19 November 2025
As the US retires the one-cent coin (the penny), the UK faces a familiar question: is small change worth keeping, or is it time to go fully digital?
In November 2025, the US officially halted production of the penny, ending more than two centuries of minting America’s smallest denomination. The move, driven by the cost of producing a coin worth less than its face value, follows similar decisions in Canada, Australia, and, decades earlier, the UK, where the halfpenny was withdrawn in 1984.
The economic logic is hard to dispute. When it costs more to make a coin than it's worth in circulation, policymakers face an obvious question: why continue? But this decision, seemingly minor, sparks a deeper conversation, one that resonates far beyond minting logistics.
It challenges us to ask: what is the role of physical money in a modern, increasingly digital world?
And is the UK ready to let go of cash completely - or does it still hold relevance in times of uncertainty?
From a fiscal standpoint, discontinuing low-denomination coins is a no-brainer. The US penny, like the UK’s 1p and 2p coins, now holds so little purchasing power that many consumers ignore them altogether. Retailers are increasingly rounding prices, and vending machines or parking meters haven’t accepted them in years.
In inflation-adjusted terms, the 1p coin buys less than half as much as it did in the 1980s. Maintaining such denominations in circulation imposes costs not only on the Royal Mint but also on retailers, banks, and the cash-handling infrastructure as a whole. That’s before factoring in the environmental cost of producing and distributing metal coinage that ends up collecting dust in kitchen drawers.
Other nations have made the move smoothly. Canada ended penny production in 2012, and Australia phased out its smallest coins in the 1990s. Inflation didn’t spiral out of control, rounding rules were introduced, and consumer habits adapted.
If the economics don’t justify their existence, and the public barely uses them, why persist with small coins at all?
Yet, as we debate the value of pennies, we risk overlooking the broader significance of physical money.
Cash is more than a payment tool; it’s a financial safety net. During the early stages of the Covid-19 pandemic, demand for cash soared across global markets, including the UK. Households, spooked by uncertainty, withdrew physical currency not because they needed it but because it felt safe.
That instinct wasn’t misplaced because cash offers immediacy, certainty, and universal acceptance. It functions without technology, intermediaries, or connectivity. For lower-income households, the older generation, or those without reliable access to digital infrastructure, physical money isn’t just a preference; it’s essential.
Moreover, cash also serves as a psychological anchor. It helps with budgeting, provides transparency and control, and, in times of geopolitical or economic stress, acts as a hedge against systemic disruptions. As digital payment platforms proliferate, cybersecurity and privacy risks grow too. In a world prone to outages and hacks, cash doesn’t crash.
In short, the value of cash often becomes most visible when digital fails.
Digital payments now dominate UK retail transactions, with contactless card and mobile wallet usage outpacing cash by a wide margin. The direction of travel is clear and in many ways irreversible. The Bank of England is actively exploring a digital pound, and private-sector innovation is making digital access cheaper, faster, and more inclusive.
But removing the smallest denominations shouldn’t be confused with declaring the end of physical cash. The two are not the same.
It’s entirely possible - perhaps even advisable - for the UK to phase out low-value coins without abandoning the tangible aspects of its currency system. A leaner, more efficient form of cash can coexist with an increasingly digital economy, if policymakers ensure accessibility, resilience, and optionality remain core to the system.
The penny’s demise in the US is symbolic, but its lessons are global. While the UK has not proposed retiring its small coins, the move raises a timely question: could it make economic sense to phase out low-value denominations - without undermining the vital role cash still plays for the most financially vulnerable?
Investors, policymakers, and financial institutions must resist the temptation to view the debate in binary terms. This isn’t about old versus new, analogue versus digital. It’s about recognising that, in a complex and volatile world, different tools serve different purposes.
Phasing out coins like the 1p may be long overdue, but declaring cash itself obsolete would be a far riskier move. For many, physical money is more than convenience; it’s a source of stability, inclusion, and control.
In an age of rapid innovation, strategic resilience lies not in choosing sides, but in preserving choice
Back to News
+44 (0)20 7048 9400
Email Us
Client login
