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Fate of the 1p and 2p coin to be unveiled this week

·Head of Yahoo Finance UK
·2-min read
The chancellor previously called the coins ‘obsolete.’ Photo: Daniel Berehulak/Getty Images
The chancellor previously called the coins ‘obsolete.’ Photo: Daniel Berehulak/Getty Images

Britain will find out the fate of the 1p and 2p coins this week.

Just a year after chancellor Philip Hammond called the copper coins “obsolete,” it will be officially announced if they will be pulled from circulation.

Many signs already point towards 1ps and 2ps being scrapped. Hammond revealed a Treasury consultation in his spring statement last year, which appeared to be laying the path towards ending the use of the copper coins.

After public uproar, prime minister Theresa May said that there were no plans to pull coppers out of circulation. A media report from the Mail on Sunday also claimed that a government source told it: “We will confirm the penny coin won’t be scrapped.”

The Treasury consultation document from March last year highlighted how more and more people are using digital payments instead of cash and that “spurred by convenience, the rise of e-commerce, and mobile technology, digital payments have grown by around 85% since 2006, with a corresponding decline in the use of cash.”

READ MORE: UK ‘sleepwalking’ towards cashless society that could exclude millions

Crucially, it said:

“In the normal course of the cash cycle, many denominations fall out of circulation, for example, by being placed into savings jars. Surveys suggest that six in ten 1p and 2p coins are used in a transaction once before they leave the cash cycle. They are either saved, or in 8% of cases are thrown away.

“To meet demand created by such losses from circulation, in previous years the government and the Royal Mint have needed to produce and issue over 500 million 1p and 2p coins each year to replace those falling out of circulation.”

The Bank of England has also come out in support of scrapping 1p and 2p coins. It said that killing copper coins would not cause inflation.

The “overwhelming weight of literature and experience, suggests it would have no significant impact on prices,” said BoE analysts, before adding that the inflationary argument is “deeply flawed on a number of levels.”

READ MORE: Backlash grows against cashless stories in the US