When will we see a regular circulating UK 5 pound coin ?

[<k>]

Our forum member Alan71 mentioned recently that when the first 50 pence coin was issued in 1969, its spending power was approximately 8 pounds and 30 pence (£8.30) in today's terms.

Inflation in the UK raced after the oil shock of 1973. By 1975 it had peaked at 26½ %. A circulating pound coin was introduced in 1983, but the circulating 2 pound coin was not introduced successfully until 1998.

Up until the mid-1960s, I could buy a Milky Way bar for 3d - that's 1¼ pence in decimal money. For a pound, I would have been able to buy 40 Milky Way bars back then! In 1983 I bought a Wispa bar for 20 pence, I recall. Nowadays you would pay at least 60 pence for a small bar like that. You cannot buy even two bars for a pound! That's a long way down from forty!

The UK decimal half penny was demonetised in 1984. The penny on its own is now worthless, yet still we retain the penny and 2 pence coins. Other countries, such as Canada and New Zealand, have abolished their lowest denominations. Why haven't we done this in the UK?

How much spending power do the highest denomination coins in the Western countries retain, in comparison to their highest denomination coins in 1969? If they have also declined markedly, why is there no clamour for still higher denominations nowadays? If the UK 50 pence coin in 1969 had a modern spending power of roughly 8 pounds 30 pence, how is it that a UK regular circulating 5 pound coin was not issued some years ago? That is an open question, since I feel no need for such a coin. I am very happy with the Bank of England's relatively new polymer 5 pound note.

[quaziright]

Yes polymer notes in many countries negate the need for higher denomination coins often. The clamour is further reduced atleast in the last 5 yrs or so because a lot of people including myself transact almost exclusively through various electronic payment methods. I don't even tap my credit card any longer since I use the tap on my phone

I was travelling in Asia recently and saw the the all pervasive use of QR codes which makes what we do in Canada seem outdated.

[Alan71]

Yep, polymer notes and increased use of electronic payments negate the need for higher value coins. 

Have many countries issued a five unit coin?  No.  The euro, US dollar, Canadian dollar, Australian dollar, New Zealand dollar etc all still have notes.  Once the step is taken to turn the five unit into a coin, the currency begins to look a bit worthless.

The UK was actually one of the first to make its one unit a coin, despite it being worth more than any of those I mentioned above (apart from the euro which didn't exist then).  Despite this, Australia, NZ and Canada issued their two unit coins long before the UK did.  It could be argued that the UK issued the £1 too early but the £2 too late.

(Australia - $1 issued 1984, $2 issued 1988;
New Zealand - both $1 and $2 issued 1991;
Canada - $1 1987, $2 1996)

[<k>]

It could be argued that the UK issued the £1 too early but the £2 too late.

By the mid-1970s, after a period of very high inflation, UK retailers were pressing for a 1 pound coin, in order to reduce the total weight of the coinage that they had to deal with. The problem for the Royal Mint was that too many related tasks needed to be achieved before a pound coin could be introduced:

1] Get rid of the old 6 pence coin (worth 2½ decimal pence) to free up that size slot.

2] Demonetise the decimal half penny to free up that size slot.

3] Reduce the size and weight of the overlarge and heavy 5 and 10 pence coins.

4] Reduce the size and weight of the overlarge 50 pence coins.

5] Introduce a smallish 20 pence coin, to reduce the overall weight of coins in circulation.

In the event, reducing the size of the 5 and 10 pence coins had to wait until the 1990s.

Yes, they introduced the 2 pound coin at a very late stage. It should have been 1985, rather than 1998. That would have given us two years to get used to the pound coin.


See:  The Royal Mint's 1979 suggestions for the future of the coinage.

[<k>]

The UK was actually one of the first to make its one unit a coin, despite it being worth more than any of those I mentioned above (apart from the euro which didn't exist then).  Despite this, Australia, NZ and Canada issued their two unit coins long before the UK did.  It could be argued that the UK issued the £1 too early but the £2 too late.

Australia - $1 issued 1984, $2 issued 1988;
New Zealand - both $1 and $2 issued 1991;
Canada - $1 1987, $2 1996.

Interesting to see those international issue dates compared. The conservative U.S. public still hasn't taken a dollar coin to its heart as yet. A $2 coin must be even further off.

[chrisild]

Doing away with the 1p and especially the giant 2p coin would make sense indeed. But as mentioned here before, there is no need for a £5 coin. Especially now that the UK uses polymer for "paper money" with that denomination. (Side note: We do almost the same thing in the euro area, so the newer €5/€10/€20 notes do feel smoother, except the effect is achieved through some lacquer coating instead of polymer.)

Now if cash was the only means of payment we have, it would probably be useful to have a £5 coin (or both note and coin). Particularly when you deal with vending or ticket machines; inserting a coin will often be easier than putting a note in. But since there are commonly used viable alternatives – nah, no such coin.

[chrisild]

The conservative U.S. public still hasn't taken a dollar coin to its heart as yet.

Take that "as yet" part out. My impression is that, for most Americans, coins are not "real money". Anything above the quarter (0.25) is not used in everyday life anyway, and coins are usually something you get back in change, not anything you get out of your wallet for a payment you make. And now that there is hardly a reason for using cash (even suburban buses where quarters were needed to pay some exact fare work with prepaid or postpaid cards these days), the idea of introducing some new coin denomination would be, hmm, dead in the water.

[Figleaf]

There's no way of predicting the future. Here's a non-extreme scenario for the US and the UK:

As tensions between the US and China increases, the Chinese start to dump USD. When USD falls, they panic and start a scare, making other countries dump USD as well. USD crashes to the floor. Chaos ensues. Attempts to support USD strand in view of the sheer quantity of USD abroad (the US has run a balance of payments deficit every year since the Vietnam war). Inflation runs amok. When things return to normal, the value of the dollar is around 25% of its former self. Coins have all been melted for scrap. A gleaming new series is issued with one zero lopped off, so a 5 dollar coin would be worth $0.50 in terms of pre-crisis dollars, which is $0.125 in trade.

The next UK government is Labour. They run a deficit trying to get the economy moving again. A tsunami hits the South coast and a nuclear power plant explodes; clean water supply is seriously threatened in the whole South-West. The press criticises the socialist government mercilessly for ineptness. Labour feels it needs a new mandate and is beaten at the polls by the conservatives, who come up with extreme budget savings.£ falls as confidence ebbs and panic leads to chaos. The rest as above.

Of course, there can also be calmer scenarios that lead to the death of the divisional coins below 10. At that point, there is a rational reason to introduce denominations of 5 and even 10 units, but in both countries, the political climate is not conducive to avoidable change, even if it means a saving.

Another variable is that synthetic banknotes are made from petro-chemicals when made and cost a lot of energy to destroy, while the UK has promised to be net zero in 2050, but technology may come up with an atmosphere-friendlier alternative.

Peter

[<k>]

So kind of you to choose such juicy disasters for your Anglo-Saxon "friends", dear Figleaf.   And of course, the EU and eurozone would remain totally unaffected by and closed off from all this chaos. Harrumph!

Another variable is that synthetic banknotes are made from petro-chemicals when made and cost a lot of energy to destroy, while the UK has promised to be net zero in 2050, but technology may come up with an atmosphere-friendlier alternative.

Another dig at the UK. But all modern technological capitalist countries depend on continuing economic growth, and such frenetic productivism always entails entropy and can never be net zero for anybody, nor can any technology reduce it significantly. But nothing lasts forever, and the days of high economic growth in the West are all but over now.

[Figleaf]

You may draw in your claws. I hope you don't think I can really predict tsunamis (it is actually a weak point in the scenario, because it is based on Fukushima and that is quite unlikely to happen again: because of new cooling technology only older plants that were not retro-fitted are vulnerable). My post is a standard financial risk analysis, because your question in the title is one of financial and political risk.

In such cases, you go for a worst case (no trader is ever interested in a best case) and a likely scenario to demonstrate the mechanics. The scenarios are never worked out until the last detail because you'd lose the reader and obscure the mechanics.

Maybe you ought to read the "synthetic banknotes" para again realising that the UK is neither the first nor the only country to use them and that we are talking about £5 coins, which means we are also thinking about £5 notes.

Peter

[andyg]

A five pound coin at the moment would be seen as a weakness for current government policy regarding inflation,  it would be seen as admitting things were not going as well as they keep telling us (and which we believe of course )

It would be something to do on a change of government, "look this is the last lots fault we need this"