Honda's UK car operations, hammered in recent years by the strength of sterling, are expected to break even next year but need a 15% rise in the value of the euro to return to profits, a senior executive said yesterday.

Minoru Harada, president of Honda Motor Europe, disclosed that European operating losses in the year to March 2002 were €307m (£197m), a €176m improvement on the previous year.

The bulk of these losses were sustained in the UK where Honda's Swindon plant, which employs 4,300, boosted output 70% last year from 76,000 to more than 130,000 units. Two thirds of its production is exported to Japan, north America and mainland Europe.

The UK's Japanese car plants are among the most productive in Europe but lose money virtually every year because of adverse foreign exchange movements. Nissan's Sunderland plant, the most productive, has never made a penny.

Mr Harada said Honda was not relying on the UK joining the single currency for future growth. "The pound/euro relation at the current level is OK for us and we can break even in the year to March 2004 on that basis. But to make the business profitable we need the euro to be 15% higher in value than now ... We would prefer the UK to join the euro but whether it does or not, we will maintain our presence here."

Mr Harada's comments came as official figures showed a 12% drop in inward investment projects into the UK last year from 869 to 764 and a 52% fall in jobs created from 71,488 to 34,087. But the UK's global inward investment stock rose 10% in the year to £351.3bn.

Anti-euro campaigners said the figures proved wrong the argument that investment would collapse unless Britain joined the euro. Ministers said the fall reflected the global economic downturn, with the UK remaining the top investment location in Europe.

Honda plans to raise output at Swindon 40% this year to 185,000 units and a further 10% next year towards the goal of full capacity at 250,000. But it plans to cut the UK local content to 60%, with more components supplied from China and other Asian countries.

Globally, the company said yesterday it planned to increase output 26% in the next three years by 700,000 vehicles to 3.4m. With motorcycles and power products, Honda's target is to boost production from 12.7m units last year to 20.4m by March 2005.