With contactless payments surging, coin production in the UK shrank by 65% in the last decade to 383 million coins a year in 2019-20, from around 1.1 billion in 2010-11. And, with the Royal Mint's stocks currently exceeding targets in all denominations, it has no plans to produce new 2p or £2 coins for at least ten years.

In contrast, the demand for notes has continued to increase. In 2020, the number of notes in circulation reached a record high of 4.4 billion, with a value of £76.5 billion.

The revelation comes in a National Audit Office (NAO) report on the production and distribution of cash, which calls for a coordinated effort from government and the public bodies overseeing the cash system to safeguard access to notes and coins.

A decade ago, cash was used in six out of 10 transactions but by 2019 it was used in less than three in 10. 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, although demand has since been recovering.

This has all put pressure on the cash system and, according to the NAO, this could mean that people who rely on cash - often the older and low income - find it more difficult to use it.

The NAO calls on the Treasury to set out more clearly the specific outcomes it wants the cash system to deliver for consumers and small businesses, and how this should be balanced against costs.

Gareth Davies, head, NAO, says: "As society progresses towards the wide use of digital payments, the use of cash in transactions is dwindling. It may become harder for people to access cash when they need it and those without the means to pay digitally will struggle if cash is not accepted.

"HM Treasury now works more closely with the public bodies in the cash system to achieve the government’s goal of safeguarding access to cash. However, the approach is fragmented, and it is not clear that the action being taken will keep up with the pace of change."

Read the full report: