By Iain Withers and Huw Jones

LONDON (Reuters) -The British government has pledged to protect access to cash for vulnerable people, while the financial regulator has said it will intervene if cash machines face removal in some areas after a 40% cut in withdrawals last year as a result of the pandemic.

Financial services minister John Glen told a webcast event by consumer group Which? on Thursday the government would launch a public consultation on legislation this summer to protect access to cash within a reasonable distance.

“The government believes the Financial Conduct Authority (FCA) would be best placed to play a leading role in holding firms to account on access to cash so that the needs of consumers and businesses are met,” Glen said.

The FCA said it would intervene if banks and other providers close cash machines in areas where there are no alternatives like the Post Office.

The COVID-19 pandemic has prompted more people to use contactless card payments and shop online, but five million adults still use cash for most of their purchases, the FCA said.

Cash withdrawals had begun to rise as pandemic restrictions lift, it added.

Many of the people still relying on cash were vulnerable due to disability or old age and needed protecting, Sheldon Mills, executive director at the FCA, told the Which? event.

“While legislation is essential to protect access to cash in the face of declining demand, we want individual firms and the wider industry to play a role now,” Mills said.

UK Finance, which represents banks and building societies, separately said that it has made five commitments to continue to preserve access to cash for consumers and businesses over the long term.

The commitments include ensuring access to cash to vulnerable people and supporting projects currently being rolled out by banks.

As the debate over cash continues, the Bank of England said on Thursday there were good reasons to move to the next stage in contactless payments by launching its own digital currency.

(Reporting by Huw Jones and Iain WithersEditing by Kevin Liffey and David Goodman)