Demand for paper money has fallen to its lowest level in more than 20 years as consumers switch to card and contactless payments, the world’s largest commercial printer of banknotes has said.
De La Rue, the 200-year-old British firm responsible for a third of all banknotes worldwide – including the new King Charles III design being produced for the Bank of England – said the drop in demand was affecting its order books.
In a profit warning to the London stock market on Wednesday, it said the downturn in banknote usage was “causing a significant degree of uncertainty” and meant its full-year profits would fall short of expectations.
Cash usage in the UK has fallen sharply in recent years amid the rise of card and contactless payments, as well as online shopping, with debit cards overtaking cash as the most popular payment method for the first time in 2017. As little as 15% of all payments are now made in cash, compared with 60% a decade ago.
The weakness in banknote orders from De La Rue’s customers is the most pronounced since about 2000, when central banks hoarded cash amid fears about the “millennium bug”. During times of economic uncertainty, banks, post offices and other cash providers typically build up reserves to ensure they are fully equipped for any sudden rush in demand.
Central banks stockpiled cash during the Covid pandemic, as the health emergency triggered the worst economic crisis in decades.
Now based in Basingstoke, Hampshire, De La Rue was founded as a print business by Thomas de la Rue in Guernsey in 1813, before setting up in London a decade later selling straw hats and stationery.
It has a contract with the Bank of England to run the central bank’s printing facility in Debden, Essex. Millions of new banknotes featuring the image of King Charles are being printed at the site before his coronation next month, but they are not expected to enter circulation until the middle of next year.
However, the order comes as usage of paper money declines across advanced economies. More than 23 million people in the UK use cash only once a month or not at all, according to industry figures, while as few as 1 million rely on it for most of their day-to-day shopping.
De La Rue said there were signs of a recovery in demand for banknote printing, but warned that the timing of any such rebound remained uncertain. It said it had entered into talks with its banks to amend its lending terms, reflecting the weaker profit outlook and higher borrowing costs after a series of interest rate hikes by the Bank of England.
It said it expected profits in the “low £20m range”, below City expectations. Shares in the company fell by more than 20% on the London stock market on Wednesday morning, extending a steady decline after four profit warnings in 18 months.
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The company has faced criticism of its financial performance as it makes faltering attempts to turn around the business. The activist investor Crystal Amber, one of the firm’s largest shareholders, has called for the removal of De La Rue’s chairman, Kevin Loosemore.
The company warned in 2019 that it risked going out of business after losing out to a Franco-German rival on a contract to print the UK’s post-Brexit blue passports.
Clive Vacher, a former aerospace executive brought in as De La Rue’s chief executive in October 2019, has said the company’s turnaround plan – which included shutting the firm’s UK banknote- and passport-printing factory in Gateshead – “saved” the company.
De La Rue employs about 2,300 staff across four continents, producing banknotes and authentication products – such as tax stamps and security IDs – in countries including Australia, Qatar, Bahrain and Oman.
