In the UK, there are 11.3 billion 1p coins in
circulation, together worth £113 million. This
accounts for nearly 40% of all coins in the system. In the US, an
estimated 150 billion 1 cent coins are being circulated, that if stacked on top
of one another, would stretch 60% of the distance to the moon.
In Canada however, the
production of the one-cent coin was stopped earlier this year as it was
determined by the government that the costs of its production were not
worthwhile. According to the Royal Canadian Mint, the producers of the coin, each
one-cent coin was costing 1.6 cents to produce. This meant every penny
minted represented a loss for tax payers and resulted in a net loss of
C$11m (£6.9m) a year for the Canadian government. This, as well as the hoarding
of pennies and handling costs placed on retailers were enough to convince
Canada that pennies just aren't worth it. Since February, change in retail has
been rounded up or down to the nearest five cents.
Canada are not the first
country to have done this and are following in the footsteps of countries
including Australia, Sweden, Brazil and New Zealand (who's also scrapped two
and five cent coins). There are also many sceptics of the one cent
coin in the US (which costs 2.4 cents to produce), and in Russia the central
bank is pushing for the 1 kopek piece to be removed.
In the UK, for many people the British penny seems like a beloved piece of history, as our older generation reminisce on childhood trips to the sweet shop to spend their pennies and half pennies. Half pennies were scrapped in the UK in 1984 to account for inflation. With the majority of transactions in sweet shops now priced by weight, and single items costing 2-3p, is it only a matter of time before pennies disappear too?
The reality is that the purchasing power of
pennies has been eroding rapidly and they are now nearing worthlessness. A 1p
coin is now worth less than one-twelfth of its original value in 1971. Spending
1p in 1971 would be the same as spending 12p today. It seems the penny's
existence is running a losing race against inflation.
It's not just the depreciating value that's turning people against the penny, for many people, pennies are simply irritating, weighing down their pockets and cluttering their purses. Research suggests that one-quarter of Britons would happily get rid of copper coins, while a similar proportion admit to hoarding them in jars and various scatterings around the house. Another poll found that up to one in five British adults aged 18-24 throw small 1ps and 2ps in the bin because they think it’s a nuisance. Consumers aren't alone in considering the pennies literal value to be less than their handling value, as many retailers feel the time and money spent handling and counting small change just isn't worth it.
Despite this, unlike other countries, the cost of production of the penny in the UK is less than its face value, at under 0.3p to produce each penny. This is as a result as the penny being changed to be produced from steel, with a copper plating rather than purely from copper. This differs from the US, where one cent is produced from zinc, a more expensive metal. In the UK, the existence of the penny therefore doesn't seem to be damaging the economy, but it's disappearance could have some negative effects. Arguably the largest argument against the scrapping of the penny is the millions of pounds raised by charity through the collection of pennies and small change. Moreover, for those who do hoard pennies at home, when they are eventually cashed in a large enough stash of near worthless pennies will accumulate to a total that is certainly worthwhile. If the penny was scrapped, the cost of a good that was previously £9.99 would inevitably be rounded up to £10. Firms, in retail in particular, would face the "menu costs" associated with changing information on price tags and online.
It therefore seems that as things stand, the removal of the penny from circulation is not worthwhile, despite the actual value of the penny growing exceedingly closer to worthlessness. The removal of the single cent in the US, however, seems much more feasible as a result of its higher production costs. Some people argue that we are more likely to see the end of coinage in general than the end of the penny alone as digital transactions are becoming increasingly popular. Currently, tangible money is still popular enough with the majority of transactions below £10 using cash. The increasing use of digital transactions, whether it be online or via credit or debit cards seems more likely to be the bigger threat of the UK's current spending normalities.
It's not just the depreciating value that's turning people against the penny, for many people, pennies are simply irritating, weighing down their pockets and cluttering their purses. Research suggests that one-quarter of Britons would happily get rid of copper coins, while a similar proportion admit to hoarding them in jars and various scatterings around the house. Another poll found that up to one in five British adults aged 18-24 throw small 1ps and 2ps in the bin because they think it’s a nuisance. Consumers aren't alone in considering the pennies literal value to be less than their handling value, as many retailers feel the time and money spent handling and counting small change just isn't worth it.
Despite this, unlike other countries, the cost of production of the penny in the UK is less than its face value, at under 0.3p to produce each penny. This is as a result as the penny being changed to be produced from steel, with a copper plating rather than purely from copper. This differs from the US, where one cent is produced from zinc, a more expensive metal. In the UK, the existence of the penny therefore doesn't seem to be damaging the economy, but it's disappearance could have some negative effects. Arguably the largest argument against the scrapping of the penny is the millions of pounds raised by charity through the collection of pennies and small change. Moreover, for those who do hoard pennies at home, when they are eventually cashed in a large enough stash of near worthless pennies will accumulate to a total that is certainly worthwhile. If the penny was scrapped, the cost of a good that was previously £9.99 would inevitably be rounded up to £10. Firms, in retail in particular, would face the "menu costs" associated with changing information on price tags and online.
It therefore seems that as things stand, the removal of the penny from circulation is not worthwhile, despite the actual value of the penny growing exceedingly closer to worthlessness. The removal of the single cent in the US, however, seems much more feasible as a result of its higher production costs. Some people argue that we are more likely to see the end of coinage in general than the end of the penny alone as digital transactions are becoming increasingly popular. Currently, tangible money is still popular enough with the majority of transactions below £10 using cash. The increasing use of digital transactions, whether it be online or via credit or debit cards seems more likely to be the bigger threat of the UK's current spending normalities.
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