Bri­tons hoard cash at fastest rate in 20 years

The Daily Telegraph - Business - - Business - By Rus­sell Lynch

PAN­ICKED Bri­tons hoarded ban­knotes at the fastest rate since fears over the mil­len­nium bug 20 years ago as lock­down hit, ex­perts have found – de­spite pre­dic­tions that Covid-19 would has­ten the death of cash.

The amount of cash in cir­cu­la­tion jumped by 2pc in May as fears surged over the fall­out from the pan­demic, ac­cord­ing to re­search by for­mer Bank of Eng­land pol­i­cy­maker Charles Good­hart and fel­low econ­o­mist Jonathan Ash­worth. They said this was the largest in­crease since a Y2K surge in De­cem­ber 1999 af­ter the turn of the mil­len­nium prompted en­tirely mis­placed alarm over the wide­spread fail­ure of com­puter sys­tems.

The surge in de­mand for notes came de­spite the limit on con­tact­less spend­ing trans­ac­tions go­ing up to £45 in a bid to pre­vent the virus spread­ing through phys­i­cal cash. It was also un­af­fected by a jump in on­line spend­ing to 30pc of all re­tail out­lays due to the cri­sis.

It is not clear why May in par­tic­u­lar saw such a large in­crease in cash as op­posed to the pre­vi­ous month when re­stric­tions were even tighter. Mr Ash­worth said a bounce back in re­tail sales is likely to have been the main driver.

Mr Good­hart and Mr Ash­worth wrote: “While the eco­nomic shut­downs and in­creased use of on­line re­tail­ing are cur­rently di­min­ish­ing cash’s tra­di­tional func­tion as a medium of ex­change, it seems that this is be­ing more than off­set by panic driven hoard­ing of ban­knotes.”

Other coun­tries saw an even more pro­nounced ef­fect, with an 11pc year-onyear rise in US cur­rency in cir­cu­la­tion in the last week of May.

This was the big­gest rise since the 2008 global fi­nan­cial cri­sis sparked fears over bank col­lapses.

There was also panic hoard­ing in the euro area. Higher de­nom­i­na­tion €200 notes ac­counted for 30pc of the in­crease in cir­cu­la­tion dur­ing March and April, de­spite only mak­ing up 7pc of the to­tal stock.

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