National Audit Office releases report on cash in the UK

Started by eurocoin, September 18, 2020, 11:14:39 AM

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eurocoin

The National Audit Office has released a report on the cash infrastructure in the UK. In the report there is being mentioned that The Royal Mint estimates that there are still enough 2 pence and 2 pound coins in stock for at least the next 10 years, and so that no news ones will have to produced for just as long. Large stocks of almost every denomination were a direct result of the withdrawal of the old 1 pound coin. Because of that people not only started to deposit their old round pound coins but also enormous quantities of coins of other denominations that they had laying around.

The Royal Mint's currency production for the UK has been loss-making for years. Although The Royal Mint has decreased costs of staff, the costs of amongst other things the alloys used in the production in the meantime increased with more than that. The production costs of the 1p coin have for example increaded by almost 70% in the last 4 years.

Between 2010 and 2020 the orders of HM Treasury at the Royal Mint have decreased with 65%. In the early months of the pandemic the demand for coins and notes in the UK decreased with over 70% because of COVID-19 although currently the demand for coins is again increasing sharply as some people and businesses are temporarily not using cash and so are keeping their coins out of circulation.

The full report can be read here.

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See also: No new 2p or £2 coins to be made for next decade

When the old £1 coin was replaced in 2017, people were given a six month window to hand in their old currency, which unexpectedly saw a rise in all denominations of coins being returned, the National Audit Office (NAO) said.

This in turn led to a huge increase in the Royal Mint's "buffer" stocks, with targets exceeded in every denomination in March 2020. While 1p and 2p stocks were six and eight times over the target, the Mint had 26 times as many £2 coins as necessary.

The Mint will reduce production levels over the next 10 years to reduce stocks steadily while maintaining production capability.

The coronavirus pandemic is believed to have further accelerated the decline of cash, with demand for cash plummeting by 71 per cent between early March and mid-April, according to industry figures.

Coin production decreased by 65 per cent in the last decade, from some 1.1 billion coins in 2010-11 to 383 million in 2019-20.
Visit the website of The Royal Mint Museum.

See: The Royal Mint Museum.

Alan71

I still think they messed up when they issued the new £1.  As I've said before, it was the perfect opportunity to reduce the numbers of £1 in circulation so that you'd only ever get one if a transaction involved an odd number of them to give in change (say, £1, £3, £6 or £8).  Anything else should have been in £2 coins but it never was.  They issued far too many £1 thereby reducing demand on the £2 even further, so I'm not in the least bit surprised that they have 26 times the number of £2 as necessary.

Still, makes no odds to me as I no longer use cash.

Deeman

Quote from: Alan71 on September 18, 2020, 06:04:02 PM
Still, makes no odds to me as I no longer use cash.

Surely you must carry some cash in case of system failure. Too much reliance is sometimes placed on electronic transactions.

Alan71

Quote from: Deeman on September 18, 2020, 07:32:26 PM
Surely you must carry some cash in case of system failure. Too much reliance is sometimes placed on electronic transactions.
Well, I've got a £20 note in my wallet, but that's been there since February as it was the first polymer £20 that I received.  And a £1 for supermarket trolley use.  Plus I do have to use cash when I get my hair cut, but that's just a straight £10 note including a tip.

Deeman

Recently I went for a meal in a country pub and their connection was down. Luckily I had the cash. Maybe you should consider giving your £20 note some company!

FosseWay

It's not particularly unprecedented for denominations to "rest" for several years. There were no 10p coins struck for circulation between 1982 and 1991 inclusive, with rather few in 1981. This was a direct result of the introduction of the 20p, which did for change-making what Alan was talking about regarding the £1 - you needed only max one 10p for any amount of change, rather than four in some cases.

The 50p took a break between 1986 and resizing in 1997; again, you can add 1985 to all intents and purposes.

And going back to £sd days, there were no or few pennies made from 1950 to 1960 inclusive.

What is perhaps odd this time is that it is the £2 that is affected. Of course, I haven't been in the UK since before covid, but on my previous visits I have noticed a lack of £2s, being given four £1s in change quite regularly.

redlock

It's an interesting report. I took a glance at it.

I found the information about banknotes very intersting, too. My highlights:
--the BoE misjudged the need for the £10 note in 2019. There was an extra order for 145 Million £10 notes to meet demand
--despite the fear of using cash/banknotes in the early stages of the pandemic, there was a significant increase in demand for £10 and £20 notes. The demand for £10 notes was so high the BoE had to dip into the contingency stock (the reserve the BoE holds)


A bit off-topic:
The last time, the BoE reported the number of banknotes produced was for the 2016/2017 period. Then, the BoE stopped putting this information on their web-site.
Does anyone know the figures for the 2017/2018, 2018/2019 and perhaps even 2019/2020 period? I haven't been able to find it on the internet :(
One can see in the above report that £5 notes were only printed in 2018/2019; £10 + £20 notes in all three periods, £50 only in 2018/19. I am just curious how many were printed.

Alan71

Thinking about this again, why are they not considering stopping production of the £1 for a while?  That way, the huge surplus of £2 coins could be issued instead.  The supplies could be used up and it would help to finally re-dress the balance between £1 and £2 in circulation.  What FosseWay mentions - getting four £1 coins in change - appears to be the norm, certainly in my experience.  What is it with £2 - do retailers not like them or something?  Even if a retailer found themselves short, there's still the fallback of two 50p coins instead.

I'd happily see the £1 rested.  It's a boring coin now that the design doesn't change (or alternative, special edition designs not being produced).

FosseWay also recalls the 10p and 50p being rested due to the introductions of the 20p and £1.  Had re-sizings not taken place, it's likely those two coins might never have been issued again.  Huge stocks of them lay idle in bank vaults for years. 

Just imagine if they'd messed up back then?  The dismay at still getting four large 10p coins in change instead of two tiny 20p?  Unthinkable really.  The size difference between £1 and £2 isn't anywhere near as great of course (as 20p was less than half the weight), but it pretty much amounts to the same thing.  The purpose of it was still to reduce the weight of the coinage, but with the £2 it failed.

It certainly is a factor in my decision to go cashless.  You've got 1p and 2p that are far too big, an abundance of £1, and an increasingly rare possibility of getting a commemorative £2 (or indeed, any at all).


Figleaf

Quote from: Alan71 on September 20, 2020, 11:23:00 AM
Thinking about this again, why are they not considering stopping production of the £1 for a while?  That way, the huge surplus of £2 coins could be issued instead.  The supplies could be used up and it would help to finally re-dress the balance between £1 and £2 in circulation.

Don't know how it is in the UK, but in the countries I do know about, mint officials are not thinking about the supply of coins in relation to each other. Rather, they estimate demand for each denomination separately and remain passive, reacting on demand as expressed by their client institutions. If people are not used to £2 coins, they don't ask for them, so banks don't ask for them, so they don't get struck, end of story.

A prime example of such thinking was the introduction of the $2 note in the US. If at the same time, the production of $1 had been shrunk, significant amounts of money would have been saved annually. Instead, the public kept asking for $1 notes and got served, rather than anyone saying "we are rationing $1 bills, but you can get as many $2 bills as you want". The quarter would have dropped eventually. ;)

Peter
An unidentified coin is a piece of metal. An identified coin is a piece of history.

FosseWay

I was having a similar discussion on another (non-numismatic) forum, and someone suggested that the automatic checkout machines used by supermarkets are made by a US company with the US market and coinage system in mind. The US has in practice only four circulating denominations, whereas the UK has eight. If you are restricted to only using four out of the eight  because of the limitations of the hardware, the most efficient denominations to choose are 1p, 5p, 20p and £1.

Now, I've no idea if it's true that these machines are made in the US or whether they are imported to the UK without modifications that allow more denominations. But if it is the case, this may explain why £1s are favoured over £2s despite the apparent illogicality discussed above.

andyg

Yes, you never get 2p or £2 coins in change from those self scan machines, 
It's a while since I last put change in one!
always willing to trade modern UK coins for modern coins from elsewhere....

Alan71

Quote from: FosseWay on September 20, 2020, 05:29:27 PMIf you are restricted to only using four out of the eight  because of the limitations of the hardware, the most efficient denominations to choose are 1p, 5p, 20p and £1.
That would explain why I got 10p change as a 5p and five 1p a while ago (I happened to have a £10 note on me and the transaction came to £9.90, so I assumed I'd get a 10p back).  I promptly got rid of the coins the following week in the same machines - what's good about them is you can rid yourself of change and pay the rest by card. 

Again, that's an experience that puts me off using cash.

FosseWay

Quote from: Alan71 on September 20, 2020, 07:58:12 PM
That would explain why I got 10p change as a 5p and five 1p a while ago

Most efficiently you should have got two 5ps. I presume the machines keep "an eye" on how much of each denomination they have left in their containers and give out "inefficient" combinations if they are running low on a given denomination.

Deeman

Quote from: FosseWay on September 20, 2020, 05:29:27 PM
I was having a similar discussion on another (non-numismatic) forum, and someone suggested that the automatic checkout machines used by supermarkets are made by a US company

The self-service kiosk was invented by David R Humble, inspired by standing in a long grocery checkout line in south Florida in 1984.
The world market leader in self-service checkout technologies is US-headquartered NCR, which supplies nine out of 10 UK retailers.