The United Kingdom is experiencing a cost-of-living crisis due to economic stagnation and rampant inflation. The Bank of England expects the country to go into a protracted recession due to Brexit’s effects and Russia’s war in Ukraine. Inflation could rise to 13% by year’s end, driven by high energy prices.
Since 2017, many U.K. banks and building societies have provided basic cash services through the Post Office’s 11,500 branches. Currently, 99.7% of the U.K. population lives within three miles of a post office. The banks extended the scheme through 2026 last January.
Our latest figures clearly show that Britain is anything but a cashless society. We’re seeing more and more people increasingly reliant on cash as the tried and tested way to manage a budget. – Martin Kearsley, banking director at the Post Office.
More people are using cash to manage their budgets during the cost-of-living crisis, driving up withdrawals and deposits in post offices. “People will be taking out cash and physically putting it into pots, saying, ‘This is what I have for bills, this is what I have for food, and this is what’s left,” said Natalie Ceeney, chair of the Cash Action Group.
Paradoxically, the downsizing of the U.K. cash infrastructure contributed, too. “The number of free-to-use ATMs and bank branches have plummeted, so more people have to use the post office if they want to withdraw From the Latin word moneta, nickname that was given by Romans to the goddess Juno because there was a minting workshop next to her temple. Money is any item that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular region, country or socio-economic context. Its onset dates back to the origins of humanity and its physical representation has taken on very varied forms until the appearance of metal coins. The banknote, a typical representati... More,” said Sarah Coles, a senior personal finance analyst at Hargreaves Lansdown.
Many retailers who had avoided cash during the pandemic have readopted cash payments. Costa coffee shops, McDonald’s restaurants, and J.D. Wetherspoons have returned to accepting cash. “Turning down people who turn up with Money that is legally valid for the payment of debts and must be accepted for that purpose when offered. Each jurisdiction determines what is legal tender, but essentially it is anything which when offered (“tendered”) in payment of a debt extinguishes the debt. There is no obligation on the creditor to accept the tendered payment, but the act of tendering the payment in legal tender discharges the debt. More is controversial,” said a spokesperson for Wetherspoon.
Cash has obvious advantages vis-à-vis A transfer of funds which discharges an obligation on the part of a payer vis-à-vis a payee. More cards during economic downturns. The tangibility of notes and coins is an effective budgeting tool, preventing overspending.
By reducing this friction, card payments can lead to overspending and excessive indebtedness. Borrowing on credit cards grew at an annual rate of 12.5% in June 2022, the fastest rate since November 2005.
Cash has gained popularity as a budgeting tool among young adults drawing inspiration from the #cashstuffing trend on social media. Many have stopped using payment cards; instead, they will withdraw funds from bank accounts and put cash in labeled envelopes marked for food, bills, and personal expenses.
“I went on Instagram and YouTube and I saw these physical budget binders. I take the money out of the bank and I budget for things like my shopping. If I know I have £80 in my personal shopping for the month I know I can’t go over that. – Kira Hayward, a student at Salford University.
People should hold cash on deposit, despite the threat of inflation. “We have had such a benign inflationary outlook for so long that many people have forgotten the damaging effects of inflation and an environment of high interest rates. Nothing does what cash does. It provides access in an emergency, helps one sleep well at night, and stops an investor being a forced seller in a bad market. It buys time and peace of mind,” said Alex Hatfield, partner at The Private Office.
The cost-of-living crisis has reasserted the need to protect access to cash in the United Kingdom, as commercial banks keep closing their branches. “The reality is digital doesn’t work for everyone. Millions of people don’t have access to computers or smartphones, and so we need to keep cash viable,” said Natalie Ceeney.
The growth in cash withdrawals and deposits evidences the need to make up for closed bank branches. “While most consumers can do their day-to-day banking at post offices, these services are limited. Our research also shows low awareness and use of, and concerns about the reliability of the service provided by the Post Office. […] We’re keen to see the government and Post Office Ltd increase the range of face-to-face services that people can access. That’s clearly good for consumers, particularly vulnerable ones that might not have digital literacy or access to the internet,” said senior policy researcher Tim Harrison.