Cash dispensers behind the great 'fiver' shortage

Bank of England Governor Mervyn King yesterday admitted there is a dramatic shortfall of new fivers entering the system.

The problem is not in production, Mr King said, declaring that there is an "ample supply" being printed.

It is that the Bank is struggling to find ways to slip the crisp notes into circulation.

In a City of London speech, Mr King explained that the main method of filtering fresh currency on to the High Street is through cash machines. But the banks that run the holes in the wall try to keep costs low by offering only a limited selection of notes.

As a result, customers almost always get offered a choice of only £10 and £20 notes.

Mr King said the banks must not stand in the way of the "public good", adding that many of the Bank's £5 notes are now "noticeably soiled and scruffy". He warned the problem is so acute that reforms to currency distribution are urgently needed.

"We must not let this situation continue any longer. The public need £5 notes,£" he said.

Over the past 15 years the value of £5 notes in circulation has stayed static at only £1billion, according to Bank of England calculations.

And the lifetime of the average fiver has doubled, leaving the stock in less than mint condition.

The notes are often so crumpled that they clog up the Bank's sorting machines when they are returned for replacement. Even the new varnish added to notes earlier in the decade has failed to stop the deterioration.

Mr King proposed a number of solutions to the crisis.

As 60 per cent of cash comes from holes in the wall, one answer is to convince High Street lenders to offer a greater variety of notes from their machines, he said.

The Bank is entering talks to offer them "incentives" to add fivers to cash dispensers.

Another answer would be to increase the amount of fresh currency distributed directly to High Street retailers, allowing new fivers to be put straight into shopkeepers' tills.

And, in a measure of its desperation, Mr King revealed the Bank is considering another upgrade to the "durability" of the notes that it prints.