Cash is still king across large parts of the UK economy, with more than 80% of people in Britain saying they pay taxi drivers, newspaper sellers, window cleaners and gardeners with notes and coins, according to a major report.

The Access to Cash Review also found that despite the runaway growth of contactless payments, more than two-thirds of people say they still pay for items such as a lunchtime sandwich, a small gift or a birthday card with cash.

The review’s final report has warned the country’s “cash infrastructure” – which costs £5bn a year to run – is on the verge of collapse because of its declining profitability, and said the government, regulators and banks all need to take action. The review is funded by the cash machine network Link, but is independent from it.

The review found 97% of the UK population carry cash and the average amount people have on them is £41. Meanwhile, 85% of those surveyed said they kept some cash at home.

The main reasons people gave as to why they carried notes and coins were that they liked to pay for small items in this way and cash provided “peace of mind”.

When people were asked what they used cash for, there were wide variations across different sectors. In terms of transport, only 33% pay for train tickets with notes and coins, but when it came to bus tickets and taxi fares, the numbers leapt to 76% and 85% respectively.

Thirty per cent said they paid for their weekly food shop with cash, but for day-to-day groceries – such as a loaf of bread – the figure was 54%, and when it came to a sandwich at lunchtime, it was 71%.

While a growing number of tradespeople and others have ditched cash-in-hand payments and now encourage customers to settle up via bank transfer or use a card terminal, cash still appears to be the primary payment method: 85% of those surveyed said they paid their window cleaner in cash, with the figures only slightly lower for gardeners (81%) and cleaners (76%).

Some commentators have expressed concern that as the UK goes increasingly cashless, charities and homeless people will suffer because fewer people will go out carrying small change. However, the Big Issue has recently been trialling card readers so people can tap to pay for their magazine.

The report said 94% of Britons who gave money to homeless people or street buskers handed over coins or notes, while 87% of parents paid their children’s pocket money in cash.

However, anecdotal evidence suggests some teenagers now have little to do with cash and go out with a payment card tucked into their mobile phone case.

Other sectors, however, have become increasingly digital: 10% of Britons pay their utility bills in cash, while 14% hand over notes and coins when buying large gifts.

The report said it was “a mistake to think the need for cash is limited to those who don’t want to move with the times … Cash doesn’t need IT to run once it’s been issued by a bank, and will work even if banks fail.”

It added that for many, “using cash isn’t a choice, it’s a necessity”, and for 25 million people, living in a cashless society would present real challenges.

Some debt charities advise people in financial difficulty to cut up cards and only use cash, while those who rely on a carer who shops for them, or who have a physical or cognitive disability that can make screens or pin numbers tricky, or who have mental health issues, may prefer to deal with physical money.