Pound sterling

Pound sterling

Overview
The pound sterling commonly called the pound, is the official currency
Currency
In economics, currency refers to a generally accepted medium of exchange. These are usually the coins and banknotes of a particular government, which comprise the physical aspects of a nation's money supply...

 of the United Kingdom
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...

, its Crown Dependencies (the Isle of Man
Isle of Man
The Isle of Man , otherwise known simply as Mann , is a self-governing British Crown Dependency, located in the Irish Sea between the islands of Great Britain and Ireland, within the British Isles. The head of state is Queen Elizabeth II, who holds the title of Lord of Mann. The Lord of Mann is...

 and the Channel Islands
Channel Islands
The Channel Islands are an archipelago of British Crown Dependencies in the English Channel, off the French coast of Normandy. They include two separate bailiwicks: the Bailiwick of Guernsey and the Bailiwick of Jersey...

) and the British Overseas Territories
British overseas territories
The British Overseas Territories are fourteen territories of the United Kingdom which, although they do not form part of the United Kingdom itself, fall under its jurisdiction. They are remnants of the British Empire that have not acquired independence or have voted to remain British territories...

 of South Georgia and the South Sandwich Islands
South Georgia and the South Sandwich Islands
South Georgia and the South Sandwich Islands is a British overseas territory and overseas territory of the European Union in the southern Atlantic Ocean. It is a remote and inhospitable collection of islands, consisting of South Georgia and a chain of smaller islands, known as the South Sandwich...

, British Antarctic Territory
British Antarctic Territory
The British Antarctic Territory is a sector of Antarctica claimed by the United Kingdom as one of its 14 British Overseas Territories. It comprises the region south of 60°S latitude and between longitudes and , forming a wedge shape that extends to the South Pole...

 and Tristan da Cunha
Tristan da Cunha
Tristan da Cunha is a remote volcanic group of islands in the south Atlantic Ocean and the main island of that group. It is the most remote inhabited archipelago in the world, lying from the nearest land, South Africa, and from South America...

. It is subdivided into 100 pence (singular: penny). A number of nations that do not use sterling also have currencies called the "pound
Pound (currency)
The pound is a unit of currency in some nations. The term originated in England as the value of a pound of silver.The word pound is the English translation of the Latin word libra, which was the unit of account of the Roman Empire...

".

The Channel Islands
Channel Islands
The Channel Islands are an archipelago of British Crown Dependencies in the English Channel, off the French coast of Normandy. They include two separate bailiwicks: the Bailiwick of Guernsey and the Bailiwick of Jersey...

 (the Bailiwick of Guernsey and the Bailiwick of Jersey) and the Isle of Man
Isle of Man
The Isle of Man , otherwise known simply as Mann , is a self-governing British Crown Dependency, located in the Irish Sea between the islands of Great Britain and Ireland, within the British Isles. The head of state is Queen Elizabeth II, who holds the title of Lord of Mann. The Lord of Mann is...

 produce their own local issues of sterling; see Guernsey pound
Guernsey pound
The pound is the currency of Guernsey. Since 1921, Guernsey has been in currency union with the United Kingdom and the Guernsey pound is not a separate currency but is a local issue of banknotes and coins denominated in pound sterling, in a similar way to the banknotes issued in Scotland and...

, Jersey pound
Jersey pound
The pound is the currency of Jersey. Jersey is in currency union with the United Kingdom, and the Jersey pound is not a separate currency but is an issue of banknotes and coins by the States of Jersey denominated in pound sterling, in a similar way to the banknotes issued in Scotland and Northern...

 and Manx pound
Manx pound
The Manx pound or Isle of Man pound is a local issue of the pound sterling, issued by the Isle of Man Government. It is subdivided into 100 pence.-Currency union with sterling:...

.
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Encyclopedia
The pound sterling commonly called the pound, is the official currency
Currency
In economics, currency refers to a generally accepted medium of exchange. These are usually the coins and banknotes of a particular government, which comprise the physical aspects of a nation's money supply...

 of the United Kingdom
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...

, its Crown Dependencies (the Isle of Man
Isle of Man
The Isle of Man , otherwise known simply as Mann , is a self-governing British Crown Dependency, located in the Irish Sea between the islands of Great Britain and Ireland, within the British Isles. The head of state is Queen Elizabeth II, who holds the title of Lord of Mann. The Lord of Mann is...

 and the Channel Islands
Channel Islands
The Channel Islands are an archipelago of British Crown Dependencies in the English Channel, off the French coast of Normandy. They include two separate bailiwicks: the Bailiwick of Guernsey and the Bailiwick of Jersey...

) and the British Overseas Territories
British overseas territories
The British Overseas Territories are fourteen territories of the United Kingdom which, although they do not form part of the United Kingdom itself, fall under its jurisdiction. They are remnants of the British Empire that have not acquired independence or have voted to remain British territories...

 of South Georgia and the South Sandwich Islands
South Georgia and the South Sandwich Islands
South Georgia and the South Sandwich Islands is a British overseas territory and overseas territory of the European Union in the southern Atlantic Ocean. It is a remote and inhospitable collection of islands, consisting of South Georgia and a chain of smaller islands, known as the South Sandwich...

, British Antarctic Territory
British Antarctic Territory
The British Antarctic Territory is a sector of Antarctica claimed by the United Kingdom as one of its 14 British Overseas Territories. It comprises the region south of 60°S latitude and between longitudes and , forming a wedge shape that extends to the South Pole...

 and Tristan da Cunha
Tristan da Cunha
Tristan da Cunha is a remote volcanic group of islands in the south Atlantic Ocean and the main island of that group. It is the most remote inhabited archipelago in the world, lying from the nearest land, South Africa, and from South America...

. It is subdivided into 100 pence (singular: penny). A number of nations that do not use sterling also have currencies called the "pound
Pound (currency)
The pound is a unit of currency in some nations. The term originated in England as the value of a pound of silver.The word pound is the English translation of the Latin word libra, which was the unit of account of the Roman Empire...

".

The Channel Islands
Channel Islands
The Channel Islands are an archipelago of British Crown Dependencies in the English Channel, off the French coast of Normandy. They include two separate bailiwicks: the Bailiwick of Guernsey and the Bailiwick of Jersey...

 (the Bailiwick of Guernsey and the Bailiwick of Jersey) and the Isle of Man
Isle of Man
The Isle of Man , otherwise known simply as Mann , is a self-governing British Crown Dependency, located in the Irish Sea between the islands of Great Britain and Ireland, within the British Isles. The head of state is Queen Elizabeth II, who holds the title of Lord of Mann. The Lord of Mann is...

 produce their own local issues of sterling; see Guernsey pound
Guernsey pound
The pound is the currency of Guernsey. Since 1921, Guernsey has been in currency union with the United Kingdom and the Guernsey pound is not a separate currency but is a local issue of banknotes and coins denominated in pound sterling, in a similar way to the banknotes issued in Scotland and...

, Jersey pound
Jersey pound
The pound is the currency of Jersey. Jersey is in currency union with the United Kingdom, and the Jersey pound is not a separate currency but is an issue of banknotes and coins by the States of Jersey denominated in pound sterling, in a similar way to the banknotes issued in Scotland and Northern...

 and Manx pound
Manx pound
The Manx pound or Isle of Man pound is a local issue of the pound sterling, issued by the Isle of Man Government. It is subdivided into 100 pence.-Currency union with sterling:...

. The pound sterling is also used in Gibraltar
Gibraltar
Gibraltar is a British overseas territory located on the southern end of the Iberian Peninsula at the entrance of the Mediterranean. A peninsula with an area of , it has a northern border with Andalusia, Spain. The Rock of Gibraltar is the major landmark of the region...

 (alongside the Gibraltar pound
Gibraltar pound
The Gibraltar pound is the currency of Gibraltar. It is exchangeable with the UK pound sterling at par value.-History:...

), the Falkland Islands
Falkland Islands
The Falkland Islands are an archipelago in the South Atlantic Ocean, located about from the coast of mainland South America. The archipelago consists of East Falkland, West Falkland and 776 lesser islands. The capital, Stanley, is on East Falkland...

 (alongside the Falkland Islands pound
Falkland Islands pound
The pound is the currency of the Falkland Islands, a British Overseas Territory in the South Atlantic Ocean. The symbol is the pound sign, £, or alternatively FK£, to distinguish it from other pound-denominated currencies...

) and Saint Helena
Saint Helena
Saint Helena , named after St Helena of Constantinople, is an island of volcanic origin in the South Atlantic Ocean. It is part of the British overseas territory of Saint Helena, Ascension and Tristan da Cunha which also includes Ascension Island and the islands of Tristan da Cunha...

 and Ascension
Ascension Island
Ascension Island is an isolated volcanic island in the equatorial waters of the South Atlantic Ocean, around from the coast of Africa and from the coast of South America, which is roughly midway between the horn of South America and Africa...

 (alongside the Saint Helena pound
Saint Helena pound
The Saint Helena pound is the currency of the Atlantic islands of Saint Helena and Ascension, which are constituents of the British overseas territory of Saint Helena, Ascension and Tristan da Cunha...

). Gibraltar, Falkland Islands and Saint Helena pounds are separate currencies, pegged at parity to the pound sterling. Within the UK, some banks operating in Scotland and Northern Ireland produce private sterling denominated banknotes.

Sterling is the fourth most traded currency in the foreign exchange market
Foreign exchange market
The foreign exchange market is a global, worldwide decentralized financial market for trading currencies. Financial centers around the world function as anchors of trading between a wide range of different types of buyers and sellers around the clock, with the exception of weekends...

, after the US dollar
United States dollar
The United States dollar , also referred to as the American dollar, is the official currency of the United States of America. It is divided into 100 smaller units called cents or pennies....

, the euro
Euro
The euro is the official currency of the eurozone: 17 of the 27 member states of the European Union. It is also the currency used by the Institutions of the European Union. The eurozone consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,...

 and the Japanese yen
Japanese yen
The is the official currency of Japan. It is the third most traded currency in the foreign exchange market after the United States dollar and the euro. It is also widely used as a reserve currency after the U.S. dollar, the euro and the pound sterling...

. Together with those three currencies it forms the basket of currencies which calculate the value of IMF
International Monetary Fund
The International Monetary Fund is an organization of 187 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world...

 Special Drawing Rights
Special Drawing Rights
Special Drawing Rights are supplementary foreign exchange reserve assets defined and maintained by the International Monetary Fund . Not a currency, SDRs instead represent a claim to currency held by IMF member countries for which they may be exchanged...

, with an 11.3% weighting . Sterling is also the third most held reserve currency
Reserve currency
A reserve currency, or anchor currency, is a currency that is held in significant quantities by many governments and institutions as part of their foreign exchange reserves...

 in global reserves
Foreign exchange reserves
Foreign-exchange reserves in a strict sense are 'only' the foreign currency deposits and bonds held by central banks and monetary authorities. However, the term in popular usage commonly includes foreign exchange and gold, Special Drawing Rights and International Monetary Fund reserve positions...

.

Name


The full, official name, pound sterling, (plural: pounds sterling) is used mainly in formal contexts and also when it is necessary to distinguish the United Kingdom currency from other currencies with the same name
Pound (currency)
The pound is a unit of currency in some nations. The term originated in England as the value of a pound of silver.The word pound is the English translation of the Latin word libra, which was the unit of account of the Roman Empire...

. Otherwise the term pound is normally used. The currency name is sometimes abbreviated to just sterling, particularly in the wholesale financial markets, but not when referring to specific amounts; for example, "Payment is accepted in sterling" but never "These cost five sterling". The abbreviations "ster." or "stg." are sometimes used. The term British pound is commonly used in less formal contexts, although it is not an official name of the currency. A common slang term is quid (singular and plural, except in the common phrase "Quids in!"). The etymology of the term is unknown, although it might derive from the Latin 'quid' and widely speculated to come from the Latin phrase "quid pro quo
Quid pro quo
Quid pro quo most often means a more-or-less equal exchange or substitution of goods or services. English speakers often use the term to mean "a favour for a favour" and the phrases with almost identical meaning include: "give and take", "tit for tat", "this for that", and "you scratch my back,...

".

There is some uncertainty as to the origin of the term "pound sterling". Some sources say it dates back to Anglo-Saxon
Anglo-Saxon
Anglo-Saxon may refer to:* Anglo-Saxons, a group that invaded Britain** Old English, their language** Anglo-Saxon England, their history, one of various ships* White Anglo-Saxon Protestant, an ethnicity* Anglo-Saxon economy, modern macroeconomic term...

 times, when coins called sterlings were minted from silver; 240 of these sterlings weighed one pound, and large payments came to be made in "pounds of sterlings". Other references, including the Oxford English Dictionary, say a sterling was a silver penny used in England by the Normans and date the term to around 1300. For more discussion of the etymology of "sterling", see Sterling silver
Sterling silver
Sterling silver is an alloy of silver containing 92.5% by mass of silver and 7.5% by mass of other metals, usually copper. The sterling silver standard has a minimum millesimal fineness of 925....

.

The currency sign
Currency sign
A currency sign is a graphic symbol used as a shorthand for a currency's name, especially in reference to amounts of money. They typically employ the first letter or character of the currency, sometimes with minor changes such as ligatures or overlaid vertical or horizontal bars...

 is the pound sign
Pound sign
The pound sign is the symbol for the pound sterling—the currency of the United Kingdom . The same symbol is used for similarly named currencies in some other countries and territories, such as the Irish pound, Gibraltar pound, Australian pound and the Italian lira...

 (£), which is usually written with a single cross-bar, as on sterling bank notes, though a version with a double cross-bar () is also sometimes seen. The pound sign derives from the black-letter
Blackletter
Blackletter, also known as Gothic script, Gothic minuscule, or Textura, was a script used throughout Western Europe from approximately 1150 to well into the 17th century. It continued to be used for the German language until the 20th century. Fraktur is a notable script of this type, and sometimes...

 "L", an abbreviation of Librae in Roman £sd
£sd
£sd was the popular name for the pre-decimal currencies used in the Kingdom of England, later the United Kingdom, and ultimately in much of the British Empire...

 units (librae, solidi, denarii) used for pounds, shillings and pence in the British pre-decimal duodecimal
Duodecimal
The duodecimal system is a positional notation numeral system using twelve as its base. In this system, the number ten may be written as 'A', 'T' or 'X', and the number eleven as 'B' or 'E'...

 currency system. Libra
Ancient Roman units of measurement
The ancient Roman units of measurement were built on the Hellenic system with Egyptian, Hebrew, and Mesopotamian influences. The Roman units were comparatively consistent and well documented.-Length:Notes...

 was the basic Roman unit of weight, derived from the Latin
Latin
Latin is an Italic language originally spoken in Latium and Ancient Rome. It, along with most European languages, is a descendant of the ancient Proto-Indo-European language. Although it is considered a dead language, a number of scholars and members of the Christian clergy speak it fluently, and...

 word for scales
Weighing scale
A weighing scale is a measuring instrument for determining the weight or mass of an object. A spring scale measures weight by the distance a spring deflects under its load...

 or balance.

The ISO 4217 currency code
ISO 4217
ISO 4217 is a standard published by the International Standards Organization, which delineates currency designators, country codes , and references to minor units in three tables:* Table A.1 – Current currency & funds code list...

 is GBP. Occasionally, the abbreviation UKP is used but this is incorrect because the ISO 3166
ISO 3166
ISO 3166 is a standard published by the International Organization for Standardization . It defines codes for the names of countries, dependent territories, special areas of geographical interest, and their principal subdivisions . The official name of the standard is Codes for the representation...

 country code for (the United Kingdom of) Great Britain and Northern Ireland is GB (see Terminology of the British Isles#Terminology in detail). The Crown dependencies
Crown dependency
The Crown Dependencies are British possessions of the Crown, as opposed to overseas territories of the United Kingdom. They comprise the Channel Island Bailiwicks of Jersey and Guernsey in the English Channel, and the Isle of Man in the Irish Sea....

 use their own (non-ISO) codes: GGP (Guernsey pound
Guernsey pound
The pound is the currency of Guernsey. Since 1921, Guernsey has been in currency union with the United Kingdom and the Guernsey pound is not a separate currency but is a local issue of banknotes and coins denominated in pound sterling, in a similar way to the banknotes issued in Scotland and...

), JEP (Jersey pound
Jersey pound
The pound is the currency of Jersey. Jersey is in currency union with the United Kingdom, and the Jersey pound is not a separate currency but is an issue of banknotes and coins by the States of Jersey denominated in pound sterling, in a similar way to the banknotes issued in Scotland and Northern...

) and IMP (Isle of Man pound). Stocks are often traded in pence, so traders may refer to pence sterling
Pence sterling
The penny sterling is a subdivision of pound sterling, the currency for the United Kingdom. It is currently of a pound, but historically was of a pound...

, GBX (sometimes GBp), when listing stock prices.

Decimal coinage


Since decimalisation
Decimalisation
Decimal currency is the term used to describe any currency that is based on one basic unit of currency and a sub-unit which is a power of 10, most commonly 100....

 in 1971 (see Decimal Day
Decimal Day
Decimal Day was the day the United Kingdom and Ireland decimalised their currencies.-Old system:Under the old currency of pounds, shillings and pence, the pound was made up of 240 pence , with 12 pence in a shilling and 20 shillings in a...

), the pound has been divided into 100 pence (until 1981 described on the coinage as "new pence"). The symbol for the penny is "p"; hence an amount such as 50p (£0.50) properly pronounced "fifty pence" is more colloquially, quite often, pronounced "fifty pee". This also helped to distinguish between new and old pence amounts during the changeover to the decimal system. A decimal halfpenny was issued until 1984.

Pre-decimal



Prior to decimalisation, the pound was divided into 20 shillings and each shilling into 12 pence, making 240 pence to the pound. The symbol for the shilling was "s."—not from the first letter of the word, but from the Latin solidus
Solidus (coin)
The solidus was originally a gold coin issued by the Romans, and a weight measure for gold more generally, corresponding to 4.5 grams.-Roman and Byzantine coinage:...

. The symbol for the penny was "d.", from the French denier, from the Latin denarius
Denarius
In the Roman currency system, the denarius was a small silver coin first minted in 211 BC. It was the most common coin produced for circulation but was slowly debased until its replacement by the antoninianus...

(the solidus and denarius were Roman coins). A mixed sum of shillings and pence, such as 3 shillings and 6 pence, was written as "3/6" or "3s. 6d." and spoken as "three and six" (except for "1/1," "2/1" etc., which were spoken as "one and a penny," "two and a penny," etc.). 5 shillings was written as "5s." or, more commonly, "5/-". The stroke (/) indicating shillings is also known as a solidus and was originally an adaptation of the long s
Long s
The long, medial or descending s is a form of the minuscule letter s formerly used where s occurred in the middle or at the beginning of a word, for example "ſinfulneſs" . The modern letterform was called the terminal, round, or short s.-History:The long s is derived from the old Roman cursive...

 which represented that word.

Various coin denominations had, and in some cases continue to have, special names—such as crown, farthing, sovereign and guinea
Guinea (British coin)
The guinea is a coin that was minted in the Kingdom of England and later in the Kingdom of Great Britain and the United Kingdom between 1663 and 1813...

. See Coins of the pound sterling and List of British coins and banknotes for details.

By the 1950s, coins of George III, George IV and William IV had disappeared from circulation, but coins (at least the penny) bearing the head of any British king or queen from Queen Victoria onwards could be found in circulation. Silver coins were replaced by those in cupro-nickel in 1947 and by the 1960s the silver coins were rarely seen. Silver/cupro-nickel shillings (from any period after 1816) and florins (2 shillings) remained as legal tender after decimalisation (as 5p and 10p respectively); the sixpences of 1816 and after remained legal tender until 1980 (as two and a half new pence).

Anglo-Saxon


The pound was a unit of account in Anglo-Saxon
Anglo-Saxons
Anglo-Saxon is a term used by historians to designate the Germanic tribes who invaded and settled the south and east of Great Britain beginning in the early 5th century AD, and the period from their creation of the English nation to the Norman conquest. The Anglo-Saxon Era denotes the period of...

 England
England
England is a country that is part of the United Kingdom. It shares land borders with Scotland to the north and Wales to the west; the Irish Sea is to the north west, the Celtic Sea to the south west, with the North Sea to the east and the English Channel to the south separating it from continental...

, equal to 240 silver pennies
History of the English penny (c. 600-1066)
The history of the English penny can be traced back to the Anglo-Saxon kingdoms of the 7th century: to the small, thick silver coins known to contemporaries as pæningas or denarii, though now often referred to as sceattas by numismatists. Broader, thinner pennies inscribed with the name of the king...

 and equivalent to one pound weight
Pound (mass)
The pound or pound-mass is a unit of mass used in the Imperial, United States customary and other systems of measurement...

 of silver. It evolved into the modern British currency
Currency
In economics, currency refers to a generally accepted medium of exchange. These are usually the coins and banknotes of a particular government, which comprise the physical aspects of a nation's money supply...

, the pound sterling.

The accounting system of 4 farthings = 1 penny
Penny
A penny is a coin or a type of currency used in several English-speaking countries. It is often the smallest denomination within a currency system.-Etymology:...

, 12 pence = 1 shilling
Shilling
The shilling is a unit of currency used in some current and former British Commonwealth countries. The word shilling comes from scilling, an accounting term that dates back to Anglo-Saxon times where it was deemed to be the value of a cow in Kent or a sheep elsewhere. The word is thought to derive...

, 20 shillings = 1 pound was adopted from that introduced by Charlemagne
Charlemagne
Charlemagne was King of the Franks from 768 and Emperor of the Romans from 800 to his death in 814. He expanded the Frankish kingdom into an empire that incorporated much of Western and Central Europe. During his reign, he conquered Italy and was crowned by Pope Leo III on 25 December 800...

 to the Frankish Empire (see French livre
French livre
The livre was the currency of France until 1795. Several different livres existed, some concurrently. The livre was the name of both units of account and coins.-Etymology:...

).

The origins of sterling lie in the reign of King Offa of Mercia
Offa of Mercia
Offa was the King of Mercia from 757 until his death in July 796. The son of Thingfrith and a descendant of Eowa, Offa came to the throne after a period of civil war following the assassination of Æthelbald after defeating the other claimant Beornred. In the early years of Offa's reign it is likely...

, (757–96) who introduced the silver penny
History of the English penny (c. 600-1066)
The history of the English penny can be traced back to the Anglo-Saxon kingdoms of the 7th century: to the small, thick silver coins known to contemporaries as pæningas or denarii, though now often referred to as sceattas by numismatists. Broader, thinner pennies inscribed with the name of the king...

. It copied the denarius of the new currency system of Charlemagne
Charlemagne
Charlemagne was King of the Franks from 768 and Emperor of the Romans from 800 to his death in 814. He expanded the Frankish kingdom into an empire that incorporated much of Western and Central Europe. During his reign, he conquered Italy and was crowned by Pope Leo III on 25 December 800...

's Frankish Empire
Frankish Empire
Francia or Frankia, later also called the Frankish Empire , Frankish Kingdom , Frankish Realm or occasionally Frankland, was the territory inhabited and ruled by the Franks from the 3rd to the 10th century...

. As in the Carolingian system, 240 pennies weighed 1 pound
Pound (mass)
The pound or pound-mass is a unit of mass used in the Imperial, United States customary and other systems of measurement...

 (corresponding to Charlemagne's libra), with the shilling corresponding to Charlemagne's solidus and equal to 12d. At the time of the penny's introduction, it weighed 22.5 troy grains of fine silver (30 tower grains; about 1.5 g), indicating that the Mercian pound weighed 5,400 troy grains (the Mercian pound became the basis of the tower pound, which weighed 5,400 troy grains, equivalent to 7,200 tower grains). At this time, the name sterling had yet to be acquired. The penny swiftly spread throughout the other Anglo-Saxon kingdoms and became the standard coin of what was to become England.

Medieval


The early pennies were struck from fine silver (as pure as was available). However, in 1158, a new coinage was introduced by King Henry II
Henry II of England
Henry II ruled as King of England , Count of Anjou, Count of Maine, Duke of Normandy, Duke of Aquitaine, Duke of Gascony, Count of Nantes, Lord of Ireland and, at various times, controlled parts of Wales, Scotland and western France. Henry, the great-grandson of William the Conqueror, was the...

 (known as the Tealby penny) which was struck from .925 (92.5%) silver. This became the standard until the 20th century and is today known as sterling silver
Sterling silver
Sterling silver is an alloy of silver containing 92.5% by mass of silver and 7.5% by mass of other metals, usually copper. The sterling silver standard has a minimum millesimal fineness of 925....

, named after its association with the currency. Sterling silver is harder than the .999 (99.9%) fine silver that was traditionally used and so sterling silver coins did not wear down as rapidly as fine silver coins. The English currency was almost exclusively silver until 1344, when the gold noble
Noble (English coin)
The Noble was the first English gold coin produced in quantity, having been preceded by the Gold penny and the Florin earlier in the reigns of King Henry III and King Edward III, which saw little circulation....

 was successfully introduced into circulation. However, silver remained the legal basis for sterling until 1816. In the reign of Henry IV
Henry IV of England
Henry IV was King of England and Lord of Ireland . He was the ninth King of England of the House of Plantagenet and also asserted his grandfather's claim to the title King of France. He was born at Bolingbroke Castle in Lincolnshire, hence his other name, Henry Bolingbroke...

 (1399–1413), the penny was reduced in weight to 15 gr of silver, with a further reduction to 12 gr in 1464.

Tudor


During the reigns of Henry VIII
Henry VIII of England
Henry VIII was King of England from 21 April 1509 until his death. He was Lord, and later King, of Ireland, as well as continuing the nominal claim by the English monarchs to the Kingdom of France...

 and Edward VI, the silver coinage was drastically debased, although the pound was redefined to the troy pound of 5760 gr in 1526. In 1544, a silver coinage was issued containing just one third silver and two thirds copper—equating to .333 silver, or 33.3% pure. The result was a coin copper in appearance, but relatively pale in colour. In 1552, a new silver coinage was introduced, struck in sterling silver
Sterling silver
Sterling silver is an alloy of silver containing 92.5% by mass of silver and 7.5% by mass of other metals, usually copper. The sterling silver standard has a minimum millesimal fineness of 925....

. However, the penny's weight was reduced to 8 gr, meaning that 1 troy pound of sterling silver produced 60 shillings of coins. This silver standard was known as the "60-shilling standard" and lasted until 1601 when a "62-shilling standard" was introduced, reducing the penny's weight to 7 grains (0.50 g).

Throughout this period, the size and value of the gold coinage fluctuated considerably.

Unofficial gold standard


In 1663, a new gold coinage was introduced based on the 22 carat
Carat (purity)
The karat or carat is a unit of purity for gold alloys.- Measure :Karat purity is measured as 24 times the purity by mass:where...

 fine guinea. Fixed in weight at 44½ to the troy pound from 1670, this coin's value varied considerably until 1717, when it was fixed at 21 shillings (21/-, 1.05 pounds). However, despite the efforts of Sir Isaac Newton
Isaac Newton
Sir Isaac Newton PRS was an English physicist, mathematician, astronomer, natural philosopher, alchemist, and theologian, who has been "considered by many to be the greatest and most influential scientist who ever lived."...

, Master of the Mint
Royal Mint
The Royal Mint is the body permitted to manufacture, or mint, coins in the United Kingdom. The Mint originated over 1,100 years ago, but since 2009 it operates as Royal Mint Ltd, a company which has an exclusive contract with HM Treasury to supply all coinage for the UK...

, to reduce the guinea's value, this valuation overvalued gold relative to silver when compared to the valuations in other Europe
Europe
Europe is, by convention, one of the world's seven continents. Comprising the westernmost peninsula of Eurasia, Europe is generally 'divided' from Asia to its east by the watershed divides of the Ural and Caucasus Mountains, the Ural River, the Caspian and Black Seas, and the waterways connecting...

an countries. British merchants sent silver abroad in payments whilst goods for export were paid for with gold. As a consequence
Gresham's Law
Gresham's law is an economic principle that states: "When a government compulsorily overvalues one type of money and undervalues another, the undervalued money will leave the country or disappear from circulation into hoards, while the overvalued money will flood into circulation." It is commonly...

, silver flowed out of the country and gold flowed in, leading to a situation where Great Britain was effectively on a gold standard
Gold standard
The gold standard is a monetary system in which the standard economic unit of account is a fixed mass of gold. There are distinct kinds of gold standard...

. In addition, a chronic shortage of silver coins developed.. This shortage was aggravated by the fact that silver was the only commodity accepted by China for exporting goods during this period. From the mid-17th century, around 28 million kilograms of silver was received by China, principally from European powers, in exchange for Chinese goods. see 1.3 British trade and the Canton System in Opium Wars

Establishment of modern currency


The Bank of England
Bank of England
The Bank of England is the central bank of the United Kingdom and the model on which most modern central banks have been based. Established in 1694, it is the second oldest central bank in the world...

 was formed in 1694, followed by the Bank of Scotland
Bank of Scotland
The Bank of Scotland plc is a commercial and clearing bank based in Edinburgh, Scotland. With a history dating to the 17th century, it is the second oldest surviving bank in what is now the United Kingdom, and is the only commercial institution created by the Parliament of Scotland to...

 a year later. Both began to issue paper money.

Currency of the United Kingdom


The pound scots
Pound Scots
The pound Scots was the national unit of currency in the Kingdom of Scotland before the country entered into political and currency union with the Kingdom of England in 1707 . It was introduced by David I, in the 12th century, on the model of English and French money, divided into 20 shillings...

 had begun equal to sterling but had suffered far higher devaluation until being pegged to sterling at a value of 12 pounds scots = 1 pound sterling. In 1707, the Kingdom of England
Kingdom of England
The Kingdom of England was, from 927 to 1707, a sovereign state to the northwest of continental Europe. At its height, the Kingdom of England spanned the southern two-thirds of the island of Great Britain and several smaller outlying islands; what today comprises the legal jurisdiction of England...

 and the Kingdom of Scotland
Kingdom of Scotland
The Kingdom of Scotland was a Sovereign state in North-West Europe that existed from 843 until 1707. It occupied the northern third of the island of Great Britain and shared a land border to the south with the Kingdom of England...

 merged to form the Kingdom of Great Britain
Kingdom of Great Britain
The former Kingdom of Great Britain, sometimes described as the 'United Kingdom of Great Britain', That the Two Kingdoms of Scotland and England, shall upon the 1st May next ensuing the date hereof, and forever after, be United into One Kingdom by the Name of GREAT BRITAIN. was a sovereign...

. In accordance with the Treaty of Union
Treaty of Union
The Treaty of Union is the name given to the agreement that led to the creation of the united kingdom of Great Britain, the political union of the Kingdom of England and the Kingdom of Scotland, which took effect on 1 May 1707...

, the currency of the 'united kingdom' was sterling with the pound scots being replaced by sterling at the pegged value.

The Irish pound
Irish pound
The Irish pound was the currency of Ireland until 2002. Its ISO 4217 code was IEP, and the usual notation was the prefix £...

 was replaced by sterling in January 1826 at the value 13 Irish pounds = 12 pound sterling.

Gold standard


During the Revolutionary and Napoleonic wars
Napoleonic Wars
The Napoleonic Wars were a series of wars declared against Napoleon's French Empire by opposing coalitions that ran from 1803 to 1815. As a continuation of the wars sparked by the French Revolution of 1789, they revolutionised European armies and played out on an unprecedented scale, mainly due to...

, Bank of England notes were legal tender
Legal tender
Legal tender is a medium of payment allowed by law or recognized by a legal system to be valid for meeting a financial obligation. Paper currency is a common form of legal tender in many countries....

 and their value floated relative to gold. The Bank also issued silver tokens to alleviate the shortage of silver coins. In 1816, the gold standard
Gold standard
The gold standard is a monetary system in which the standard economic unit of account is a fixed mass of gold. There are distinct kinds of gold standard...

 was adopted officially, with the silver standard reduced to 66 shillings (66/-, £3 6s), rendering silver coins a "token" issue (i.e., not containing their value in precious metal). In 1817, the sovereign was introduced, valued at 20 shillings. Struck in 22‑carat gold, it contained 113 gr of gold and replaced the guinea as the standard British gold coin without changing the gold standard. In 1825, the Irish pound
Irish pound
The Irish pound was the currency of Ireland until 2002. Its ISO 4217 code was IEP, and the usual notation was the prefix £...

, which had been pegged to sterling since 1801 at a rate of 13 Irish pounds = 12 pounds sterling, was replaced, at the same rate, with sterling.

During the late 19th and early 20th centuries, many other countries adopted the gold standard. As a consequence, conversion rates between different currencies could be determined simply from the respective gold standards. The pound sterling was equal to 4.85 U.S. dollars, 5.25 Canadian dollar
Canadian dollar
The Canadian dollar is the currency of Canada. As of 2007, the Canadian dollar is the 7th most traded currency in the world. It is abbreviated with the dollar sign $, or C$ to distinguish it from other dollar-denominated currencies...

s, 12.10 Dutch guilders, 26.28 French franc
French franc
The franc was a currency of France. Along with the Spanish peseta, it was also a de facto currency used in Andorra . Between 1360 and 1641, it was the name of coins worth 1 livre tournois and it remained in common parlance as a term for this amount of money...

s (or equivalent currencies in the Latin Monetary Union
Latin Monetary Union
The Latin Monetary Union was a 19th century attempt to unify several European currencies, at a time when most circulating coins were still made of gold and silver...

), 20.43 German Mark
German gold mark
The Goldmark was the currency used in the German Empire from 1873 to 1914.-History:Before unification, the different German states issued a variety of different currencies, though most were linked to the Vereinsthaler, a silver coin containing 16⅔ grams of pure silver...

s or 24.02 Austro-Hungarian Krone
Austro-Hungarian krone
The Krone or korona was the official currency of the Austro-Hungarian Empire from 1892 until the dissolution of the empire in 1918...

s. Discussions took place following the International Monetary Conference of 1867
International Monetary Conferences
The international monetary conferences were a series of assemblies held in the second half of the 19th century. They were held with a view to reaching agreement on matters relating to international banking...

 in Paris
Paris
Paris is the capital and largest city in France, situated on the river Seine, in northern France, at the heart of the Île-de-France region...

 concerning the possibility of the UK joining the Latin Monetary Union, and a Royal Commission
Royal Commission
In Commonwealth realms and other monarchies a Royal Commission is a major ad-hoc formal public inquiry into a defined issue. They have been held in various countries such as the United Kingdom, Australia, Canada, New Zealand, and Saudi Arabia...

 on International Coinage examined the issues, resulting in a decision against joining monetary union.

The gold standard was suspended at the outbreak of the war in 1914, with Bank of England and Treasury notes becoming legal tender. Prior to World War I, the United Kingdom had one of the world's strongest economies, holding 40% of the world's overseas investments. However, by the end of the war the country owed £850 million (£ as of ), mostly to the United States, with interest costing the country some 40% of all government spending. In an attempt to resume stability, a variation on the gold standard was reintroduced in 1925, under which the currency was fixed to gold at its pre-war peg, although people were only able to exchange their currency for gold bullion, rather than for coins. This was abandoned on 21 September 1931, during the Great Depression
Great Depression
The Great Depression was a severe worldwide economic depression in the decade preceding World War II. The timing of the Great Depression varied across nations, but in most countries it started in about 1929 and lasted until the late 1930s or early 1940s...

, and sterling suffered an initial devaluation of some 25%.

Use in the Empire



Sterling circulated in much of the British Empire
British Empire
The British Empire comprised the dominions, colonies, protectorates, mandates and other territories ruled or administered by the United Kingdom. It originated with the overseas colonies and trading posts established by England in the late 16th and early 17th centuries. At its height, it was the...

. In some parts, it was used alongside local currencies. For example, the gold sovereign was legal tender in Canada despite the use of the Canadian dollar
Canadian dollar
The Canadian dollar is the currency of Canada. As of 2007, the Canadian dollar is the 7th most traded currency in the world. It is abbreviated with the dollar sign $, or C$ to distinguish it from other dollar-denominated currencies...

. Several colonies and dominions adopted the pound as their own currency. These included Australia
Australia
Australia , officially the Commonwealth of Australia, is a country in the Southern Hemisphere comprising the mainland of the Australian continent, the island of Tasmania, and numerous smaller islands in the Indian and Pacific Oceans. It is the world's sixth-largest country by total area...

, Barbados
Barbados
Barbados is an island country in the Lesser Antilles. It is in length and as much as in width, amounting to . It is situated in the western area of the North Atlantic and 100 kilometres east of the Windward Islands and the Caribbean Sea; therein, it is about east of the islands of Saint...

, British West Africa
British West Africa
British West Africa was the collective name for British colonies in West Africa during the colonial period, either in the general geographical sense or more specifically those comprised in a formal colonial administrative entity...

, Cyprus
Cyprus
Cyprus , officially the Republic of Cyprus , is a Eurasian island country, member of the European Union, in the Eastern Mediterranean, east of Greece, south of Turkey, west of Syria and north of Egypt. It is the third largest island in the Mediterranean Sea.The earliest known human activity on the...

, Fiji
Fiji
Fiji , officially the Republic of Fiji , is an island nation in Melanesia in the South Pacific Ocean about northeast of New Zealand's North Island...

, the Irish Free State
Irish Free State
The Irish Free State was the state established as a Dominion on 6 December 1922 under the Anglo-Irish Treaty, signed by the British government and Irish representatives exactly twelve months beforehand...

, Jamaica
Jamaica
Jamaica is an island nation of the Greater Antilles, in length, up to in width and 10,990 square kilometres in area. It is situated in the Caribbean Sea, about south of Cuba, and west of Hispaniola, the island harbouring the nation-states Haiti and the Dominican Republic...

, New Zealand
New Zealand
New Zealand is an island country in the south-western Pacific Ocean comprising two main landmasses and numerous smaller islands. The country is situated some east of Australia across the Tasman Sea, and roughly south of the Pacific island nations of New Caledonia, Fiji, and Tonga...

, South Africa
South Africa
The Republic of South Africa is a country in southern Africa. Located at the southern tip of Africa, it is divided into nine provinces, with of coastline on the Atlantic and Indian oceans...

 and Southern Rhodesia
Southern Rhodesia
Southern Rhodesia was the name of the British colony situated north of the Limpopo River and the Union of South Africa. From its independence in 1965 until its extinction in 1980, it was known as Rhodesia...

. Some of these retained parity with sterling throughout their existence (e.g. the South African pound
South African pound
In 1825, an imperial order-in-council made sterling coinage legal tender in all the British colonies. At that time, the only British colony in Southern Africa was the Cape of Good Hope Colony. As time went on, the British pound sterling and its associated subsidiary coinage became the currency of...

), whilst others deviated from parity after the end of the gold standard (e.g. the Australian pound
Australian pound
The pound was the currency of Australia from 1910 until 13 February 1966, when it was replaced by the Australian dollar. It was subdivided into 20 shillings, each of 12 pence.- Earlier Australian currencies :...

). These currencies and others tied to sterling constituted the Sterling Area
Sterling Area
The sterling area came into existence at the outbreak of World War II. It was a wartime emergency measure which involved cooperation in exchange control matters between a group of countries, which at the time were mostly dominions and colonies of the British Empire...

.

Bretton Woods


In 1940, an agreement with the U.S.A. pegged the pound to the U.S. dollar
United States dollar
The United States dollar , also referred to as the American dollar, is the official currency of the United States of America. It is divided into 100 smaller units called cents or pennies....

 at a rate of £1 = $4.03. (Only the year before, it had been $4.86.) This rate was maintained through the Second World War
World War II
World War II, or the Second World War , was a global conflict lasting from 1939 to 1945, involving most of the world's nations—including all of the great powers—eventually forming two opposing military alliances: the Allies and the Axis...

 and became part of the Bretton Woods system
Bretton Woods system
The Bretton Woods system of monetary management established the rules for commercial and financial relations among the world's major industrial states in the mid 20th century...

 which governed post-war exchange rates. Under continuing economic pressure, and despite months of denials that it would do so, on 19 September 1949 the government devalued the pound by 30.5% to $2.80. The move prompted several other currencies to be devalued against the dollar.

In 1961, 1964 and 1966, the pound came under renewed pressure since the exchange rate against the dollar was considered too high. In the summer of 1966, with the value of the pound falling in the currency markets, exchange controls were tightened by the Wilson
Harold Wilson
James Harold Wilson, Baron Wilson of Rievaulx, KG, OBE, FRS, FSS, PC was a British Labour Member of Parliament, Leader of the Labour Party. He was twice Prime Minister of the United Kingdom during the 1960s and 1970s, winning four general elections, including a minority government after the...

 government. Among the measures, tourists were banned from taking more than £50 out of the country, until the restriction was lifted in 1979. The pound was eventually devalued by 14.3% to $2.40 on 18 November 1967.

Decimalisation



On 15 February 1971, the UK decimalised, replacing the shilling and penny with a single subdivision, the new penny. The word "new" was omitted from coins after 1981.

Free-floating pound


With the breakdown of the Bretton Woods system
Bretton Woods system
The Bretton Woods system of monetary management established the rules for commercial and financial relations among the world's major industrial states in the mid 20th century...

, the pound floated from August 1971 onwards. It at first appreciated a little, rising to almost $2.65 in March 1972, from 2.42 when it had been fixed. The Sterling Area
Sterling Area
The sterling area came into existence at the outbreak of World War II. It was a wartime emergency measure which involved cooperation in exchange control matters between a group of countries, which at the time were mostly dominions and colonies of the British Empire...

 effectively ended at this time when the majority of its members also chose to float freely against the pound and the dollar.

The 1976 sterling crisis


James Callaghan
James Callaghan
Leonard James Callaghan, Baron Callaghan of Cardiff, KG, PC , was a British Labour politician, who was Prime Minister of the United Kingdom from 1976 to 1979 and Leader of the Labour Party from 1976 to 1980...

 came to power in 1976. He was immediately told the economy was facing huge problems, according to documents released in 2006 by the National Archives. The effects of the 1973 oil crisis
1973 oil crisis
The 1973 oil crisis started in October 1973, when the members of Organization of Arab Petroleum Exporting Countries or the OAPEC proclaimed an oil embargo. This was "in response to the U.S. decision to re-supply the Israeli military" during the Yom Kippur war. It lasted until March 1974. With the...

 were still being felt, with inflation rising to over 27% in 1975. Financial markets were beginning to believe the pound was overvalued and in April of that year The Wall Street Journal advised the sale of sterling investments in a story titled "Good-bye Great Britain". At the time the UK government was running a budget deficit and Labour's strategy emphasised high public spending. Callaghan was told there were three possible outcomes: a disastrous free fall in Sterling, an internationally unacceptable siege economy or a deal with key allies to prop up the pound while painful economic reforms were put in place. The US government feared the crisis could endanger NATO and the EEC and in light of this the US Treasury set out to force domestic policy changes. In November 1976 the IMF announced the conditions for a loan, including deep cuts in public expenditure.

1979–1989


The Conservatives arrived in power in 1979, on a programme of fiscal austerity. Initially, the pound rocketed, moving above the $2.40 level, as interest rates rose in response to the monetarist policy of targeting money supply
Money supply
In economics, the money supply or money stock, is the total amount of money available in an economy at a specific time. There are several ways to define "money," but standard measures usually include currency in circulation and demand deposits .Money supply data are recorded and published, usually...

. The high exchange rate was widely blamed for the deep recession
Recession
In economics, a recession is a business cycle contraction, a general slowdown in economic activity. During recessions, many macroeconomic indicators vary in a similar way...

 of 1981. Sterling fell sharply after 1980; at its lowest, the pound stood at just $1.03 in March 1985, before returning to the US$1.70 level in December 1989.

Following the Deutsche Mark


In 1988, Margaret Thatcher
Margaret Thatcher
Margaret Hilda Thatcher, Baroness Thatcher, was Prime Minister of the United Kingdom from 1979 to 1990...

's Chancellor of the Exchequer
Chancellor of the Exchequer
The Chancellor of the Exchequer is the title held by the British Cabinet minister who is responsible for all economic and financial matters. Often simply called the Chancellor, the office-holder controls HM Treasury and plays a role akin to the posts of Minister of Finance or Secretary of the...

 Nigel Lawson
Nigel Lawson
Nigel Lawson, Baron Lawson of Blaby, PC , is a British Conservative politician and journalist. He was a Member of Parliament representing the constituency of Blaby from 1974–92, and served as the Chancellor of the Exchequer in the government of Margaret Thatcher from June 1983 to October 1989...

 decided that the pound should "shadow" the West German Deutsche Mark, with the unintended result of a rapid rise in inflation as the economy boomed due to inappropriately low interest rates. (For ideological reasons, the Conservative Government declined to use alternative mechanisms to control the explosion of credit. For this reason, former Prime Minister Edward Heath
Edward Heath
Sir Edward Richard George "Ted" Heath, KG, MBE, PC was a British Conservative politician who served as Prime Minister of the United Kingdom and as Leader of the Conservative Party ....

 referred to Lawson as a "one club golfer").

Following German re-unification in 1990, the reverse held true, as high borrowing costs to fund Eastern reconstruction, a need exacerbated by the political choice to make the Ostmark equivalent to the Deutsche Mark (DM), meant rates in other countries shadowing the DM, especially the UK, were far too high relative to domestic circumstances, leading to a housing decline and recession.

Following the European Currency Unit


On 8 October 1990 the Conservative government decided to join the European Exchange Rate Mechanism
European Exchange Rate Mechanism
The European Exchange Rate Mechanism, ERM, was a system introduced by the European Community in March 1979, as part of the European Monetary System , to reduce exchange rate variability and achieve monetary stability in Europe, in preparation for Economic and Monetary Union and the introduction of...

 (ERM), with the pound set at DM2.95. However, the country was forced to withdraw from the system on “Black Wednesday
Black Wednesday
In politics and economics, Black Wednesday refers to the events of 16 September 1992 when the British Conservative government was forced to withdraw the pound sterling from the European Exchange Rate Mechanism after they were unable to keep it above its agreed lower limit...

” (16 September 1992) as Britain’s economic performance made the exchange rate unsustainable. Speculator George Soros
George Soros
George Soros is a Hungarian-American business magnate, investor, philosopher, and philanthropist. He is the chairman of Soros Fund Management. Soros supports progressive-liberal causes...

 famously made approximately US$1 billion from shorting the pound.

'Black Wednesday' saw interest rates jump from 10% to 15% in an unsuccessful attempt to stop the pound from falling below the ERM limits. The exchange rate fell to DM2.20. Proponents of a lower GBP/DM exchange rate were vindicated as the cheaper pound encouraged exports and contributed to the economic prosperity of the 1990s.

Following inflation targets


In 1997, the newly elected Labour
Labour Party (UK)
The Labour Party is a centre-left democratic socialist party in the United Kingdom. It surpassed the Liberal Party in general elections during the early 1920s, forming minority governments under Ramsay MacDonald in 1924 and 1929-1931. The party was in a wartime coalition from 1940 to 1945, after...

 government handed over day-to-day control of interest rates to the Bank of England
Bank of England
The Bank of England is the central bank of the United Kingdom and the model on which most modern central banks have been based. Established in 1694, it is the second oldest central bank in the world...

 (a policy that had originally been advocated by the Liberal Democrats
Liberal Democrats
The Liberal Democrats are a social liberal political party in the United Kingdom which supports constitutional and electoral reform, progressive taxation, wealth taxation, human rights laws, cultural liberalism, banking reform and civil liberties .The party was formed in 1988 by a merger of the...

). The Bank is now responsible for setting its base rate of interest so as to keep inflation in the Consumer Price Index
Consumer Price Index (United Kingdom)
The Consumer Price Index is the official measure of inflation of consumer prices of the United Kingdom. It is also called the Harmonised Index of Consumer Prices .-History:...

 (CPI) very close to 2%. Should CPI inflation be more than one percentage point above or below the target, the governor of the Bank of England is required to write an open letter to the Chancellor of the Exchequer
Chancellor of the Exchequer
The Chancellor of the Exchequer is the title held by the British Cabinet minister who is responsible for all economic and financial matters. Often simply called the Chancellor, the office-holder controls HM Treasury and plays a role akin to the posts of Minister of Finance or Secretary of the...

 explaining the reasons for this and the measures which will be taken to bring this measure of inflation back in line with the 2% target. On 17 April 2007, CPI inflation was reported at 3.1% (inflation of the Retail Prices Index
Retail Prices Index (United Kingdom)
In the United Kingdom, the Retail Prices Index or Retail Price Index is a measure of inflation published monthly by the Office for National Statistics. It measures the change in the cost of a basket of retail goods and services.-History:...

 was 4.8%). Accordingly, and for the first time, the Governor had to write publicly to the government explaining why inflation was more than one percentage point higher than its target.

Euro


As a member of the European Union
European Union
The European Union is an economic and political union of 27 independent member states which are located primarily in Europe. The EU traces its origins from the European Coal and Steel Community and the European Economic Community , formed by six countries in 1958...

, the United Kingdom could adopt the Euro
Euro
The euro is the official currency of the eurozone: 17 of the 27 member states of the European Union. It is also the currency used by the Institutions of the European Union. The eurozone consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,...

 as its currency. However, the subject remains politically controversial. Gordon Brown
Gordon Brown
James Gordon Brown is a British Labour Party politician who was the Prime Minister of the United Kingdom and Leader of the Labour Party from 2007 until 2010. He previously served as Chancellor of the Exchequer in the Labour Government from 1997 to 2007...

, then Chancellor of the Exchequer
Chancellor of the Exchequer
The Chancellor of the Exchequer is the title held by the British Cabinet minister who is responsible for all economic and financial matters. Often simply called the Chancellor, the office-holder controls HM Treasury and plays a role akin to the posts of Minister of Finance or Secretary of the...

, ruled out membership for the foreseeable future, saying that the decision not to join had been right for Britain and for Europe.

The government of former Prime Minister Tony Blair
Tony Blair
Anthony Charles Lynton Blair is a former British Labour Party politician who served as the Prime Minister of the United Kingdom from 2 May 1997 to 27 June 2007. He was the Member of Parliament for Sedgefield from 1983 to 2007 and Leader of the Labour Party from 1994 to 2007...

 had pledged to hold a public referendum to decide on membership should "five economic tests
Five economic tests
The five economic tests were the criteria defined by the UK treasury under Gordon Brown that were to be used to assess the UK's readiness to join the Economic and Monetary Union of the European Union , and so adopt the euro as its official currency...

" be met, to ensure that adoption of the euro would be in the national interest. In addition to these internal (national) criteria, the UK would have to meet the EU's
European Union
The European Union is an economic and political union of 27 independent member states which are located primarily in Europe. The EU traces its origins from the European Coal and Steel Community and the European Economic Community , formed by six countries in 1958...

 economic convergence criteria
Convergence criteria
The euro convergence criteria are the criteria for European Union member states to enter the third stage of European Economic and Monetary Union and adopt the euro as their currency...

 (Maastricht criteria), before being allowed to adopt the euro. The Conservative/Liberal Democrat coalition ruled out joining the euro for the parliamentary term. Currently, the UK's annual government deficit, as a percentage of the GDP
Gross domestic product
Gross domestic product refers to the market value of all final goods and services produced within a country in a given period. GDP per capita is often considered an indicator of a country's standard of living....

, is above the defined threshold. In February 2005, 55% of British citizens were against adopting the currency, with 30% in favour. The idea of replacing the pound with the euro has been controversial with the British public, partly because of the pound's identity as a symbol of British sovereignty and because it would, according to critics, lead to suboptimal interest rates, harming the British economy. In December 2008 the results of a BBC poll of 1000 people suggested that 71% would vote no, 23% would vote yes to joining the European single currency, while 6% said they were unsure.
The pound did not join the Second European Exchange Rate Mechanism (ERM II) after the Euro was created. Denmark and the UK have opt-outs from entry to the Euro. Technically, every other EU nation must eventually sign up.

The Scottish Conservative Party claims that there is an issue for Scotland in that the adoption of the Euro would mean the end of regionally distinctive banknotes, as the Euro banknotes do not have national designs. The Scottish National Party
Scottish National Party
The Scottish National Party is a social-democratic political party in Scotland which campaigns for Scottish independence from the United Kingdom....

 have not yet confirmed what the national currency of Scotland would be should Independence be realized.

On 1 January 2008 the British sovereign bases on Cyprus (Akrotiri and Dhekelia
Akrotiri and Dhekelia
The Sovereign Base Areas of Akrotiri and Dhekelia are two British-administered areas comprising a British Overseas Territory on the island of Cyprus administered as Sovereign Base Areas of the United Kingdom...

) began using the Euro (along with the rest of the Republic of Cyprus
Cyprus
Cyprus , officially the Republic of Cyprus , is a Eurasian island country, member of the European Union, in the Eastern Mediterranean, east of Greece, south of Turkey, west of Syria and north of Egypt. It is the third largest island in the Mediterranean Sea.The earliest known human activity on the...

).

Current exchange value


The pound and the Euro fluctuate in value against one another, although there may be correlation between movements in their respective exchange rates with other currencies such as the US dollar. Inflation concerns in the UK led the Bank of England to raise interest rates in late 2006 and 2007. This caused the pound to appreciate against other major currencies and, with the US dollar depreciating at the same time, the pound hit a 15-year high against the US dollar on 18 April 2007, reaching US$2 the day before, for the first time since 1992. The pound and many other currencies continued to appreciate against the dollar; sterling hit a 26-year high of US$2.1161 on 7 November 2007 as the dollar fell worldwide. From mid-2003 to mid 2007, the Pound/Euro rate remained rangebound (within ± 5%) of €1.45. Following the global financial crisis in late 2008, however, the pound has since depreciated at one of the fastest rates in history, reaching a 24-year low of $1.35 per £1 on 23 January 2009 and falling below €1.25 against the Euro in April 2008. A further decline was seen during the remainder of 2008; most dramatically in December when its Euro rate hit an all-time low at €1.0219 (29th), while its US dollar rate depreciated to $1.37 on 24 January 2009. The Pound appreciated in early 2009 reaching a peak against the Euro in mid-July of €1.17. The following months the pound remained broadly steady against the Euro, with the Pound's current (27 May 2011) value at €1.15 and US$1.65.

On 5 March 2009, the Bank of England
Bank of England
The Bank of England is the central bank of the United Kingdom and the model on which most modern central banks have been based. Established in 1694, it is the second oldest central bank in the world...

 had announced that they would pump £75 billion of new capital
Capital (economics)
In economics, capital, capital goods, or real capital refers to already-produced durable goods used in production of goods or services. The capital goods are not significantly consumed, though they may depreciate in the production process...

 into the British economy
Economy of the United Kingdom
The economy of the United Kingdom is the sixth-largest national economy in the world measured by nominal GDP and seventh-largest measured by purchasing power parity , and the third-largest in Europe measured by nominal GDP and second-largest measured by PPP...

, through a process known as quantitative easing
Quantitative easing
Quantitative easing is an unconventional monetary policy used by central banks to stimulate the national economy when conventional monetary policy has become ineffective. A central bank buys financial assets to inject a pre-determined quantity of money into the economy...

. This was the first time in the United Kingdom's history that this measure has been used, although the Bank's Governor
Governor of the Bank of England
The Governor of the Bank of England is the most senior position in the Bank of England. It is nominally a civil service post, but the appointment tends to be from within the Bank, with the incumbent grooming his or her successor...

 Mervyn King
Mervyn King (economist)
An ex-officio member of the Bank's interest-rate setting Monetary Policy Committee since its inception in 1997, Sir Mervyn is the only person to have taken part in every one of its monthly meetings to date. His voting style is often seen as "hawkish", a perspective that emphasises the dangers of...

 suggested it was not an experiment.

The process had seen the Bank of England creating new money for itself, which it then had used to purchase assets such as government bonds, bank loans, or mortgages. The initial amount stated to be created through this method had been £75 billion, although Chancellor of the Exchequer
Chancellor of the Exchequer
The Chancellor of the Exchequer is the title held by the British Cabinet minister who is responsible for all economic and financial matters. Often simply called the Chancellor, the office-holder controls HM Treasury and plays a role akin to the posts of Minister of Finance or Secretary of the...

 Alistair Darling
Alistair Darling
Alistair Maclean Darling is a Scottish Labour Party politician who has been a Member of Parliament since 1987, currently for Edinburgh South West. He served as the Chancellor of the Exchequer from 2007 to 2010...

 had given permission for up to £150 billion to be created if necessary. It had been expected the process likely to occur over a period of three months with results only likely in the long term. By 5 November 2009, some £175 billion had been injected using quantitative easing and the effectiveness of the process remained lesser successful on the long term.

Annual inflation rate


The Bank of England had stated (2009) that the decision had been taken to prevent the rate of inflation
Inflation
In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a...

 falling below the two percent target rate Mervyn King, the Governor of the Bank of England, also had suggested there were no other monetary options left as interest rates have already been cut to their lowest level ever (0.5%) and it was unlikely that they would be cut further..

The 2009 moves are history, the current inflation rate per annum is estimated roughly 5% for October 2011 after 5.2% in September 2011.

Pre-decimal coins


The silver penny (plural: pence; abbreviation: d) was the principal and often sole coin in circulation from the 8th century until 13th century. Although some fractions of the penny were struck (see farthing and halfpenny), it was more common to find pennies cut into halves and quarters to provide smaller change. Very few gold coins were struck, with the gold penny (worth 20 silver pence) a rare example. However, in 1279, the groat, worth 4d was introduced, with the half groat following in 1344. 1344 also saw the establishment of a gold coinage with the introduction (after the failed gold florin
Florin (English coin)
The Florin or Double Leopard was an attempt in 1344 by English king Edward III to produce a gold coinage suitable for use in Europe as well as in England . It was 108 grains of nominal pure gold and had a value of six shillings The Florin or Double Leopard was an attempt in 1344 by English king...

) of the noble
Noble (English coin)
The Noble was the first English gold coin produced in quantity, having been preceded by the Gold penny and the Florin earlier in the reigns of King Henry III and King Edward III, which saw little circulation....

 worth six shillings and eight pence ('6/8') (i.e. 3 to the pound), together with the half and quarter noble. Reforms in 1464 saw a reduction in value of the coinage in both silver and gold, with the noble renamed the ryal and worth 10/- (i.e. 2 to the pound) and the angel
Angel (coin)
The Angel is a gold coin introduced into England by Edward IV in 1465 as a new issue of the Noble, thus is was first called the "angel-noble". It is based off the French coin known as the Angelot or Ange, which had been issued since 1340. It varied in value between that period and the time of...

 introduced at the noble's old value of 6/8.

The reign of Henry VII
Henry VII of England
Henry VII was King of England and Lord of Ireland from his seizing the crown on 22 August 1485 until his death on 21 April 1509, as the first monarch of the House of Tudor....

 saw the introduction of two important coins, the shilling
Shilling
The shilling is a unit of currency used in some current and former British Commonwealth countries. The word shilling comes from scilling, an accounting term that dates back to Anglo-Saxon times where it was deemed to be the value of a cow in Kent or a sheep elsewhere. The word is thought to derive...

 (abbr.: s; known as the testoon) in 1487 and the pound (known as the sovereign, abbr.: £ or L) in 1489. In 1526, several new denominations of gold coins were added, including the crown and half crown
Half crown (British coin)
The half crown was a denomination of British money worth half of a crown, equivalent to two and a half shillings , or one-eighth of a pound. The half crown was first issued in 1549, in the reign of Edward VI...

worth five shillings (5/-), and two shillings and six pence (2/6, two and six) respectively. Henry VIII
Henry VIII of England
Henry VIII was King of England from 21 April 1509 until his death. He was Lord, and later King, of Ireland, as well as continuing the nominal claim by the English monarchs to the Kingdom of France...

's reign (1509–1547) saw a high level of debasement
Debasement
Debasement is the practice of lowering the value of currency. It is particularly used in connection with commodity money such as gold or silver coins...

 which continued into the reign of Edward VI (1547–1553). However, this debasement was halted in 1552 and a new silver coinage was introduced, including coins for 1d, 2d, 3d, 4d and 6d, 1/-, 2/6 and 5/-. The reign of Elizabeth I (1558–1603) saw the addition of silver ¾d and 1½d coins, although these denominations did not last. Gold coins included the half crown, crown, angel, half sovereign and sovereign. Elizabeth's reign also saw the introduction of the horse-drawn screw press to produce the first "milled" coins.

Following the succession of the Scottish King James VI to the English throne, a new gold coinage was introduced, including the spur ryal
Spur Ryal
The Spur Royal was an extremely rare English gold coin issued in the reign of King James I. The coin is a development of the earlier Rose Noble, or Ryal which was worth ten shillings when issued by Kings Edward IV and Henry VII, and fifteen shillings when issued by Queens Mary and Elizabeth I.The...

(15/-), the unite
Unite (English coin)
The Unite was the second English gold coin with a value of twenty shillings or one pound first produced during the reign of King James I. It was named after the legends on the coin indicating the king's intention of uniting his two kingdoms of England and Scotland...

(20/-) and the rose ryal (30/-). The laurel
Laurel (English coin)
The Laurel was the third English gold coin with a value of twenty shillings or one pound produced during the reign of King James I. It was named after the laurel that the king is portrayed as wearing on his head, but it is considerably poorer in both quality and style than the Sovereign and Unite...

, worth 20/-, followed in 1619. The first base metal coins were also introduced, tin
Tin
Tin is a chemical element with the symbol Sn and atomic number 50. It is a main group metal in group 14 of the periodic table. Tin shows chemical similarity to both neighboring group 14 elements, germanium and lead and has two possible oxidation states, +2 and the slightly more stable +4...

 and copper
Copper
Copper is a chemical element with the symbol Cu and atomic number 29. It is a ductile metal with very high thermal and electrical conductivity. Pure copper is soft and malleable; an exposed surface has a reddish-orange tarnish...

 farthings. Copper halfpenny coins followed in the reign of Charles I
Charles I of England
Charles I was King of England, King of Scotland, and King of Ireland from 27 March 1625 until his execution in 1649. Charles engaged in a struggle for power with the Parliament of England, attempting to obtain royal revenue whilst Parliament sought to curb his Royal prerogative which Charles...

. During the English Civil War
English Civil War
The English Civil War was a series of armed conflicts and political machinations between Parliamentarians and Royalists...

, a number of siege coinages were produced, often in unusual denominations.

Following the restoration of the monarchy in 1660, the coinage was reformed, with the ending of production of hammered coins in 1662. The guinea
Guinea (British coin)
The guinea is a coin that was minted in the Kingdom of England and later in the Kingdom of Great Britain and the United Kingdom between 1663 and 1813...

was introduced in 1663, soon followed by the ½, 2 and 5 guinea coins. The silver coinage consisted of denominations of 1d, 2d, 3d, 4d and 6d, 1/-, 2/6 and 5/-. Due to the widespread export of silver in the 18th century, the production of silver coins gradually came to a halt, with the half crown and crown not issued after the 1750s, the 6d pence and 1/- stopping production in the 1780s. One response was the introduction of the copper 1d and 2d coins and the gold ⅓ guinea (7/-) in 1797. The copper penny was the only one of these coins to survive long.

To alleviate the shortage of silver coins, between 1797 and 1804, the Bank of England counterstamped Spanish dollar
Spanish dollar
The Spanish dollar is a silver coin, of approximately 38 mm diameter, worth eight reales, that was minted in the Spanish Empire after a Spanish currency reform in 1497. Its purpose was to correspond to the German thaler...

s (8 reales) and other Spanish
Spanish real
The real was a unit of currency in Spain for several centuries after the mid-14th century, but changed in value relative to other units introduced...

 and Spanish colonial
Spanish colonial real
The silver real was the currency of the Spanish colonies in the Americas and the Philippines. In the seventeenth century the silver real was established at two billon reals or sixty-eight Spanish maravedís. Gold escudos were also issued...

 coins for circulation. A small counterstamp of the King's head was used. Until 1800, these circulated at a rate of 4/9 for 8 reales. After 1800, a rate of 5/- for 8 reales was used. The Bank then issued silver tokens for 5/- (struck over Spanish dollars) in 1804, followed by tokens for 1/6 and 3/- between 1811 and 1816.

In 1816, a new silver coinage was introduced in denominations of 6d, 1/-, 2/6 (half-crown) and 5/- (crown). The crown was only issued intermittently until 1900. It was followed by a new gold coinage in 1817 consisting of 10/- and £1 coins, known as the half sovereign and sovereign. The silver 4d coin was reintroduced in 1836, followed by the 3d ("thruppence") in 1838, with the 4d coin issued only for colonial use after 1855. In 1848, the 2/- florin was introduced, followed by the short-lived double florin in 1887. In 1860, copper was replaced by bronze in the farthing (quarter penny, ¼d), halfpenny and penny.

During the First World War, production of the half sovereign and sovereign was suspended and, although the gold standard was restored, the coins saw little circulation thereafter. In 1920, the silver standard, maintained at .925 since 1552, was reduced to .500. In 1937, a nickel-brass 3d coin was introduced; the last silver 3d coins were issued seven years later. In 1947, the remaining silver coins were replaced with cupro-nickel. Inflation caused the farthing to cease production in 1956 and be demonetised in 1960. In the run-up to decimalisation, the halfpenny and half-crown were demonetised in 1969.

Decimal coins



British coinage timeline:
  • 1968: The first decimal coins were introduced. These were cupro-nickel 5p and 10p coins which were equivalent to and circulated alongside the 1/- and 2/- coins.
  • 1969: The curved equilateral heptagonal cupro-nickel 50p coin replaced the 10/- note.
  • 1971: The decimal coinage was completed when decimalisation came into effect in 1971 with the introduction of the bronze ½p, 1p and 2p coins and the withdrawal of the 1d and 3d coins.
  • 1980: Withdrawal of 6d coins, which had circulated at a value of 2½p.
  • 1982: The word "new" was dropped from the coinage and a 20p coin was introduced.
  • 1983: A £1 coin was introduced.
  • 1983: The ½p coin was last produced.
  • 1984: The ½p coin was demonetised
  • 1990s: The 5p, 10p and 50p coins became smaller.
  • 1991: The old 1/- coins, which had continued to circulate with a value of 5p, were demonetised in 1991 after the 5p coin became smaller.
  • 1992: Bronze
    Bronze
    Bronze is a metal alloy consisting primarily of copper, usually with tin as the main additive. It is hard and brittle, and it was particularly significant in antiquity, so much so that the Bronze Age was named after the metal...

     was replaced with copper-plated
    Copper plating
    Copper plating is the process in which a layer of copper is deposited on the item to be plated by using an electric current.Three basic types of processes are commercially available based upon the complexing system utilized:...

     steel
    Steel
    Steel is an alloy that consists mostly of iron and has a carbon content between 0.2% and 2.1% by weight, depending on the grade. Carbon is the most common alloying material for iron, but various other alloying elements are used, such as manganese, chromium, vanadium, and tungsten...

  • 1993: The 2/- coins were similarly demonetised.
  • 1998: The bi-metallic
    Bi-metallic coins
    Bi-metallic coins are coins consisting of more than one metal or alloy, generally arranged with an outer ring around a contrasting center. Common circulating examples include the €1, €2, British £2, Canadian $2, South African R5, Turkish 1 lira, and all Mexican coins of $1 or higher...

     £2 coin was introduced.
  • 2007: By now the value of copper in the pre-1992 1p/2p coins (which are 97% copper) exceeded the value to such an extent that melting down the coins by entrepreneur
    Entrepreneur
    An entrepreneur is an owner or manager of a business enterprise who makes money through risk and initiative.The term was originally a loanword from French and was first defined by the Irish-French economist Richard Cantillon. Entrepreneur in English is a term applied to a person who is willing to...

    s was becoming worthwhile (with a premium of up to 11%, with smelting costs reducing this to around 4%)—although this is illegal, and the market value
    Market value
    Market value is the price at which an asset would trade in a competitive auction setting. Market value is often used interchangeably with open market value, fair value or fair market value, although these terms have distinct definitions in different standards, and may differ in some...

     of copper has subsequently fallen dramatically from these earlier peaks.


At present, the oldest circulating coins in the U.K. are the 1p and 2p copper coins introduced in 1971. Before decimalisation, change could contain coins aged one hundred years or more, with any of five monarchs' heads on the obverse.

In April 2008 an extensive redesign of the coinage was unveiled. The new designs were issued gradually into circulation, starting in summer 2008. The new reverses of the 1p, 2p, 5p, 10p, 20p and 50p coins feature parts of the Royal Shield
Royal coat of arms of the United Kingdom
The Royal coat of arms of the United Kingdom is the official coat of arms of the British monarch, currently Queen Elizabeth II. These arms are used by the Queen in her official capacity as monarch of the United Kingdom, and are officially known as her Arms of Dominion...

, and the new pound coin depicts the whole shield. The coins are of the same specifications as those with the old designs (which will continue to circulate).

Banknotes



The first sterling notes were issued by the Bank of England
Bank of England
The Bank of England is the central bank of the United Kingdom and the model on which most modern central banks have been based. Established in 1694, it is the second oldest central bank in the world...

 shortly after its foundation in 1694. Denominations were initially written on the notes at the time of issue. From 1745, the notes were printed in denominations between £20 and £1000, with any odd shillings added in hand. £10 notes were added in 1759, followed by £5 in 1793 and £1 and £2 in 1797. The lowest two denominations were withdrawn following the end of the Napoleonic wars
Napoleonic Wars
The Napoleonic Wars were a series of wars declared against Napoleon's French Empire by opposing coalitions that ran from 1803 to 1815. As a continuation of the wars sparked by the French Revolution of 1789, they revolutionised European armies and played out on an unprecedented scale, mainly due to...

. In 1855, the notes were converted to being entirely printed, with denominations of £5, £10, £20, £50, £100, £200, £300, £500 and £1000 issued.

The Bank of Scotland
Bank of Scotland
The Bank of Scotland plc is a commercial and clearing bank based in Edinburgh, Scotland. With a history dating to the 17th century, it is the second oldest surviving bank in what is now the United Kingdom, and is the only commercial institution created by the Parliament of Scotland to...

 began issuing notes in 1695. Although the pound scots
Pound Scots
The pound Scots was the national unit of currency in the Kingdom of Scotland before the country entered into political and currency union with the Kingdom of England in 1707 . It was introduced by David I, in the 12th century, on the model of English and French money, divided into 20 shillings...

 was still the currency of Scotland, these notes were denominated in sterling in values up to £100. From 1727, the Royal Bank of Scotland
Royal Bank of Scotland
The Royal Bank of Scotland Group is a British banking and insurance holding company in which the UK Government holds an 84% stake. This stake is held and managed through UK Financial Investments Limited, whose voting rights are limited to 75% in order for the bank to retain its listing on the...

 also issued notes. Both banks issued some notes denominated in guineas as well as pounds. In the 19th century, regulations limited the smallest note issued by Scottish banks to be the £1 denomination, a note not permitted in England.

With the extension of sterling to Ireland in 1825, the Bank of Ireland
Bank of Ireland
The Bank of Ireland is a commercial bank operation in Ireland, which is one of the 'Big Four' in both parts of the island.Historically the premier banking organisation in Ireland, the Bank occupies a unique position in Irish banking history...

 began issuing sterling notes, later followed by other Irish banks. These notes included the unusual denominations of 30/- and £3. The highest denomination issued by the Irish banks was £100.

In 1826, banks at least 65 miles (104.6 km) from London were given permission to issue their own paper money. From 1844, new banks were excluded from issuing notes in England and Wales but not in Scotland and Ireland. Consequently, the number of private banknotes dwindled in England and Wales but proliferated in Scotland and Ireland. The last English private banknotes were issued in 1921.

In 1914, the Treasury
HM Treasury
HM Treasury, in full Her Majesty's Treasury, informally The Treasury, is the United Kingdom government department responsible for developing and executing the British government's public finance policy and economic policy...

 introduced notes for 10/- and £1 to replace gold coins. These circulated until 1928, when they were replaced by Bank of England notes. Irish independence reduced the number of Irish banks issuing sterling notes to five operating in Northern Ireland
Northern Ireland
Northern Ireland is one of the four countries of the United Kingdom. Situated in the north-east of the island of Ireland, it shares a border with the Republic of Ireland to the south and west...

. The Second World War had a drastic effect on the note production of the Bank of England. Fearful of mass forgery by the Nazis (see Operation Bernhard
Operation Bernhard
Operation Bernhard was the codename of a secret Nazi plan devised during the Second World War by the RSHA and the SS to destabilise the British economy by flooding the country with forged Bank of England £5, £10, £20, and £50 notes...

), all notes for £10 and above ceased production, leaving the bank to issue only 10/-, £1 and £5 notes. Scottish and Northern Irish issues were unaffected, with issues in denominations of £1, £5, £10, £20, £50 and £100.

The Bank of England reintroduced £10 notes in 1964. In 1969, the 10/- note was replaced by the 50p coin as part of the preparation for decimalisation. £20 Bank of England notes were reintroduced in 1970, followed by £50 in 1982. Following the introduction of the £1 coin in 1983, Bank of England £1 notes were withdrawn in 1988. Scottish and Northern Irish banks followed, with only the Royal Bank of Scotland continuing to issue this denomination.

The £5 polymer banknote
Polymer banknote
Polymer banknotes were developed by the Reserve Bank of Australia , Commonwealth Scientific and Industrial Research Organisation and The University of Melbourne and were first issued as currency in Australia in 1988. These banknotes are made from the polymer biaxially-oriented polypropylene ...

, issued by Northern Bank
Northern Bank
Northern Bank , is a commercial bank in Northern Ireland. It is one of the oldest banks in Ireland having been formed in 1809. Northern Bank is considered one of the leading retail banks in Northern Ireland with 82 branches and four finance centres...

 in 2000, is the only polymer note currently in circulation, although Northern Bank also produces paper-based £10, £20 and £50 notes and, interestingly, notes named "Titan". A Titan is a £100,000,000 (one hundred million pound) bank note, of which there are only 40 in existence. Titans are only used within the banking system and are unobtainable by the general public
General Public
General Public were a band formed by The Beat vocalists, Dave Wakeling and Ranking Roger, and which included former members of Dexy's Midnight Runners, The Specials and The Clash...

.

Legal tender and regional issues


Legal tender
Legal tender
Legal tender is a medium of payment allowed by law or recognized by a legal system to be valid for meeting a financial obligation. Paper currency is a common form of legal tender in many countries....

 in the UK
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...

 means (according to the Royal Mint) "that a debtor cannot successfully be sued for non-payment if he pays into court in legal tender." It does not mean that any ordinary transaction has to take place in legal tender or only within the amount denominated by the legislation. Both parties are free to agree to accept any form of payment whether legal tender or otherwise according to their wishes. In order to comply with the very strict rules governing an actual legal tender it is necessary, for example, actually to offer the exact amount due because no change can be demanded.

Throughout the UK
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...

, £1 and £2 coins are legal tender for any amount, with the other coins being legal tender only for limited amounts. In England and Wales
England and Wales
England and Wales is a jurisdiction within the United Kingdom. It consists of England and Wales, two of the four countries of the United Kingdom...

, Bank of England
Bank of England
The Bank of England is the central bank of the United Kingdom and the model on which most modern central banks have been based. Established in 1694, it is the second oldest central bank in the world...

 notes are also legal tender for any amount. In Scotland and Northern Ireland
Northern Ireland
Northern Ireland is one of the four countries of the United Kingdom. Situated in the north-east of the island of Ireland, it shares a border with the Republic of Ireland to the south and west...

, no banknotes are currently legal tender, although Bank of England 10/- and £1 notes were legal tender, as were Scottish banknotes, during World War II
World War II
World War II, or the Second World War , was a global conflict lasting from 1939 to 1945, involving most of the world's nations—including all of the great powers—eventually forming two opposing military alliances: the Allies and the Axis...

 (Currency (Defence) Act 1939; this status was withdrawn on 1 January 1946). However, the banks made deposits with the Bank of England
Bank of England
The Bank of England is the central bank of the United Kingdom and the model on which most modern central banks have been based. Established in 1694, it is the second oldest central bank in the world...

 to cover the bulk of their note issues. In the Channel Islands
Channel Islands
The Channel Islands are an archipelago of British Crown Dependencies in the English Channel, off the French coast of Normandy. They include two separate bailiwicks: the Bailiwick of Guernsey and the Bailiwick of Jersey...

 and Isle of Man
Isle of Man
The Isle of Man , otherwise known simply as Mann , is a self-governing British Crown Dependency, located in the Irish Sea between the islands of Great Britain and Ireland, within the British Isles. The head of state is Queen Elizabeth II, who holds the title of Lord of Mann. The Lord of Mann is...

, the local variations on the banknotes are legal tender in their respective jurisdictions.

Scottish, Northern Irish, Channel Islands and Manx notes can be used anywhere in the UK as a means of payment. Guernsey, Jersey, the Isle of Man are in currency union
Currency union
A currency union is where two or more states share the same currency, though without there necessarily having any further integration such as an Economic and Monetary Union, which has in addition a customs union and a single market.There are three types of currency unions:#Informal - unilateral...

 with the United Kingdom and these currencies are not a separate currency from the British pound but are just a local issue of banknotes and coins denominated in pound sterling.

It is legal for shopkeepers to choose to reject any payment, even if it would be legal tender in that jurisdiction, but not in their interest because no debt exists when the offer of payment is made at the same time as the offer of goods or services. When settling a restaurant bill after consuming the meal, or settling another debt, the laws of legal tender do apply and the payment can not be rejected. But usually any reasonable method of settling the debt (such as by credit card) will be accepted.

Commemorative £5 and 25p
British Twenty-Five Pence coin
The commemorative British decimal twenty-five pence coin was issued in four designs between 1972 and 1981. These coins were a post-decimalisation continuation of the traditional crown, with the same value of a quarter of a pound sterling. Uniquely in British decimal coinage, the coins do not have...

 (crown) coins, rarely seen in circulation, are legal tender, as are the bullion coins issued by the Mint.
Coin Maximum usable as legal tender
£5 (post-1990 crown) unlimited
£2 unlimited
£1 unlimited
50p £10
25p (pre-1990 crown) £10
20p £10
10p £5
5p £5
2p 20p
1p 20p

Further, any coin or bank note ceases to be legal tender if it is 100× the amount of the debt (for example, offering a £20 note to settle a 20p debt).

Value


In 2006, the House of Commons Library
House of Commons Library
The House of Commons Library is the library and information resource of the lower house of the British Parliament. It has adopted the phrase "Contributing to a well-informed democracy" as a summary of its mission statement.- History :...

 published a document which included an index of prices in pounds for each year between 1750 and 2005, where 1974 was indexed at 100. (This was an update of earlier documents published in 1998 and 2003.)

Regarding the period 1750–1914 the document states: "Although there was considerable year on year fluctuation in price levels prior to 1914 (reflecting the quality of the harvest, wars, etc.) there was not the long-term steady increase in prices associated with the period since 1945". It goes on to say that "Since 1945 prices have risen in every year with an aggregate rise of over 27 times."

The value of the index in 1751 was 5.1, increasing to a peak of 16.3 in 1813 before declining very soon after the end of the Napoleonic Wars
Napoleonic Wars
The Napoleonic Wars were a series of wars declared against Napoleon's French Empire by opposing coalitions that ran from 1803 to 1815. As a continuation of the wars sparked by the French Revolution of 1789, they revolutionised European armies and played out on an unprecedented scale, mainly due to...

 to around 10.0 and remaining in the range 8.5–10.0 at the end of the nineteenth century. The index was 9.8 in 1914 and peaked at 25.3 in 1920, before declining to 15.8 in 1933 and 1934—prices were only about three times as high as they had been 180 years earlier.

Inflation
Inflation
In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a...

 had a dramatic effect during and after World War II
World War II
World War II, or the Second World War , was a global conflict lasting from 1939 to 1945, involving most of the world's nations—including all of the great powers—eventually forming two opposing military alliances: the Allies and the Axis...

—the index was 20.2 in 1940, 33.0 in 1950, 49.1 in 1960, 73.1 in 1970, 263.7 in 1980, 497.5 in 1990, 671.8 in 2000 and 757.3 in 2005.

The following table shows the equivalent amount of goods that, in a particular year, could be purchased with £1. The table shows that from 1971 through 2009 the British Pound has lost about 90% of its buying power.
Buying power of one British Pound compared to 1971 GBP
 Year   Equivalent  buying power  Year   Equivalent  buying power  Year   Equivalent  buying power  Year   Equivalent  buying power
1971  £1.00 1981  £0.271 1991  £0.152 2001  £0.117
1972  £0.935 1982  £0.250 1992  £0.146 2002  £0.115
1973  £0.855 1983  £0.239 1993  £0.144 2003  £0.112
1974  £0.735 1984  £0.227 1994  £0.141 2004  £0.109
1975  £0.592 1985  £0.214 1995  £0.136 2005  £0.106
1976  £0.510 1986  £0.207 1996  £0.133 2006  £0.102
1977  £0.439 1987  £0.199 1997  £0.123 2007  £0.0980
1978  £0.407 1988  £0.190 1998  £0.125 2008  £0.0943
1979  £0.358 1989  £0.176 1999  £0.123 2009  £0.0952
1980  £0.303 1990  £0.161 2000  £0.119 2010 £0.113

Exchange rate


The pound is freely bought and sold on the foreign exchange market
Foreign exchange market
The foreign exchange market is a global, worldwide decentralized financial market for trading currencies. Financial centers around the world function as anchors of trading between a wide range of different types of buyers and sellers around the clock, with the exception of weekends...

s around the world, and its value relative to other currencies therefore fluctuates. It has been among the highest-valued currency units in the world. , £1 was worth US$
United States dollar
The United States dollar , also referred to as the American dollar, is the official currency of the United States of America. It is divided into 100 smaller units called cents or pennies....

1.60,
Euro
The euro is the official currency of the eurozone: 17 of the 27 member states of the European Union. It is also the currency used by the Institutions of the European Union. The eurozone consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,...

1.16, ¥
Japanese yen
The is the official currency of Japan. It is the third most traded currency in the foreign exchange market after the United States dollar and the euro. It is also widely used as a reserve currency after the U.S. dollar, the euro and the pound sterling...

125, CHF
Swiss franc
The franc is the currency and legal tender of Switzerland and Liechtenstein; it is also legal tender in the Italian exclave Campione d'Italia. Although not formally legal tender in the German exclave Büsingen , it is in wide daily use there...

 1.41, A$
Australian dollar
The Australian dollar is the currency of the Commonwealth of Australia, including Christmas Island, Cocos Islands, and Norfolk Island, as well as the independent Pacific Island states of Kiribati, Nauru and Tuvalu...

1.55, or C$
Canadian dollar
The Canadian dollar is the currency of Canada. As of 2007, the Canadian dollar is the 7th most traded currency in the world. It is abbreviated with the dollar sign $, or C$ to distinguish it from other dollar-denominated currencies...

1.63.

Reserve


Sterling is used as a reserve currency
Reserve currency
A reserve currency, or anchor currency, is a currency that is held in significant quantities by many governments and institutions as part of their foreign exchange reserves...

 around the world and is currently ranked third in value held as reserves.

See also

  • Angevin pound
    Angevin pound
    The Angevin pound was "the ordinary standard of the currency in the continental possessions of the early Plantagenets" Roger of Hoveden wrote that its value was set at about one-fourth of an English pound by an ordinance of Richard the First....

  • Coins of the pound sterling
  • Economic history of the United Kingdom
    Economic history of the United Kingdom
    The economic history of the United Kingdom deals with the history of the economy of the United Kingdom from the creation of the Kingdom of Great Britain on May 1st, 1707, with the political union of the Kingdom of England and the Kingdom of Scotland...

  • Economy of the United Kingdom
    Economy of the United Kingdom
    The economy of the United Kingdom is the sixth-largest national economy in the world measured by nominal GDP and seventh-largest measured by purchasing power parity , and the third-largest in Europe measured by nominal GDP and second-largest measured by PPP...

  • Pound (currency)
    Pound (currency)
    The pound is a unit of currency in some nations. The term originated in England as the value of a pound of silver.The word pound is the English translation of the Latin word libra, which was the unit of account of the Roman Empire...


External links