The Bank of England has decided to stick to plastic banknotes despite complaints from vegans and religious groups that they contain tallow, an animal byproduct.

The central bank concluded after “careful and serious consideration and extensive public consultation” that switching to palm oil alternatives would be costly and raise questions about environmental sustainability.

A row broke out over the use of animal fat in the new plastic fiver last November, and a petition was launched calling for the use of tallow to be stopped.

The petition said the use of animal fat was “unacceptable to millions of vegans, vegetarians, Hindus, Sikhs, Jains and others in the UK”. Some Hindu temples in the UK banned the £5 note.

Henry Smith, the Conservative MP for Crawley and a vegetarian, tweeted:

Very disappointing that @bankofengland have decided to continue using animal slaughter derived polymer for their £5 and £10 notes. pic.twitter.com/0yimWmfU56 — Henry Smith MP (@HenrySmithUK) August 10, 2017

The decision means the new plastic £20 note and future print runs of £5 and £10 notes will be made from polymer, which typically contains less than 0.05% of animal fat.

The only viable alternative would be to use chemicals derived from palm oil, the central bank said, but its suppliers were “unable to commit to sourcing the highest level of sustainable palm oil at this time”. Coconut oil did not work, tests by the suppliers Innovia and De La Rue showed.

Another consideration was value for money. The Bank estimates the cost of switching would be about £16.5m over the next 10 years, on top of the £70m cost of reprinting the £5 and £10 notes. The Treasury advised that a switch to palm oil would not represent value for money for taxpayers.

Polymer banknotes are used in more than 30 countries. It emerged during the Bank’s research that plastic containing animal fat is also used in debit and credit cards, mobile phones, carrier bags, cosmetics, soaps, household detergent bottles and car parts.

The central bank said 3,554 people responded to its consultation. Of those who expressed a preference, 88% were against the use of animal-derived additives and 48% were against the use of palm oil-derived additives.

It said it had taken account of its obligations under the Equality Act 2010 and had “not taken this decision lightly”. The Bank argues that polymer banknotes are much harder to counterfeit and last longer than paper notes. Mark Carney dipped one of the new plastic fivers in chicken curry at Borough Market in London last year to prove their durability.

The news came as Royal Bank of Scotland said it would issue its first polymer £10 note in Scotland. The new Scottish tenner and RBS’s first plastic fiver, issued last year, are made by De La Rue and also contain traces of tallow.

RBS chief Ross McEwan with his bank’s first polymer £10 note commemorating scientist Mary Somerville, which will enter circulation on 4 October. Photograph: RBS/PA

The new £10 note, to be released on 4 October, will be 15% smaller than current paper banknotes. It will feature the Scottish mathematician and astronomer Mary Somerville.

The face of the new polymer £20 note, scheduled to enter circulation in 2020, has been revealed as philanthropist and entrepreneur Catherine Cranston, who set up a series of tearooms across Glasgow. She was a major patron of Scottish artists Charles Rennie Mackintosh and Margaret Macdonald.

Scottish banknotes are issued by RBS, Bank of Scotland and Clydesdale. The Committee of Scottish Bankers said the Scottish banks would, like the Bank of England, continue to use polymer for banknotes after “careful consideration”.