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Polymer notes announced for UK arrival in 2016. De La Rue to capitalize?

The Bank of England announced on 18th December 2013 that they are planning to change the UK’s paper £5 and £10 bank notes to plastic, polymer bank notes in 2016 and 2017, respectively.

The Bank of England took to shopping centers nationwide to gauge public interest on the change to polymer notes. Out of the 13,000 people who participated in the consultation, 87% of respondents were in favor of the change, 6% opposed it and 7% were neutral. There have been a few issues raised by the public, such as the notes sticking together when they have been newly produced, that they’re not as easily foldable, and that the notes are too slippery. However the negative points are vastly outweighed by the positives,  as the new notes will be a lot more difficult to counterfeit,  will be cheaper to produce, and  will last a lot longer in circulation before they have to be replaced.

The Bank of England says that although the short term costs to produce the notes will be high, it predicts that production costs will be cut by over £100 million over the next ten years and that costs associated with counterfeiting paper notes will be reduced by £30 million per year. Other countries that have completely converted to polymer notes include Australia, Bermuda, Brunei, New Zealand, Papua New Guinea, Romania, and Vietnam.

The images on the bank notes will have Queen Elizabeth II on one side whilst the other will feature a famous British historical icon on the other. The face of the new £5 note is due to be former Prime Minister, Sir Winston Churchill, and the £10 note will feature one of Britain’s most famous writers, Jane Austen. According to the Bank of England, the process to select the faces of the £20 and £50 notes will not begin until 2015.

Commercial papermaker company, De La Rue plc, have produced bank notes for the Bank of England for the last 11 years and its current contract will be finishing in 2015. The company started producing polymer notes for Fiji and Mauritius earlier this year, so it puts De La Rue in an excellent position to renew its current contract and could potentially lead to a long term contract with the production of the £5 polymer note starting in 2016, especially as the date of arrival for the £20 and £50 notes have not yet been confirmed. The company will of course face competition for the contract, but they are one step ahead of everybody else as they already have the facilities to product polymer notes.

For more information, read MarketLine’s ‘Company SWOT Profile on De La Rue plc‘.

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