Britons hoard cash despite decline in cash payments

The Bank of England reported on Sept. 17 that cash accounted for 8% of UK payments in 2025, down from 58% in 2009. Over the same period banknote circulation rose from about £50 billion to £99 billion, with £94 billion held by the public in the UK and abroad. The central bank said inflation and overseas holdings explain part of the increase but described the combination of fewer cash payments and larger note holdings as a paradox.

The report noted reasons why households hold notes. Banknotes can be spent without an electronic approval step, so they remain usable when a phone battery dies, networks fail or card processors decline payments. Digital payments depend on devices, telecoms and payment processors to work at the point of sale.

The Dutch National Forum on the Payment System, which includes the central bank and consumer groups, advises households to prepare for three days of disrupted electronic payments and recommends around €70 per adult and €30 per child for essentials. Central bank research across Europe shows spikes in cash withdrawals and holdings during crises, including the 2008 financial crisis, Greece’s debt crisis, the pandemic, the war in Ukraine and an April 2025 blackout in Spain and Portugal that left some digital payment systems unusable.

Cash removes the need for an immediate bank authorisation and creates no automated transaction record in the same way a card payment does. Central banks note those features when they advise on contingency holdings. At the same time, banknotes do not restore electricity, reopen closed stores or power fuel pumps. Holding large sums in cash exposes people to inflation, theft and damage, and forfeits interest that could be earned in a bank or investments.

Demand for physical assets rose alongside cash holdings. The World Gold Council reported a 16% increase in global bar and coin demand in 2025 to about 1,374 tonnes, the highest annual total since 2013, with stronger purchases in China and the Middle East and lower volume demand in the United States.

The Bank of England said it will retain £120 billion of government bonds to back banknotes indirectly during a transition to a new framework as part of a balance-sheet overhaul. The central bank and other institutions that supply, distribute and process cash must maintain infrastructure for withdrawals, retailer acceptance and note circulation for cash to function as a contingency.

Policy bodies and payment system operators are weighing how much to preserve those services as electronic payments become dominant. For many households, a modest cash reserve remains a practical option to meet basic needs when electronic systems are unavailable.