The mystery of the ‘missing’ £50bn of UK bank notes

A new report from the UK’s National Audit Office (NAO) said that “little is known” as to the whereabouts of £50 billion of British banknotes.

“Despite fewer people using cash for transactions, the demand for notes has continued to increase,” said the report.

“In 2020, the number of notes in circulation reached a record high of 4.4 billion, with a value of £76.5 billion.

“In 2018, the Bank of England (the Bank) estimated that only 20%–24% of the value of notes in circulation were being used or held for cash transactions, with UK households holding a further 5% as savings.

“Little is known about the remainder, worth approximately £50 billion, but possible explanations include holdings overseas for transactions or savings and possibly holdings in the UK of unreported domestic savings, or for use in the shadow economy.

“The Bank and other government bodies have little reliable information to quantify how much is likely to be held where.”

The report said that 10 years ago, cash was used in six out of 10 transactions but by 2019 it was used in less than three in 10 transactions.

The outbreak of COVID-19 may have accelerated this trend, as data suggests that market demand for notes and coins declined by 71% between early March and mid-April during the lockdown, although demand has since been recovering.

“The decline in the use of cash in transactions is putting pressure on the cash system,” said the report.

“Commercial operators who distribute cash rely on high demand to maintain the attractiveness of their business models, and cover large fixed costs, such as bank branches and ATMs.

“In March 2020 the government announced that it would be bringing forward legislation to protect access to cash and address the sustainability of the cash infrastructure.”

Coin production shrank by 65% in the last decade to 383 million UK coins a year in 2019-20, from around 1.1 billion in 2010-11.