Falkland Islands to withdraw 1p and 2p coins

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The Falkland Islands Treasury Department has launched a public consultation about the proposal to withdraw the 1p and 2p coins.

This is being considered because the supply of 1p and 2p coins of the Falklands Islands Treasury is very low – despite their efforts to boost the available stock, such as a recent coin recycling challenge. The Treasury has at most an 8 month supply of these coins remaining. Ordinarily, it would arrange for a new supply of coins to be minted and released into circulation. A combination of global shortages in coin blank materials and the relatively low volume of coins the treasury typically orders compared to other countries, means that their provider is unable to source the coin blanks they need from the Royal Mint. It's unlikely they'll be able to access any blanks for the foreseeable future, and in addition to the supply issue; the costs involved in minting these low value coins is prohibitively expensive even if the materials did become available – far greater than the monetary value of the coins themselves.

This becomes even less cost-effective as their experience shows that the majority of their 1p and 2p coins tend to be lost or disregarded, and effectively removed from active circulation – creating an environmental cost as well, since abandoned coins typically end up in public land, household waste and landfill.

The Treasury last arranged for low value coins to be minted in 2019, and sought a quote for an additional supply in 2022 when stocks began to run low.
The table below shows that the production costs for 1p and 2p coins is more than the face value of each coin. The increasingly limited availability of the materials needed to mint new coins has also impacted the costs involved – between 2019 and 2022, the cost has more than doubled for 1p coins and has tripled for 2p coins.

1p coins:
2019 - 2p per coin
2022 (quote) - 5p per coin

2p coins:
2019 - 3p per coin
2022 (quote) - 9p per coin

If the removal of 1 penny and 2 pence coins from circulation is agreed, a rounding system would need to be introduced to account for the changes to how cash payments are made. The rounding system proposed by the Falkland Islands Treasury is known globally as the Swedish Rounding system, and is named after the system put in place by Sweden when they removed their own 1 penny and 2 pence equivalents in 1971. With the removal of 1p and 2p coins, the total bill for cash transactions would be rounded to the nearest 5 or 10 pence, as these would become the lowest value coins. This rounding system is designed to be fair to both consumers and retailers.

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In the survey, 71% of the respondents replied that they believe that the 1p and 2p coins should be removed from circulation. 37% of the respondents mentioned that they sometimes use the 1p and 2p coins with 63% indicating that they use them rarely or never. Following the survey results, the Treasury Department will develop and in due course present a paper to ExCo looking to withdraw the 1p and 2p coins from circulation. If agreed by ExCo, further engagement with both the public and retailers will be undertaken in preparation for the withdrawal.

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See:  The UK and the Six: the future of the penny and 2 pence coins.

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The 1 and 2p coins will be withdrawn on the Falkland Islands on 1 January 2025. Furthermore, if no problems caused by the withdrawal of the 1p and 2p occur, the government is planning to withdraw the 5p coin on 1 January 2026, as the cost of minting that denomination has risen to 11.5 pence.