Britain's economy is failing a key Treasury criteria for euro entry, new research has found.

The economy is flunking the first of Gordon Brown's five economic tests on "whether a clear and unambiguous case can be made", according to an ESRC funded study.

It provides more bad news for euro enthusiasts, coming after weekend reports that Brussels had written-off the prospect of a euro referendum before the next general election.

European Commission sources have revealed that overtures to the Treasury seeking closer cooperation on EU economic rules as the UK joins the eurozone have met with a stony silence.

Officials are set to assess the chancellor's euro measures by June and top of the list will be economic convergence with the EU.

"Sustainable convergence between Britain and the economies of a single currency" was the first requirement set out by Brown in October 1997.

But a study by Manchester's Centre for Growth and Business Cycle Research found the UK economy shows no sign of converging with the euro zone, "nor indeed do the economies of any regions within the UK".

Researchers are concerned that the Treasury test "does not consider potentially important regional differences".

Focusing on the business cycle in 11 British regions and six euro zone countries over 30 years - between 1966 and 1997 - the study finds "that the business cycle of the UK economy has in fact diverged from that of mainland Europe over this period, while those of our EU partners have continued to move closer together".

The research also points to "some regional differences among business cycles" but no evidence that regions in the south "are more suitable candidates for EMU that those in the north".