The Scotsman

£50bn-worth of UK banknotes ‘missing’ from circulatio­n

- By VICKY SHAW newsdeskts@scotsman.com

Mystery surrounds the exact whereabout­s of £50 billionwor­th of banknotes in circulatio­n, according to a public spending watchdog.

The National Audit Office (NAO), which said cash pro - duct ion capacity should be aligned closely to future needs, also said it could take at least a decade for current stocks of 2p and £2 coins to run out.

The NA O said little is known about around £50bnworth of notes in circulatio­n which are not being used for transactio­ns or identified as savings held by UK households.

Possible explanatio­ns include holdings overseas, un reported domestic savings, or cash held for use in the “shadow economy”.

There is little reliable informatio­n to quantify how much is likely to be held where, the NAO said.

The NAO said a “fragmented” approach is being taken by the bodies involved in the UK’S cash system.

Five public bodies–the Treasury, the Bank of England, the Royal Mint, the Financial Conduct Authority (FCA) and the Payments Systems Regulator (PSR) – play a role in administer­ing or overseeing it.

But these bodies lack a shared view of what a good outcome for the consumer looks like and how the costs of achieving this are to be taken into account, the NAO’S report said.

There is no single body with responsibi­lity for overseeing how well the cash system is performing.

The NAO said when field - work was carried out, the Mint had no plans to produce new 2p or £2 coins for at least 10 years.

When the Mint replaced the old £1 coin, people returned unexpected­ly large volumes of all coin denominati­ons, the report said.

The Royal Mint’ s“buffer” stocks in March 2020 exceeded targets in all de nomination­s, the NA O said, with holdings of1psand2p­s six and eight times above target respective­ly, and £2 coins 26 times over target.

Ten years ago, cash was used in six in 10 transactio­ns, but by 2019 it was used in fewer than three in 10. Forecasts suggest it might be one in 10 by 2028.

C ovid -19 has potentiall­y accelerate­d the decline.

Industry data suggests market demand for notes and coins from cash centres plunged by 71 percent between early March and mid-april.

However, cash use appears to have been recovering as businesses have re-opened.

The NAO said older people and low incomes are particular­ly likely to rely on cash.

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