How the buying power of £2 coin has shrunk in 25 years since launch

A £2 coin could have bought two pints of lager when it was first introduced a quarter of a century ago, but it would purchase less than half a pint today typically, according to analysis.

Inflation has significantly eroded the purchasing power of the bi-metal coin since it launched on June 15 1998, according to the research by M&G’s Investment Office, the team behind the company’s flagship PruFund strategy.

Its research indicates that, while someone could have got a round of drinks in for themselves and a friend for £2 back in 1998, they may now struggle to buy a lager just for themselves – as the coin is worth the equivalent of 0.4 pints of lager typically.

M&G’s analysis of Office for National Statistics (ONS) data indicates that a £2 coins will buy significantly less in the supermarket than 25 years ago.

Shopping basket essentials have taken a hit, with £2 only having sufficient purchasing power to buy one loaf of bread typically, compared with four loaves 25 years ago.

A £2 coin could potentially buy about 1.4 litres of fuel at the petrol pump, whereas it would have bought five litres of petrol 25 years ago, according to the research.

The coin could also be worth the equivalent of 65 home-brewed cups of tea, but in 1998 households could have quenched their thirsts with about 160 cuppas, according to M&G.

It also calculated that the value of a £2 left in a piggy bank for the past 25 years would have eroded to just £1.07 in real terms.

The value could potentially have increased to just over £6 over the same period if the money had instead been invested in the FTSE All-Share Index, M&G calculated.

The research was released at a time when households are dealing with a multitude of rising bills.

Parit Jakhria, head of long-term investment at M&G said: “With huge rises in the cost-of-living across the UK in recent years, we are all feeling how dramatic the impact of inflation can be on our shopping baskets.

“However, it is equally important to see the longer-term impact of how inflation can eat away at your savings.”