- By Noor Nanji
- Business reporter, BBC News
Banknote maker De La Rue says worldwide demand for banknotes is at a 20-year low.
The company that designs a third of the world’s banknotes says demand for cash has fallen since the pandemic as central banks hoard the currency.
It said the recession would hit its full-year profit, which would fall short of expectations.
The company is having to renegotiate loan contracts with banks due to tougher trading conditions.
“Demand for banknotes has been at its lowest level in more than 20 years, resulting in low order volumes in fiscal year 2024,” De La Rue said in a trading update.
Its boss, Clive Vacher, told the BBC that central banks have stepped up their orders of banknotes during Covid as they do during economic crises. But now they are delaying new orders as they run out of stock.
“They always do that when there is a crisis, because of the security that cash gives them,” he said.
“So we were predicting a recession, which actually happened, but that recession is likely going to be much deeper and possibly 9-12 months longer than that,” he said. what we normally expect in the normal cycle of things.”
It comes as consumer cash usage is declining in many countries as more transactions are done online or by card, especially contactless payments.
De La Rue said there are signs of recovery but is uncertain when that will happen. Shares of De la Rue fell as much as 30% on Wednesday, before rebounding after the announcement of a trading update.
The 200-year-old company said it was in talks with banks for lower-yield and higher-interest loans, following a series of rate hikes by the Bank of England.
De La Rue now expects its full-year profit to be “as low as £20m” while interest expenses on loans have risen.
It said it was “in discussions with lenders regarding seeking amendments to banking covenants, reflecting the prospect of an amendment and also reflecting an increase in corporate funding costs due to interest Bank of England base rate higher”.
De La Rue employs 1,800 people globally and works with 140 countries.
All current Bank of England banknotes are printed by the company at a location in Debden, Essex.
The scene inside the De La Rue mint is a mixture of the mundane and the surreal.
The factory floor feels very familiar with the high-tech machinery, pallet transporters and staff appearances typical of many manufacturing centers.
But the “product”, as it is called, turns heads. Millions of bills, in various stages of production, are here. Obviously, security is extremely tight.
Too many banknotes are printed every day which makes us feel at odds with everyday life – when for many people, the use of cash is very rare as we pay for goods and services with cards and electricity. smart phone.
De La Rue is also printing new notes featuring King Charles, although these won’t go into circulation until the middle of next year.
The company, based in Basingstoke, Hampshire, has contracts with central banks around the world.
For some of those banks, it prints money, while for others it provides polymers for banknotes as well as other services.