Fears have been 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. It comes after Japanese electronic giant Matsushita and car maker Nissan's recent threats to move production to other parts of Europe if Britain does not adopt the single currency.

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

Suppliers in Britain were now being asked to deal in euros to "minimise currency risk exposure", he said.

The company saw its UK profits wiped out last year because the strong pound made its exports to other parts of 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."

Kitty Ussher, chief economist of the pro-Europe group Britain in Europe, said: "We can expect more major manufacturers to share the cost of sterling's volatility outside the euro, rather than bearing the brunt themselves."