By Lyndsey Hall
The National Audit Office (NAO) has revealed that the Royal Mint is sitting on a huge surplus of 2p and £2 coins as a result of declining cash usage, and has made the decision to suspend production for a decade.
In part thanks to the coronavirus pandemic and resulting lockdown measures, cash use has dropped even further than anticipated, and the Royal Mint has now exceeded targets in all denominations. The NAO found that the Royal Mint has more than twenty-six times the £2 coins needed, six times the one pence coins and eight times the two pence coins required. In total, the excess coins are worth around £89 million.
How has cash usage fallen in the last decade?
The Royal Mint’s prediction of coins fell by 65% between 2011 and 2020, and the NAO believes the pandemic could have a permanent impact on access to cash and cash usage. When the new £1 piece was introduced in 2017 and the old £1 coin was withdrawn, and unexpected amount of all denominations was returned to banks by businesses and households, as cash increasingly falls out of favour.
In 2010, cash was used in six of every ten transactions, falling to three out of every ten by 2019. The coronavirus outbreak has added fuel to the fire, resulting in a 71% decline in market demand for physical money during lockdown.
What is the impact of a fall in cash usage on society?
In 2018, LINK commissioned and funded an independent Access to Cash Review, which found that older age and lower income were two key factors in determining cash use.
“Cash use might be declining overall but it remains a vital part of millions people’s lives—particularly for some of the most vulnerable in society,” said Public Accounts Committee chair Meg Hiller.
“As society progresses towards the wide use of digital payments, the use of ash in transactions is dwindling,” said head of NAO Gareth Davies. “It may become harder for people to access cash when they need it and those without the means to pay digitally will struggle if cash is not accepted.”
Where in the country has cash usage fallen most?
In October 2020, LINK published its latest data on cash machine withdrawals across UK constituencies. ATM withdrawals fell on average by 65% in early April and have remained around 35% down on the same time last year, despite improving since the initial lockdown restrictions were lifted. Between Aril and September, consumers took out £22bn less than in the same period of 2019.
The biggest drop took place in Cities of London and Westminster, which saw a drop of 81%. The smallest impact was seen in Liverpool, Walton, where cash withdrawals only fell by 23%. This information and the rest of LINK’s data highlights the North/South divide, and the disparity of cash usage between the wealthiest and least wealthy areas of the country.
“The impact of the coronavirus pandemic has accelerated the move to digital payments and a decline in cash,” commented Starling Bank CEO and founder Anne Boden. “There are huge benefits to digital technology, but we need to make sure that these are felt more widely across society to create a fairer and better banking system for everyone. Education on digital banking is essential to ensure no one gets left behind.”
What are your thoughts on the decline of cash usage and the rise of digital money? How would a cashless society impact on you and your business? Let us know in the comments or on our Linkedin page.
Should the UK become a cashless society?