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Production of £2 coins halted as coronavirus accelerates switch to contactless

Cash is literally piling up at the Royal Mint which has a ten-year backlog of £2 coins

De La Rue PLC - Production of £2 coins halted as coronavirus accelerates switch to contactless

Shares in banknote printer De la Rue PLC (LON:DLAR) fell 4% to 143p after a report highlighted cash usage in the UK had slumped even more due to coronavirus disruption.

There was a 59% drop in transactions using cash between 2018-19, according to the National Audit Office, which has prompted the Royal Mint to halt production of 2p and £2 coins for at least ten years.

Lockdown restrictions, meanwhile, saw demand for notes and coins from ATMs and banks fall by more than 70% between March and April, said the NAO.

The Bank of England has a 10-year contract with De la Rue produce Britain's banknotes at aa fixed price for each note printed within pre-agreed volumes.

Cash usage was already in rapid decline before the pandemic due to the growth of contactless debit cards and less than 30% of monetary transactions now involve notes and coins, said the NAO, a  figure tipped to fall to as low as 0% by 2028.

At the beginning of lockdown in March, the Royal Mint held 26 times more £2 coins than it needed and eight times more 2ps, said the NAO.

Hygiene concerns have been another factor behind the falling use of cash during lockdown, though there has been an uptick as restrictions have eased.

Cash is also used more by the elderly and people in vulnerable categories.

The NAO report also noted there are £50bn worth of banknotes in circulation unaccounted for either by transactions or savings by householders.

De la Rue's contract, which started in 2015, has built-in efficiency improvements.

If the company exceeds performance its profit margins increase, and likewise if it falls below the targets, it incurs the associated additional costs,

Quick facts: De La Rue PLC

Price: 147.6 GBX

LSE:DLAR
Market: LSE
Market Cap: £287.84 m
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