UK Seeing Cash Comeback
Cash use has seen a sustained recovery across the United Kingdom following the end of lockdown and the value of banknotes in circulation remains close to a historic high, with up to 60 percent of the population holding cash as a store of value in uncertain times.
These insights are drawn from a bulletin published by the Bank of England—Knocked down during lockdown: the return of cash—that forms part of the central bank’s strategy to ensure it is correctly meeting demand for banknotes. The bulletin notes that cash remains the number one payment choice for 20 percent of Brits, and 1.1 million people depend on it for their everyday spending. It adds that ‘even for those who may not use it day-to-day, cash remains an important back-up option.’
While the future trajectory remains uncertain… What is certain is there remains a significant group of people, with varied characteristics, who value cash.
The value of circulating banknotes increased by £12.3 billion between the end of March 2020 and the end of June 2022, representing a growth rate of 17 percent. Since the end of all COVID-19 restrictions in August 2021, it has continued to grow, but at a slower rate, showing signs of stabilisation in recent months.
Regarding the transactional use of cash, around half of consumers were using cash as of mid-2020 versus an estimated 73 percent in January 2022. While overall cash use has declined, the rate has slowed and there has been a sustained, if partial, recovery. In 2020, cash use dropped by 35 percent compared with 2019—a far greater drop than the 15 percent decrease year-on-year seen up to that point—but has largely stabilised since around mid-2020, rising somewhat to reach around 30 percent below pre-pandemic levels.
Interviews with large retailers conducted in the first half of 2022 showed the vast majority are accepting cash and no longer encouraging contactless payments. Overall, they were reported to be ‘ambivalent’ regarding customers’ payment choice. In line with these findings, the number of people coming across stores that would not accept cash has fallen from 44 percent in July 2021 to 35 percent in July 2022. 98 percent of small business owners said if a customer wanted to pay in cash, they would not refuse them. 80 percent of small and medium-sized businesses said they were very likely to continue accepting cash over the next five years, recognising cash as ‘a relevant payment offering and one that their customers still want to use.’
Regarding cash as a backup option for when cashless options fail—for example during power or internet outages, or should a customer’s card simply not be accepted—a March 2022 survey found 85 percent of people believe cash is vital for such occasions.
For a sizable proportion of the population cash remains vital and so is likely to be a critical part of the UK payments landscape to come.