According to a report issued by the Bank of England, at least half of all UK banknotes in circulation are held overseas or used in the black market. It said evidence suggested that no more than half of the notes in circulation are held for use domestically for legitimate purposes. These include money in ATMs, consumers' wallets, purses and shop tills, all of which estimate to around a quarter of all cash in circulation.
Around £3 to £5 billion may be “hoarded” in homes “to provide comfort against potential emergencies”, the report said. The remainder is likely to be held overseas or for use in the “shadow economy”. The bank's latest figures suggested that banknotes with a value of £62.6 billion were estimated to be in circulation at the end of July, equal to around £1,000 for every person in the country. It is also understood that even though the number of cashless payments in the UK via card use and smartphones have overtaken the use of notes and coins, the value of banknotes in circulation has tripled over the last 20 years.
Almost 97% of the money belonging to people in the UK is held electronically as deposits, with the remainder held in physical form. The report said hoarders “may choose to save their money in a safe deposit box, or under the mattress, or even buried in the garden, rather than placing it in a bank account”.
Concluding, the report read, “Over the next few years, consumers will enjoy even greater choice when paying for goods and services and for paying each other. "As a result, cash consumption as a proportion of overall spending in the domestic economy will continue to decline. "However, given consumer preferences, recent historical trends, and the absence of significant initiatives on the part of retailers, banks or government to push people away from cash, the absolute amount of cash used for transactions is likely to remain resilient.”
