Cash in the time of Covid


  • During the Covid-19 (Covid) pandemic the way people use cash has changed, with less being used for transactions. That is partly because consumer spending as a whole has fallen, but may also reflect concerns about the risk of banknotes transmitting the virus. We have commissioned research to understand how the virus behaves on banknotes. Our analysis indicates that the risk of transmission via banknotes is low.
  • People are spending less cash, but the total value of banknotes in circulation has increased as people appear to choose to hold more cash. These trends have persisted for a number of years, but have been magnified by the pandemic.
  • As the UK’s central bank, we are responsible for banknote production and ensuring banknotes are high quality, durable and difficult to counterfeit. We also monitor trends in cash usage and cash demand to understand what is behind changing behaviours so we know how many notes we need to produce in the future, and how best we can support access to cash for those who want to use it.


As the UK’s central bank, we produce and issue banknotes and oversee many of the other payment systems people use every day. While cash continues to play a key role in the UK economy, we have seen a gradual decline in cash usage for transactions over the past decade and a corresponding shift towards other payment methods.footnote[3]

Changing technology and an evolving financial services market account for some of the shift in demand. But other factors also have a role to play, especially in the short term.

This article explores the impact of the Covid pandemic on cash usage. Our work to understand the impact of the pandemic on cash use is ongoing, and we will continue to build upon our initial analysis. This will include monitoring the impact of local, regional and national restrictions implemented in different parts of the UK.

Introduction: trends in cash demand

Cash demand before Covid

Cash remains an important part of the UK economy, with an estimated 9.3 billionOpens in a new window cash payments made in 2019 and 2.1 million people who mainly use cash for their day-to-day purchases.

People use cash as a medium of exchange when buying or selling goods and services, and as a store of value. Cash’s use as a medium of exchange has fallen dramatically in recent years. Only 23% of all payments in 2019 were made using cash, down from close to 60% a decade earlier, as people increasingly turn to other methods to make transactions, such as debit cards and digital payments.

While the transactional use of cash has declined, the value of notes in circulation (NIC) has increased (Chart 1). Between 2005 and 2017, the value of banknotes in circulation doubled. Even adjusting for rising economic activity and price levels, NIC has generally been trending upwards since the early 1990s. This fall in the use of cash for transactions, but continued growth in demand for notes, has been called the ‘paradox of banknotes’.footnote[4]

The apparent paradox is explained by an increasing role for cash as a store of value. This is likely to be driven by a variety of factors. In part, it results from historically low interest rates which, along with lower levels of inflation since the early 1990s, have reduced the opportunity cost of holding banknotes (as a non interest bearing asset). Relative exchange rates also matter, with increases in demand for banknotes observed when sterling weakens: there was an increase in demand for £50 banknotes — the highest denomination note — in 2016 when sterling fell sharply. But there are also notable increases in cash demand when there are concerns about banks or the economy. For example, in 2008–10 as people were concerned about the health of banks, they opted to hold more cash.

See full article here.