The Treasury has placed no new orders for coins this year for the first time as it was revealed that more than a third of UK adults are living largely cashless lives.
Ministers have decided not to ask the Royal Mint for any new coins, believing there are enough in circulation already, as the number of payments made by cash continued to fall.
The Treasury decision will accelerate fears that the use of cash is dying out, amid warnings that lower-income households were more likely to be reliant on physical currency.
UK Finance, which represents financial services, released new research on Wednesday that found the number of cash payments made in the UK during last year fell by 7 per cent to six billion.
Cash accounted for 12 per cent of all payments made in the UK during 2023, down from 14 per cent in 2022.
It found that 39 per cent of adults were living “largely cashless lives”. But the number of people mainly using cash rose to 2.6 per cent of the population.
Britain’s high street lenders have shut thousands of branches across the UK in recent years, leaving many towns without branches, citing more and more people using cards and digital payments.
But the Financial Conduct Authority said its research found that three million people on average still relied on cash, with lower-income households disproportionately likely to be excluded from digital services and more reliant on cash.
A Treasury spokesman said it is not expected to order any new 1p or 2p coins in the coming years, as there are around 27 billion coins in circulation.
It was reported that officials were considering scrapping the copper coins altogether, as part of a package of suggestions being prepared for ministers. However, the department denied this was the case, with the spokesman adding: “We are not scrapping 1p or 2p coins. We are confident there are enough coins in the system without the need to order more this year.”
The most recent time a coin was taken out of circulation was in 1984, when the half-penny ceased to exist.
Mark Carney, the former Bank of England governor who has backed Labour’s chancellor Rachel Reeves, previously hinted that 1p and 2p coins could be scrapped, and the former Tory chancellor Philip Hammond consulted on the idea in 2018 before resolving to keep them in circulation after he was accused of being a “penny pincher”.
Adrian Buckle, head of research at UK Finance, said the move away from cash payments did not mean Britain would become a cashless society.
He said: “Mobile contactless payments are growing fast and one third of adults are now making these at least once a month, with scope for usage to increase further.
“This doesn’t mean we are on our way to becoming a cashless society. Cash is still the second most frequently used method of payment in the UK, although on the whole we are using it less and more people are leading largely cashless lives.”
It comes as the FCA set out its plan to ensure the public could access cash. From September 18, the financial watchdog will require banks and building societies to fill gaps in cash access with measures such as banking hubs, ATMs and Post Office facilities.
Banking hubs allow staff from several banks to share the same space, helping to fill gaps left in the system from branch closures. They have a counter service operated by the Post Office, allowing customers to conduct routine banking transactions like withdrawing and depositing cash and paying in cheques.
Banks will also need to assess the needs of local communities and make sure they are responding to residents and groups that raise concerns.
Sheldon Mills, executive director of consumers and competition at the FCA, said: “Three million people continue to rely on cash, even as digital payments become more popular. And many small businesses still need somewhere to safely deposit their takings each day.
“That’s why we’ve acted quickly in response to new powers given to us by parliament to ensure reasonable access to cash withdrawal and deposits is maintained.”
