Signs are emerging that the Treasury is considering the withdrawal of 1ps, 2ps and the £50 note.
One of the consultations announced in the Spring Statement is looking into cash and digital payments in the new economy.
The paper highlighted that: “From an economic perspective, having large numbers of denominations that are not in demand, saved by the public, or in long term storage at cash processors rather than used in circulation does not contribute to an efficient or cost effective cash cycle.”
Hargreaves Lansdown persona finance analyst Sarah Coles: “The writing looks to be on the wall for 1ps and 2ps. When it costs more to produce and distribute a coin than the coin itself is worth, governments tend to decide it’s a spent force - and we’re rapidly heading in that direction for coppers.”
“The root of the issue is that demand for these coins has dramatically declined. People are increasingly using debit cards and contactless payments for low value spending. Cash was used for 7.2 billion transactions of under £1 in 2006. By 2016 it had fallen to 4 billion, and by 2026 it is expected to fall to 1.3 billion. Meanwhile, shops are using rounded pricing to save the bother of handling low value coins, so even those who stick with cash have less use for coppers.”
“Many of the costs of manufacturing and distributing them are fixed – and some are actually rising at the moment - so falling volumes means it costs more to handle each coin. When you add in the impact of inflation eroding their real value, it’s clear that the days are numbered for copper coins.”
The consultation paper also revealed that at the other end of the spectrum, the £50 note is under pressure. It said it is believed to be rarely used, and held as a store of value instead. There’s also a perception that it is often used for money laundering, hidden economy activity, and tax evasion.
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