News & Views - Savantor

Beginning of the end.......?

Friday, 16 March 2018

The eventual demise of cash in the UK is a topic which has been much discussed and continues to be so. An announcement in the Budget/spring statement may have brought that day a little closer.

It was announced by the Chancellor of the Exchequer in the Spring Statement that the Government is going to seek views on the role of cash in the economy, as digital technology has changed the way people shop, sell and save. Whilst acknowledging that cash will continue to be an important method of payment, the government also recognises that more people are moving towards digital payments every year.

The announcement immediately sparked reactions and outpourings within the media and social media about whether this review signalled the end of copper coin usage, to the extent that Downing Street felt it necessary to issue a clarification statement the following day. The statement stressed that there are no proposals to scrap 1p or 2p coins in the consultation and that the call for evidence is simply intended to enable the Government to understand better the role of cash and digital payments in the new economy.

The review has been prompted by a sharp decline in the use of small value coins and a significant increase in contactless and phone payments. Apparently 6 in 10 copper coins are used just once and never again, either because they are saved or, in 8 per cent of cases, thrown away. The Royal Mint has to produce and issue over 500 million 1p and 2p coins a year to replace those falling out of circulation, even though they cost as much to make as higher value coins. According to the Treasury, some retailers and vending machine operators have already started to phase out transactions requiring copper coins in change.

In terms of daily usage, copper coins, particularly the 1p coin, are very frequently used as change for items priced below a round pound value for marketing purposes, ie to make the price seem cheaper.

As a result of the Chancellor’s statement, a review of cash usage will be undertaken and it is highly likely to include some recommendations regarding copper coin usage. Whilst there are many arguments around the subject of the cashless society and getting rid of cash, in the case of copper coins it could be argued that it makes practical and financial sense to remove them from usage. Many countries, including Canada, Australia Brazil and Sweden have already removed their low denomination coins from circulation.

However, if this step is undertaken, it could also be seen to have broader implications and perhaps to signal a step towards a cashless society in the UK. It will be interesting to see the outcome of the review and its recommendations.

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