The UK central bank said the value of notes and coins in circulation rose 17% to £12.3 billion ($13.9 billion) at the end of June 2022 compared with early 2020, when coronavirus lockdowns were in force.

“Cash is increasingly being used as a store of value, which is a fundamental role of money,” the BOE said in an article in its quarterly bulletin on Friday. “It is also consistent with the role that cash has played throughout history as a safe asset that people turn to in times of economic and social uncertainty, and when interest rates are low.”

The central bank said half the reason for the increase in notes and coins in circulation related to people keeping it as a store of value even though they use it less from day to day. The research predates the current turmoil hitting UK financial markets as Prime Minister Liz Truss reworks her economic policies following a revolt by investors.

The findings feed into a debate about the what forms of money people will use in the future. While the BOE intends to maintain notes and coins as a key part its management of the UK currency, it’s also studying digital forms of the pound that could work smoother in web transactions.

The BOE estimates households have about £10 billion to £30 billion of cash in reserves. A third of people who hold cash in reserve say they want it in case of an emergency, and 22% say they do so to keep greater control over their finances, according to the BOE research, which was based on a surveys.

The findings contrast with a sharp drop in the use of cash in everyday transactions as the popularity of card-based money grows. Only 23% of payments were made with banknotes and coins in 2019, down 60% from a decade ago, according to the BOE.

Pandemic Shift

“The pandemic has had an impact on payment habits, with some shifting permanently towards digital payment methods,” the BOE said in the paper. “It is unlikely that cash use will recover much further from its current level.”

However, cash remains important to many people, especially the elderly and those on lower incomes. It’s now the first preference for paying for items for 27% of those over age 65, up from 20% in mid-2021.

A BOE survey of 5,000 people in March 2021 found that 60% of adults in England and Wales held cash in reserve. The median holding was about £167, with a third of people having less.

“A small group of people held very large values,” the BOE said.