Scrapping 1p and 2p coins would have no significant impact on prices, Bank of England says
Scrapping 1p and 2p coins would have “no significant impact” on prices, Bank of England economists have said.
The government had considered scrapping coppers coins earlier this year but subsequently ruled out the move after a public backlash, with many arguing retailers would round up prices to the nearest 5p more often than rounding down.
But Bank of England economists Marilena Angeli and Jack Meaning, writing on the BoE's blog, said those arguments were “flawed on a number of levels”.
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They said that card payments and the reduction in item prices ending in 99p made the issue redundant.
Their research also found that buying multiple items, as few as three, would remove any inflationary bias from items with prices ending in 99p.
They said: “Economies that have removed their low denomination coins, or introduced rounding (and there are lots of them) have moved to a system in which rounding is applied to the final bill, not to individual items.
“If you buy more than one item at a time, the bias in the probability that your total bill will need to be rounded up rather than down falls.”
The economists also said the prevalence of item prices ending in .99 had fallen in recent years and now only accounted for just over 12 per cent of prices, while just three per cent of all payments were made with cash.
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