The chief executive officer of De La Rue, Clive Vacher has said that countries may replace banknotes more frequently because of the coronavirus crisis. The firm said it expected demand to grow around the world for its plastic banknotes as governments try to slow the spread of coronavirus. However, some experts have said coronavirus will hasten the decline in the use of cash as people make a long-term switch to digital payments.
The Bank of England and the World Health Organization have both stressed that the risk of virus transmission from banknotes and coins is no greater than for any other items and have repeated advice on regular hand washing. However, De la Rue added, "There is no doubt that a big driver – apart from the longevity of [plastic] notes - is the cleanliness of them, and that's why state banks and state print works are making the decision to switch."
Although the firm plans to raise £100m as part of a turnaround plan focused on shifting to plastic notes, the decision to end banknote printing at its Gateshead plant, is putting 260 jobs at risk.
Gateshead job losses
De La Rue said it would begin a consultation process with staff about stopping banknote production at its Gateshead plant. It expects banknote production to stop at the plant by the end of 2020. In addition, UK passport production will stop in the first half of 2021 as the contract transfers to Franco-Dutch firm Gemalto.
De La Rue has however maintained its position to continue to print banknotes in the UK at other facilities.
Mr. Vacher's comments came as De La Rue set out a plan to raise £100m from shareholders. The firm, which prints the UK's banknotes, has been hit by setbacks including losing the contract to make Britain’s blue post-Brexit passports to Gemalto in 2018. In May of that year, it had to write off £18m after Venezuela's central bank failed to pay its bills.
The loss of the British passport contract, profit warnings in 2019, and ballooning debt prompted De La Rue to warn late last year of uncertainty over the future of the business. Also, at the time, the company was also under investigation by the Serious Fraud Office (SFO) in connection with "suspected corruption" in South Sudan. However, on Tuesday the SFO said it had dropped its investigation.
Mr. Vacher said in February that "considerable" work was needed at the firm, while unveiling plans to boost profitability by reining in costs and investing in plastic notes.
On Wednesday, De La Rue said most of the money it planned to raise, about £80m, would go into the company's turnaround plan. Some £15m will be invested in plastic note production, which at the moment is based in the UK. He said, “It's very likely to be in the UK, but actual location is still under discussion”.
De La Rue shares rose more than 4.5% following the announcements.