``Britain will have to look seriously at joining EMU before the next general election because of the success the single currency will have,'' chairman and chief executive Bruce Lakefield of Lehman Brothers International (Europe), told Reuters in a recent interview. The British government is committed in principle to joining the single currency, but has effectively ruled out its involvement during this parliament, which could last until 2002.

Lakefield, 54, who has been at Lehman for 24 years and in London for 3-1/2 -- believes the success of the euro is already evident in the convergence of European interest rates, cooperation between states and closer social policies.

The longer the pound stays outside the single currency, the more isolated Britain will become, Lakefieldwarned. While the single currency -- due to come into being in January 1999 -- is based on convergence of European currencies and interest rates, Lakefield believes it will lead to greater diversification within Europe and more business for Lehman as well as benefits such as tax harmonisation. Lakefield sees Lehman Brothers as a solutions provider, able to match clients' assets and liabilities in the new landscape.

But while it operates in all Europe's local markets, Lehman is not seeking to become a regional firm, relying instead on its global reach.

With only 8,500 employees, Lakefield believes Lehman can be more efficient, personalised and flexible in the face of rapidly changing technologies than some of its larger competitors. ``There are economies of scale. You can either be too small or too big. We believe Lehman Brothers is the right size, in the middle, right where we're supposed to be,'' he said. This was borne out by the fact it had just had its best half year ever.

He is unconvinced bythe efforts of Europe's banks -- which he describes as ``wannabes'' -- to break into investment banking. And he questions their spread of resources and ability to achieve a return on equity anywhere near that of their US rivals, given their current reliance on narrowing spreads in their traditional commercial lending.

Unlike these large, lumbering organisations -- constrained by branch networks and the social consequences of the redundancies they still have to make -- Lehman can concentrate on the areas it sees as most profitable. Lakefield said Lehman has invested heavily in Europe because it is a firm believer in the benefits of the euro, but he was unwilling to say what return on equity the region produced beyond the fact it was ``very competitive'' on a global scale.

``We are starting to see the investment we put in three years ago returned today. With the euro coming in next year we are going to get more bang for the buck,'' he said. But this strategy depends on a discriminatoryapproach.

``We are going to concentrate on those core businesses where we do it better than anyone else. We're going to keep ourselves rich in technology and lean on overhead,'' Lakefield said. He is also adamant that Lehman -- with a total capitalisation of $30 billion -- is not in ``merger mode,'' although it has looked at all the possibilities as consolidation has gripped the financial services sector.

``We've looked and evaluated how big we should be and where we should be. We've made the decision that we'd achieved more value by investing in ourselves -- by bringing up people, by hiring teams and individuals -- rather than by buying somebody else.''