6.1 The government agrees with the Committee’s recommendation. Target implementation date: December 2021 6.2 HM Treasury and The Royal Mint (TRM) recognise the pressures that the reduction in transactional cash use and COVID-19 have placed on the profitability of UK coin manufacture. Ensuring that operations are sustainable and cost effective into the long-term, is a key priority for both HM Treasury and TRM. TRM is working to mitigate the impact of the reduction in transactional cash use by seeking to make long-term improvements in business efficiencies. To date, TRM has made significant advancements in its overall business operations, and since 2018 TRM has reduced the average direct manufacturing cost per UK coin. These cost reductions and efficiency gains are part of TRM’s continuous improvement plans and on-going business strategy. Led by market demand, TRM has reduced its cost base by over 30% in the last 3 years. 6.3 TRM will continue its work in aligning operational costs with coin production demand. Furthermore, as UK volumes have been falling over recent years TRM has worked hard to strengthen its overseas business, to a point where UK volumes account for less than 15% of all circulating coin production. This ensures that the business is sustainable, spreading the fixed cost base over a larger overall volume. It safeguards TRM’s capability to produce UK coinage at a competitive cost. Furthermore, the UK Coin Contract (UKCC) between TRM and HM Treasury sets a fixed price for the production of UK coins. The UKCC drives cost efficiencies in the manufacturing of UK coin and value-for-money, ensuring any rise, outside of inflation, in manufacturing costs are not passed on to the taxpayer. 6.4 A key challenge for TRM, now and moving forwards, is forecasting coin demand in an environment of declining cash use. The COVID-19 pandemic presented additional, unprecedented challenges. TRM has worked closely with industry to accurately forecast demand for new coin and engages bilaterally with the Bank of England to share best practice in forecasting. Prior to the COVID-19 pandemic, forecasting accuracy in 2019-20 was 98%. TRM has taken a more active role in engaging with HM Treasury, industry and the Bank of England since COVID-19 impacted the UK and as a result has introduced additional measures to ensure the appropriate level of coin is available to industry at the right time and support the effective operation of the UK economy.