The new £1 coin was introduced on 28 March, with the Treasury heralding the “highly secure” quid as an opportunity to reduce counterfeit money in circulation.
Made from two metals, the coin has a hidden security feature to protect it from counterfeiting. Approximately one in 30 of the old coins in circulation are fake, according to The Royal Mint.
But what does the new coin mean to the thousands of retail, hospitality and other businesses in the UK? Cashless transactions may now account for over half of UK payments, but a significant number of coins and notes are spent up and down British high streets and must be handled by merchants?
Speaking when the new £1 was launched, British Retail Consortium policy adviser Andrew Cregan said the trade association has been working closely with the government since its arrival was announced in 2014.
He commented: “[Preparation] is no small feat. For retailers, this has meant updating trolleys, vending machines, parking meters, self-service check-outs and various machines used to count cash in the back offices of shops all across the country.
“We estimate the cost of these preparations to the retail industry alone to be in the range of £22 million.”
Major pain or minor distraction?
Tesco had to free up its trolleys, which usually require a pound to unlock. The UK’s largest retailer told Essential Retail it is still in the process of updating locks on its trolleys so they can accept the old and new coin, although self-service tills across its UK estate accepted both coins on 28 March.
For mid-size retailers, it has seemingly been a less troublesome process. Andrew Rafferty, IT and eCommerce director at 28-store Booths, said the main problem was the peak in demand for engineers to make the amendments.
“We required a normal software patch on cash counting which was neither here nor there,” he told this publication.
“For self-checkouts we needed a mixture of hardware and software reconfiguration. We get that from Wincor Nixdorf and the vendor’s problem was, not surprisingly, everyone wanted systems changing within the same few days. They had to scale up their operations – it would have been the same for NCR as well – to upgrade thousands of machines.”
Rafferty added: “It is a cost and an overhead – and I’d rather spend time doing something that adds better value – but you have to accept policy changes from time to time. It’s a minor distraction. If you have self-checkouts you need to accept that, but if we didn’t have self-checkouts it would hardly have been spoken about.”
The wider context is the more comprehensive changes currently taking place to sterling adding accumulative costs to the industry – with the biggest impact on companies operating larger estates. Last year saw the introduction of polymer (or plastic) £5 notes, while £10 notes made from the same material will be introduced in July ahead of the £20 equivalents in 2018.
CMS Payments Intelligence (CMSpi), which campaigns on behalf of merchants, has been vocal in its criticism of the polymer roll-out strategy. It claims the new notes add an unnecessary cost burden to merchants with no clear benefit analysis.
The organisation supports The Royal Mint’s case for a new £1 coin, but says the combined cost of new coins and notes will total around £220-£250 million.
Brendan Doyle, CEO of CMSpi, has called the current UK payments changes as “the most significant change to the UK’s currency since decimalisation in 1971”.
Although backing the introduction of the £1 coin, he said: “It remains unclear why the Bank of England has decided to introduce polymer notes and it is even less clear why they have not faced harsher official scrutiny over the lack of a proper cost-benefit analysis.”
CMSpi estimates upgrades costs for self-service machines will be £8 million, while counterfeit equipment (£55 million) and cash circulation (£60 million) will require more significant expenditure.
Next steps
The Royal Mint has mapped out a clear path for businesses – including retailers and hospitality companies – who will feel the impact of the new £1 as it filters into the UK economy.
Organisations now find themselves well into the co-circulation period where both old and new coins can be accepted but must be bagged up separately before being banked. Businesses also must offer a clear message to customers about the coins which can be used in their vending machines, self-service tills and trolleys.
From 16 October 2017 onwards, the demonetisation period takes over. Businesses are warned that coin handling equipment must accept the new £1 coin, and even though they are under no obligation to accept the round £1 coin from customers they should not distribute it themselves.
Rafferty does not expect any problems by the time autumn comes. The required changes have been made and he said Booths’ community-focused outlook means the company will probably continue to accept the old coins for some time after the October cut-off.
“We’re down to around 20% cash payments now anyway,” he remarked.
“We were down to around 60% card payments but that has grown around 15-20% since the arrival of contactless. There are fewer people using cash so it makes the [change of currency] process a whole lot less panicky and worrisome.”