Skip to main content

The production and distribution of cash


Ten years ago, cash was used in six out of every ten transactions - but by last year this was down to less than three in 10.

The outbreak of COVID-19 may have accelerated this trend, with market demand for notes and coins declining by 71% between early March and mid-April this year during the lockdown - although demand has since been recovering.

Evidence shows older people and those on a low income are more likely to make cash transactions, but in just two years to December 2019, there was a 17% reduction in free-to-use ATMs. While there are still more free-to-use ATMs in more deprived areas, the proportion of free-to-use ATMs in those areas has declined faster.

The government has a stated goal of safeguarding access to cash - but the commercial operators that make and distribute cash rely on high demand for it to stay profitable, with large fixed costs in maintaining bank branches and ATMs.

A recent report by the NAO found that HM Treasury and the other public bodies involved in the cash system need to work better together to prevent vulnerable people who rely on cash for transactions from being excluded. It says that the Treasury should be clearer about the outcomes it wants the cash system to deliver for consumers and small businesses, and how this should be balanced against costs.

Despite fewer people using cash for transactions, the demand for notes has continued to increase. In 2020, the number of notes in circulation reached a record high of 4.4 billion, with a value of £76.5 billion. In 2018, the Bank of England estimated that only 20%–24% of the value of notes in circulation were being used or held for cash transactions, with UK households holding a further 5% as savings in cash.

Little is known about the remainder, which is worth approximately £50 billion. Possible explanations include holdings in cash overseas for transactions or savings; unreported cash savings in UK households; or for use in the shadow economy. The Bank and other government bodies have little reliable information to quantify how much is likely to be held where.

Recent anti-counterfeiting work by both the Bank and the Mint is delivering improvements, however. Indications so far are that £5 and £10 polymer notes, with new security technology, have reduced the incidence of counterfeiting compared to equivalent paper notes.

If you have evidence on the issues raised in this inquiry, please submit it here by Monday 12 October.