As recently as July 2022, there have been reports of a gradual ongoing decline in the use of cash, with the Coronavirus pandemic contributing significantly.

The House of Commons reported in July that ‘the pandemic saw a particularly sharp drop in cash use, with cash payments accounting for just 17% of all payments in 2020’.

However, the Post Office has now reported that £801 million of cash withdrawals were made in July 2022. Cash withdrawals were reported to be increasing 8% month-on-month to June 2022.

The Post Office is attributing the unprecedented rise to people choosing to staycation in the UK, in addition to the current cost of living crisis. BBC News reports that people are choosing to use cash in the current climate ‘to help manage their budgets on a week-by-week and often a day-by-day basis.’

As we highlighted last month, many people are struggling to pay their regular household bills and are buying less of what would be considered essential items. Having physical cash in their weekly or monthly budgets appears to be helping many people manage their expenditure in these exceptional times.

In addition, a new viral Tik-Tok trend known as ‘cash-stuffing’ may also be fuelling the increase in cash withdrawals. The Daily Mail reports cash-stuffing as a trend where ‘fans physically withdraw money from the bank to allocate cash into categories… The ‘cash stuffing’ hashtag on TikTok has generated over 530 million views to date with savers from around the world following the growing trend.’

However, it has also been reported recently that in the last decade, the number of cash machines and bank branches have decreased significantly. The House of Commons reported that ‘between July 2018 and May 2022, the number of ATMs in the UK fell by 13,679 or 21%’ and ‘the number of bank branches has fallen by 4,390 or 39% between 2012 and 2021.’ This begs the question, if cash is here to stay, will the infrastructure cope with the new increase in demand? Certainly, the rate of inflation is projected to continue rising and with a recession looming, it seems banks will also be keen to keep their expenses to a minimum as shown by recent branch closures.

The Post Office has not disclosed whether the withdrawals they are reporting are from savings or general banking accounts (where salary and benefits are paid into). Given the current climate, is there more reliance on savings pots now being drawn upon to meet ongoing commitments? Will there be more reliance on reserves as the year progresses with the spiralling cost of living? What happens when reserves are all used up? 

Many people will fall into default on their commitments and ongoing debt with more reliance on credit. Weekly and monthly outgoings for commitments and bills will continue to increase and if reliant on credit, the payments will be higher value over shortened periods with many having interest applied which if not cleared, will continue to increase the size of household debt.

Our team at Dunedin Advisory are experienced in cash management and debt advice. We are also recognised DAS (Debt Arrangement Scheme) providers which is the only Scottish Government backed statutory non-insolvency debt management plan in the UK. It allows people in debt much needed breathing space and allows them to repay their debts in full through a debt payment programme over an extended period of time. 

When a DAS is approved all interest, fees and charges are frozen and individuals are given protection from the threat of any legal action from their creditors (those who the debt is payable to).

As well as individuals, sole trader business owners, partnerships, certain limited partnerships, trusts, unincorporated businesses, certain categories of charities and certain corporate bodies are eligible for DAS.  Liabilities due for ordinary loans, credit cards, utility arrears, HMRC, suppliers, corporate companies and shortfalls on secured loans can all be considered.

At Dunedin Advisory we can administer the full DAS programme including payments to creditors. We provide full information on whether it is a suitable option together with other recommendations that may suit individuals or business circumstances.