London's City financial institutions and banks are looking more favourably at the prospect of Britain joining the European currency union, according to a survey by accountancy and financial consultancy firm KPMG.

The tide of opinion in the City in favour of the UK joining euroland appears to be changing towards a more positive stance, KPMG said.

In answer to the question whether their attitude on the UK's joining euroland had altered during the past six months, 51 per cent of companies said that they were now more in favour.

Forty per cent of respondents from 200 leading financial organisations, including 60 banks, said they believe London will lose jobs as a result of Britain not being in the first wave of European economic and monetary union (EMU).

The survey also found that 49 per cent of companies think London will be less attractive to overseas investors. Just 8 per cent thought London would gain jobs and 22 per cent said they believed investment in London would increase.

The most common reasons for the attitude change in favour of EMU were that it is inevitable, that Britain is now better informed and that its advantages are now more apparent. Only 11 per cent of companies said they had become less in favour of Britain joining EMU, while 40 per cent expressed no change or no opinion.

In terms of the timing of a British entry, 41 per cent of the respondents said their preferred date was January 1st, 2001, while 30 per cent considered entry after the next British general election to be preferable.

Five per cent favoured a delay in the decision for the next two parliaments and only 6 per cent said they did not want the UK to join at all.

The survey respondents employ between them 140,000 people in London. The fieldwork was carried out on November 13th-19th, 1998, and the respondents were company officials responsible for the euro preparations.

The survey outcome follows indications in the first days of trading in the euro that London's dominance in setting benchmark reference interest rates could be eclipsed by Brussels, which has introduced a rival European system.

Mr Brian Williamson, chairman of the London International Financial Futures and Options Exchange (LIFFE), was quoted by the Financial Times on Friday as saying that up to 80 per cent of money market deals in the euro had been based upon the Brussels-based Euribor reference rate, rather than euro Libor, set by the British Bankers' Association.

Bankers and analysts say London's ability to maintain its position as the European financial centre could be determined by the popularity of euro Libor.

The British government has adopted a wait-and-see attitude towards the euro and has ruled out an EMU entry during the life of the current parliament, which can run until 2002.

The Prime Minister, Mr Blair, has said it is in Britain's interest for the euro to succeed, but has fallen short of coming out publicly in favour of joining the European single currency.

What Britain cannot to do is stand aside as a matter of principle, he told the BBC's Breakfast with Frost programme.

It is essential for Britain that the euro succeeds.

However, he reiterated that Britain faced the same test as before - making sure that its economy falls into line with the rest of Europe.

The test is, is it in Britain's national economic interest? Are the benefits of joining the euro clear and unambiguous?

Supporters of Britain adopting the euro were hoping its successful launch by 11 countries on January 1st would nudge the government into putting forward a firm timetable for joining.

Mr Giles Radice, an influential Labour MP, said last week he wanted Mr Blair to give a clearer signal of his intention to join.

Mr Blair said Britain must do everything it can to make the euro succeed, but he was non-committal on whether or when to join.

If the euro fails, Britain, even out of it, will feel the backwash. Any idea that it can remain immune from what happens in continental Europe is absurd, he said.

"It would be the biggest failure of leadership imaginable if I fail to point out to the British people the consequences of looking away from Europe and leaving ourselves without influence on it," Mr Blair said.

His tone differed from that of the leaders of two other euro-out countries - Denmark and Sweden - who last week softened their approach towards the euro, creating market speculation that they could join earlier than expected. Opinion polls show greater enthusiasm among voters in both countries.

Britain has ruled out adopting the euro at least until the next parliamentary elections, due in 2002, and any decision to join would need to win approval in a referendum.