beaten only by the United States. These companies want Britain to stay where it is: inside the EU, outside the euro, a bridge between America and Europe.

Today's leaked memo on inward investment is therefore a grotesque distortion of Britain's inward investment success. The memo makes no attempt to analyse the costs of joining the euro as well as the benefits. All the evidence shows that global investors come to Britain because of our economic advantages such as low business taxes - advantages that would be destroyed in the eurozone.

Arguing that we should join the euro because it is a weak currency is short-term and foolish. 100,000 businesses went bankrupt in our last currency experiment, the ERM, because of our obsession with achieving exchange rate stability with the eurozone which benefits just one sixth of the economy.

The truth on British inward investment will emerge on Wednesday this week. New Government figures will show that British inward investment rose to record levels while Britain was outside of the eurozone.