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Last updated: September 10, 2013 8:23 pm
The Bank of England looks set to part company with paper banknotes after more than 300 years, becoming one of a growing number of central banks around the world to switch to plastic tender.
The BoE said on Tuesday that it would consult with the public on plans to print the new Winston Churchill £5 note, set for a 2016 launch, and the Jane Austen £10, rolled out the following year, on polymer.
The central bank has considered the move for several years and Charlie Bean, deputy governor, made clear on Tuesday that staff at Threadneedle Street were confident that a switch to polymer made sense, though he stressed that the BoE would need to win over the public before ditching paper notes.
The polymer notes, which are far stronger and more resistant to extreme weather conditions, are initially more expensive to produce, costing more than 50 per cent more than the notes the BoE now uses, which are printed on paper and linen.
However, polymer notes last longer and the BoE claimed that the cost of printing on polymer would be £100m cheaper over 10 years because of the notes’ enhanced durability. The BoE spent £75m on currency production last year, though not all of this was spent on note printing.
The notes are also more environmentally friendly, cleaner and, crucially, are far more difficult to counterfeit.
Nick Carver, publisher of Central Banking Publications, a trade journal, said: “There is no disputing the success countries with polymer notes have had against counterfeiting. But it can be pricey for lower value notes, which have a shorter life, and can get pricier for higher value notes if they have lots of security features.”
The BoE said over the next couple of months it would show members of the public how the banknotes it currently produces would look if they were printed on polymer through events at 12 shopping centres around the UK. There would be additional events with chambers of commerce, as well as focus groups and surveys.
If polymer notes are introduced, they are expected to be smaller than the current £5 and £10 notes.
At present, specialist security printer De La Rue prints all of the UK’s notes on a paper made from cotton and linen. The notes are made at a facility in Debden, Essex, which is owned by the BoE.
More than 20 central banks use polymer notes – including the Bank of Canada, where Mark Carney was governor before he joined the BoE in July. Innovia, a Cumbria-based manufacturer, supplies the material used for note printing.
Mr Carver said: “The chances of a shift to polymer can’t have been damaged by Mark Carney becoming governor. Before Canada, polymer was seen largely as a preserve of hotter countries, where paper-based notes tend to have an even shorter lifespan than here.”
A decision is expected in December. The BoE said no decision would be made on whether the £20 or £50 denomination would be printed on polymer at least until the £5 and £10 notes were introduced.
The Reserve Bank of Australia was the first central bank to print a polymer note, in 1988. Since then, a host of other central banks around the world have followed suit, including those of New Zealand, Fiji and Mexico. The last country to introduce the notes was Mauritius, which switched to polymer in August.
7th century First recorded use of paper money in China.
Middle Ages Bills of exchange are used in Europe for the first time to simplify trade. The Knights’ Templar functioned as bankers.
17th century Goldsmiths, the first modern bankers, begin to produce banknotes. Samuel Pepys mentions in his diary that in the mid 1660s he visits Edward Backwell, a goldsmith based in Lombard Street, “to set all my reckonings straight there, which I did, and took up all my notes”.
1694 The Bank of England is founded and almost immediately begins producing handwritten banknotes. The notes were redeemable for gold or coinage of the value of the notes in question, made out in pounds, shillings and pence. Today, all of the Bank’s notes still feature the words “I promise to pay the bearer on demand the sum of”.
18th century BoE gradually moves to fixed denomination notes. By 1745, notes are part printed in denominations ranging from £20 to £1,000.
1844 The BoE moves towards becoming the monopoly issuer of banknotes in England and Wales. The Bank Charter Act becomes law, banning the establishment of new banks of issue. Eleven years later, the first fully printed note appears.
1983 The Queen’s face appears on plastic for the first time after the Isle of Man government releases a £1 note on a substance known as Bradvek, produced by Du Pont.
1988 The Reserve Bank of Australia becomes the first central bank to introduce a polymer note, printing a commemorative $10 bill in January. By 1996, all of Australia’s banknotes are made of polymer.
2011 Mark Carney, then governor of the Bank of Canada, presides over the launch of the country’s first polymer note, a $100 bill, in November. Since then, Canada has introduced polymer $5, $10, $20 and $50 notes.
2013 In the decades since Australia introduced the first note, polymer has become more and more popular. More than 20 countries now use plastic notes, among them Mexico, New Zealand and Canada.
Transparency opens way to better secrurity
Polymer banknotes are made from transparent sheets of a plastic called biaxially oriented polypropylene, or Bopp, coated with a white layer on which the traditional design features of “paper money” can be printed, writes Clive Cookson.
Polymer notes usually have small windows of clear plastic that can include intricate security features not available in paper notes. These are instantly visible from both sides.
Polymer notes are harder to counterfeit because special plastic film printers are needed to produce them. Their surface is also more resistant to dirt, moisture and tearing than the coated cotton paper used for traditional notes.
Another option is to combine polymer and paper in a thin sandwich. Cotton paper can be in the middle, protected on each side by plastic film. Or there can be a strong polymer core with cotton paper on the outside. These allow paper features such as watermarks and metal threads. But the Bank of England is more likely to go for an all-polymer option if it switches from paper.
De La Rue, the security printer that makes all the BoE’s notes, will want to continue that relationship into the polymer era. But Innovia, a manufacturer of plastic films owned by Arle Capital, UK private equity group, will be hoping for some of the business.
Innovia, based in Wigton, Cumbria, produces Bopp films for specialised packaging applications. It owns the polymer substrate technology that produced the first plastic banknotes introduced in Australia in 1988, used in 21 countries.
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