The Bank of England’s announcement that it is considering using palm oil in the production of its next £20 notes has been met with caution after the bank already faced a major backlash for using animal fat in the new fivers.

Last month, the Bank said that it will not withdraw the £5 notes from circulation, but added that it would consult with the public on how future banknotes should be made.

On Thursday, the Bank said that the “only practical alternative” to animal-derived additives are those derived from palm oil - an ingredient which has been controversial for its contribution to deforestation.

According to an independent report by the environmental advice group Efeca—released alongside the Bank's consultation— palm oil production was responsible for 8 per cent of the world's deforestation between 1990 and 2008.

Dr Emma Keller, agriculture commodities manager at the World Wide Fund (WWF) said that her organisation is encouraged by the thorough review that the Bank has conducted in response to the animal fat issue in new bank notes. However she still has concerns.

“Palm oil has benefits as it produces more oil per land area than any other equivalent oil crop. Worldwide demand is expected to double again by 2050 but this expansion comes at the expense of human rights and tropical forest – which forms critical habitat for a large number of endangered wildlife – unless it is sustainable,” she said.

“People don’t want the bank notes in their pocket to come with such a high environmental cost. The bank must only source RSPO (Roundtable on Sustainable Palm Oil) certified sustainable palm oil or none at all,” she added.

Commenting on the concerns, the Bank said: "These can be potentially mitigated by the Bank's suppliers acquiring additives that meet an associated certification standard for environmentally sustainable production."

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Vegans and vegetarians voiced outrage after the Bank of England said last year that the new plastic fivers would be made with tallow - a substance derived from fat and used in candles and soaps.

A petition garnered more than 100,000 signatures and stated that the fact that the use of tallow, “is unacceptable to millions of vegans & vegetarians, Hindus, Sikhs and Jains in the UK”.