Cash may be king, but two denominations of coins are turning into a royal pain in the United Kingdom, according to a report released Sept. 18 by the country’s National Audit Office.

The report details an array of numbers, all pointing to decreased need for and use of coins and paper money, particularly the 2-penny and £2 coins.

The Royal Mint is required to keep about 11 weeks’ worth of coins on hand at any given time, but in March, it had eight times that supply of 2-penny coins, and 26 times the usual demand of £2 coins.

Because of this, Royal Mint officials decided that the mint would not produce new examples of those two denominations for circulation (collector versions remain available) for at least 10 years. 

Falling demand

The glut of these coins is a symptom of a larger issue, falling demand for cash in circulation.

Use of cash for payments fell 59 percent between 2008 and 2019, from six in 10 transactions, to fewer than three in 10 transactions. Cash was the most prevalent payment method until 2017, and £151 billion was used in commerce in 2019.

Use of cash in circulation is expected to fall a further 65 percent, to £59 billion, between 2018 and 2028 (though the pandemic may accelerate that drop).

Though demand for coins and paper money as payment methods is dropping, the costs to process money remain the same, putting pressure on financial services companies.

Making money has not been a money-making proposition for the Royal Mint: circulation coin services lost £21.3 million from 2017–2018 through 2019–2020. This includes international coinage contracts, which account for three-fourths of the Royal Mint’s circulating coin production.

The Royal Mint cut employees and “mothballed” two plating lines to reduce costs by 23 percent, but coinage production remains unprofitable, the report said.

Pandemic effects

Demand for cash plummeted by 71 percent from March to mid-April, but began to rebound by August, to 77 percent of pre-pandemic demand. Long-term effects of the pandemic remain to be calculated.

Perhaps as much as two-thirds of coins issued remain out of active circulation, according to the report.

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