The use of cash has been declining over the recent years in Britain, but demand for banknotes is skyrocketing.
Some UK lawmakers have said as much as GBP £50 billion in cash was “missing,” and it urged the Bank of England to investigate.
The money is “stashed somewhere but the Bank of England doesn’t know where, who by or what for — and doesn’t seem very curious,” Meg Hillier, chair of the House of Commons Public Accounts Committee (PAC), which oversees government finances, said in a statement. “It needs to be more concerned about where the missing £50 billion is,” she added.
The Bank of England in a statement said: “Members of the public do not have to explain to the Bank why they wish to hold banknotes. This means that banknotes are not missing.”
Despite the increased use of digital payments, demand for cash has risen in most advanced economies since the global financial crisis, according to a 2018 report by the Bank for International Settlements. This has been partly driven by lower interest rates, the report said, which have diminished returns on savings held with banks.
“We are seeing the increasing use of cash as a store of value, as opposed to for transactional purposes,” chief cashier at the Bank of England Sarah John said in testimony before the Public Accounts Committee in October. Worries about the strength of financial institutions since the 2008 crisis have also contributed to this, she added.
And while there was a sharp decline in demand for notes and coins during the peak of coronavirus lockdowns this year, it has since recovered, with people stockpiling even more cash at home as a result of the pandemic.
The number of notes in circulation in Britain reached a record high of 4.4 billion in July, with a total value of GBP £76.5 billion (USD $103 billion), according to a September report by the National Audit Office (NAO), which monitors government spending. This compares with 1.5 billion notes worth about GBP£ 24 billion (USD $32.3 billion) in 2000.
The volume of cash payments is likely to de-accelerate because of the pandemic. A decade ago, cash was used in six out of 10 transactions; last year it was less than three.