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Sterling (abbreviation: stg; Other spelling styles, such as STG and Stg, are also seen. ISO code: GBP) is the currency of the United Kingdom and nine of its associated territories. The pound ( sign: £) is the main unit of sterling, and the word "pound" is also used to refer to the British currency generally, often qualified in international contexts as the British pound or the pound sterling. Sterling is the world's oldest currency that is still in use and that has been in continuous use since its inception. It is currently the fourth most-traded currency in the
foreign exchange market The foreign exchange market (Forex, FX, or currency market) is a global decentralized or over-the-counter (OTC) market for the trading of currencies. This market determines foreign exchange rates for every currency. It includes all asp ...
, after the United States dollar, the euro, and the Japanese yen. Together with those three currencies and
Renminbi The renminbi (; symbol: ¥; ISO code: CNY; abbreviation: RMB) is the official currency of the People's Republic of China and one of the world's most traded currencies, ranking as the fifth most traded currency in the world as of April 2022. ...
, it forms the
basket of currencies A currency basket is a portfolio of selected currencies with different weightings. A currency basket is commonly used by investors to minimize the risk of currency fluctuations and also governments when setting the market value of a country’s ...
which calculate the value of
IMF The International Monetary Fund (IMF) is a major financial agency of the United Nations, and an international financial institution, headquartered in Washington, D.C., consisting of 190 countries. Its stated mission is "working to foster glob ...
special drawing rights Special drawing rights (SDRs, code ) are supplementary foreign exchange reserve assets defined and maintained by the International Monetary Fund (IMF). SDRs are units of account for the IMF, and not a currency ''per se''. They represent a claim ...
. As of mid-2021, sterling is also the fourth most-held reserve currency in global reserves. The
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 to act as the English Government's banker, and still one of the bankers for the Government o ...
is the
central bank A central bank, reserve bank, or monetary authority is an institution that manages the currency and monetary policy of a country or monetary union, and oversees their commercial banking system. In contrast to a commercial bank, a central ba ...
for sterling, issuing its own banknotes, and regulating issuance of banknotes by private banks in Scotland and Northern Ireland. Sterling banknotes issued by other jurisdictions are not regulated by the Bank of England; their governments guarantee convertibility at par. Historically, sterling was also used to varying degrees by the colonies and territories of the
British Empire The British Empire was composed of the dominions, colonies, protectorates, mandates, and other territories ruled or administered by the United Kingdom and its predecessor states. It began with the overseas possessions and trading posts esta ...
.


Names

"Sterling" is the name of the currency as a whole while "pound" and "penny" are the units of account. This is analogous to the distinction between "
renminbi The renminbi (; symbol: ¥; ISO code: CNY; abbreviation: RMB) is the official currency of the People's Republic of China and one of the world's most traded currencies, ranking as the fifth most traded currency in the world as of April 2022. ...
" and " yuan" when discussing the official currency of the People's Republic of China.


Etymology

There are various theories regarding the origin of the word "sterling". ''
The Oxford English Dictionary The ''Oxford English Dictionary'' (''OED'') is the first and foundational historical dictionary of the English language, published by Oxford University Press (OUP). It traces the historical development of the English language, providing a co ...
'' states that the "most plausible" etymology is a derivation from the Old English ''steorra'' for "star" with the added diminutive suffix "-ling", to yield "little star". The reference is to the
silver penny A penny is a coin ( pennies) or a unit of currency (pl. pence) in various countries. Borrowed from the Carolingian denarius (hence its former abbreviation d.), it is usually the smallest denomination within a currency system. Presently, it is th ...
used in
Norman England England in the High Middle Ages includes the history of England between the Norman Conquest in 1066 and the death of King John, considered by some to be the last of the Angevin kings of England, in 1216. A disputed succession and victory at the ...
in the twelfth century, which bore a small star. Another argument, according to which the Hanseatic League was the origin of both its definition and manufacture as well as its name is that the German name for the Baltic is "Ostsee", or "East Sea", and from this the Baltic merchants were called "Osterlings", or "Easterlings". In 1260, Henry III granted them a charter of protection and land for their Kontor, the Steelyard of London, which by the 1340s was also called "Easterlings Hall", or Esterlingeshalle. Because the League's money was not frequently debased like that of England, English traders stipulated to be paid in pounds of the "Easterlings", which was contracted to "'sterling". The OED dismisses this theory as unlikely, since the stressed first syllable would not have been elided. Encyclopædia Britannica states the (pre-Norman) Anglo-Saxon kingdoms had silver coins called "sterlings" and that the compound noun "pound sterling" was derived from a pound (weight) of these sterlings.


Symbol

The
currency sign A currency symbol or currency sign is a graphic symbol used to denote a currency unit. Usually it is defined by the monetary authority, like the national central bank for the currency concerned. In formatting, the symbol can use various forma ...
for the pound unit of sterling is , which (depending on typeface) may be drawn with one or two bars: the Bank of England has exclusively used the single bar variant since 1975. ("£1 1st Series Treasury Issue" to "£5 Series B") Historically, a simple capital (in the historic
black-letter Blackletter (sometimes black letter), also known as Gothic script, Gothic minuscule, or Textura, was a script used throughout Western Europe from approximately 1150 until the 17th century. It continued to be commonly used for the Danish, Norwe ...
typeface, \mathfrak) placed before the numerals, or an italic ''l.'' after them, was used in newspapers, books and letters. The Royal Mint was still using this style of notation as late as 1939. The glyphs and may occasionally be encountered. Use of the letter for pound derives from medieval Latin documents: "L" was the abbreviation for , the Roman pound (weight), which in time became an
English English usually refers to: * English language * English people English may also refer to: Peoples, culture, and language * ''English'', an adjective for something of, from, or related to England ** English national ...
unit of weight defined as the tower pound. A "pound sterling" was literally a tower pound (weight) of sterling silver. In the British pre-decimal (
duodecimal The duodecimal system (also known as base 12, dozenal, or, rarely, uncial) is a positional notation numeral system using twelve as its base. The number twelve (that is, the number written as "12" in the decimal numerical system) is instead wri ...
) currency system, the term £sd (or Lsd) for pounds,
shilling The shilling is a historical coin, and the name of a unit of modern currency, currencies formerly used in the United Kingdom, Australia, New Zealand, other British Commonwealth countries and Ireland, where they were generally equivalent to 1 ...
s and pence referred to the Roman , ''
solidus Solidus (Latin for "solid") may refer to: * Solidus (coin) The ''solidus'' (Latin 'solid';  ''solidi'') or nomisma ( grc-gre, νόμισμα, ''nómisma'',  'coin') was a highly pure gold coin issued in the Late Roman Empire and By ...
'', and '' denarius''. Notable style guides recommend that the pound sign be used without any abbreviation or qualification to indicate sterling (e.g., £12,000). Notations with a more explicit sterling abbreviation such as ''£ ..nbsp;stg.'' (e.g., £12,000 stg.), ''£stg.'' (e.g., ), ''stg'' or ''STG'' (e.g., Stg. 12,000 or STG 12,000), or the
ISO 4217 ISO 4217 is a standard published by the International Organization for Standardization (ISO) that defines alpha codes and numeric codes for the representation of currencies and provides information about the relationships between individual cu ...
code ''GBP'' (e.g., 12,000 GBP) may be seen, but are not usually used unless disambiguation is absolutely necessary.


Currency code

The ISO 4217 currency code for sterling is "GBP", formed from the
ISO 3166-1 alpha-2 ISO 3166-1 alpha-2 codes are two-letter country codes defined in ISO 3166-1, part of the ISO 3166 standard published by the International Organization for Standardization (ISO), to represent countries, dependent territories, and special areas of ...
code for the United Kingdom, "GB", and the first letter of "pound". Banking and finance often use the abbreviation ''stg'' or the pseudo-ISO code '' STG''. The Crown Dependencies use their own abbreviations which are not ISO codes but may be used like them: GGP ( Guernsey pound), JEP ( Jersey pound) and IMP (
Isle of Man pound The pound (; abbreviation: IMP; sign: £) is the currency of the Isle of Man, at parity with sterling. The Manx pound is divided into 100 pence. Notes and coins, denominated in pounds and pence, are issued by the Isle of Man Government. Pari ...
). Stock prices are often quoted in pence, so traders may refer to penny sterling, GBX (sometimes GBp), when listing stock prices.


Cable

The exchange rate of sterling against the US dollar is referred to as "cable" in the wholesale
foreign exchange market The foreign exchange market (Forex, FX, or currency market) is a global decentralized or over-the-counter (OTC) market for the trading of currencies. This market determines foreign exchange rates for every currency. It includes all asp ...
s. The origins of this term are attributed to the fact that from the mid-19th century, the sterling/dollar exchange rate was transmitted via transatlantic cable.


Slang terms

Historically almost every British coin had a widely recognised nickname, such as "tanner" for the sixpence and "bob" for the
shilling The shilling is a historical coin, and the name of a unit of modern currency, currencies formerly used in the United Kingdom, Australia, New Zealand, other British Commonwealth countries and Ireland, where they were generally equivalent to 1 ...
. Since decimalisation these have mostly fallen out of use except as parts of proverbs. A common slang term for the pound unit is ''quid'' (singular and plural, except in the common phrase "quids in!"). The term may have come via Italian immigrants from " scudo", the name for a number of currency units used in Italy until the 19th century; or from Latin 'quid' via the common phrase ''
quid pro quo Quid pro quo ('what for what' in Latin) is a Latin phrase used in English to mean an exchange of goods or services, in which one transfer is contingent upon the other; "a favor for a favor". Phrases with similar meanings include: "give and take", ...
'', literally, "what for what", or, figuratively, "An equal exchange or substitution". The term "nicker" (also singular and plural) may also refer to the pound.


Crown Dependencies and British Overseas Territories

The currency of all the Crown Dependencies and most
British Overseas Territories The British Overseas Territories (BOTs), also known as the United Kingdom Overseas Territories (UKOTs), are fourteen territories with a constitutional and historical link with the United Kingdom. They are the last remnants of the former Bri ...
is either sterling or is pegged to sterling at par. These are Jersey,
Guernsey Guernsey (; Guernésiais: ''Guernési''; french: Guernesey) is an island in the English Channel off the coast of Normandy that is part of the Bailiwick of Guernsey, a British Crown Dependency. It is the second largest of the Channel Islands, ...
, the Isle of Man, the Falkland Islands,
Gibraltar ) , anthem = "God Save the King" , song = "Gibraltar Anthem" , image_map = Gibraltar location in Europe.svg , map_alt = Location of Gibraltar in Europe , map_caption = United Kingdom shown in pale green , mapsize = , image_map2 = Gibra ...
,
South Georgia and the South Sandwich Islands ) , anthem = "God Save the King" , song_type = , song = , image_map = South Georgia and the South Sandwich Islands in United Kingdom.svg , map_caption = Location of South Georgia and the South Sandwich Islands in the southern Atlantic Oce ...
, Saint Helena and the
British Antarctic Territory The British Antarctic Territory (BAT) is a sector of Antarctica claimed by the United Kingdom as one of its 14 British Overseas Territories, of which it is by far the largest by area. It comprises the region south of 60°S latitude and between ...
, and Tristan da Cunha. Some British Overseas Territories have a local currency that is pegged to the
U.S. dollar The United States dollar ( symbol: $; code: USD; also abbreviated US$ or U.S. Dollar, to distinguish it from other dollar-denominated currencies; referred to as the dollar, U.S. dollar, American dollar, or colloquially buck) is the official ...
or the
New Zealand dollar The New Zealand dollar ( mi, tāra o Aotearoa; sign: $, NZ$; code: NZD) is the official currency and legal tender of New Zealand, the Cook Islands, Niue, the Ross Dependency, Tokelau, and a British territory, the Pitcairn Islands. Within New Zea ...
. The Sovereign Base Areas of Akrotiri and Dhekelia (in Cyprus) use the euro.


Subdivisions and other units


Decimal coinage

Since decimalisation on
Decimal Day Decimal Day in the United Kingdom and in Republic of Ireland, Ireland was Monday 15 February 1971, the day on which each country decimalised its respective £sd currency of pound sterling, pounds, Shilling (British coin), shillings, and penny ...
in 1971, the pound has been divided into 100 pence (denoted on coinage, until 1981, as "new pence"). The symbol for the penny is "p"; hence an amount such as 50p (£0.50) properly pronounced "fifty pence" is often pronounced "fifty pee" /fɪfti piː/. The old sign ''d'' was not reused for the ''new penny'' in order to avoid confusion between the two units. A decimal halfpenny (p, worth 1.2 old pennies) was issued until 1984 but was withdrawn due to inflation.


Pre-decimal

Before decimalisation in 1971, 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 "shilling", but from the Latin ''
solidus Solidus (Latin for "solid") may refer to: * Solidus (coin) The ''solidus'' (Latin 'solid';  ''solidi'') or nomisma ( grc-gre, νόμισμα, ''nómisma'',  'coin') was a highly pure gold coin issued in the Late Roman Empire and By ...
''. The symbol for the penny was "''d''.", from the French ''denier'', from the Latin '' denarius'' (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 "3''s''. 6''d''." and spoken as "three and six" or "three and sixpence" except for "1/1", "2/1" etc., which were spoken as "one and a penny", "two and a penny", etc. 5 shillings, for example, was written as "5''s''." or, more commonly, "5/–" (five shillings, no pence). Various coin denominations had, and in some cases continue to have, special names, such as florin (2/–),
crown A crown is a traditional form of head adornment, or hat, worn by monarchs as a symbol of their power and dignity. A crown is often, by extension, a symbol of the monarch's government or items endorsed by it. The word itself is used, partic ...
(5/–), half crown (2/6''d''),
farthing Farthing or farthings may refer to: Coinage *Farthing (British coin), an old British coin valued one quarter of a penny ** Half farthing (British coin) ** Third farthing (British coin) ** Quarter farthing (British coin) *Farthing (English co ...
(''d''), sovereign (£1) and guinea (''
q.v. } (right to left). , - , ''quo errat demonstrator'', , where the prover errs, , A pun on " quod erat demonstrandum" , - , ''quo fata ferunt'', , where the fates bear us to, , motto of Bermuda , - , ''quo non ascendam'' , , to what heights can I ...
''). See
Coins of the pound sterling The standard circulating coinage of the United Kingdom, British Crown Dependencies and British Overseas Territories is denominated in pennies and Pound (currency), pounds Pound sterling, sterling (pound sign, symbol "£", commercial GBP), and ...
and List of British coins and banknotes for details. By the 1950s, coins of Kings
George III George III (George William Frederick; 4 June 173829 January 1820) was King of Great Britain and of Monarchy of Ireland, Ireland from 25 October 1760 until his death in 1820. Both kingdoms were in a personal union under him until the Acts of U ...
, George IV and William IV had disappeared from circulation, but coins (at least the penny) bearing the head of every British monarch from Queen Victoria onwards could be found in circulation. Silver coins were replaced by those in
cupro-nickel Cupronickel or copper-nickel (CuNi) is an alloy of copper that contains nickel and strengthening elements, such as iron and manganese. The copper content typically varies from 60 to 90 percent. (Monel is a nickel-copper alloy that contains a min ...
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 legal tender after decimalisation (as 5p and 10p respectively) until 1990 and 1993 respectively, but are now officially demonetised.


History (600 to 1945)

The pound sterling emerged after the adoption of the
Carolingian monetary system The Carolingian monetary system, also called the Carolingian coinage system


Anglo-Saxon

The pound was a unit of account in
Anglo-Saxon England Anglo-Saxon England or Early Medieval England, existing from the 5th to the 11th centuries from the end of Roman Britain until the Norman conquest in 1066, consisted of various Anglo-Saxon kingdoms until 927, when it was united as the Kingdom of ...
. By the ninth century it was equal to 240 silver pence. The accounting system of dividing one pound into twenty
shilling The shilling is a historical coin, and the name of a unit of modern currency, currencies formerly used in the United Kingdom, Australia, New Zealand, other British Commonwealth countries and Ireland, where they were generally equivalent to 1 ...
s, a shilling into twelve pence, and a penny into four farthings was adopted from that introduced by
Charlemagne Charlemagne ( , ) or Charles the Great ( la, Carolus Magnus; german: Karl der Große; 2 April 747 – 28 January 814), a member of the Carolingian dynasty, was King of the Franks from 768, King of the Lombards from 774, and the first Em ...
to the Frankish Empire (see
livre carolingienne The livre (abbreviation: £ or ₶., French for (pound)) was the currency of Kingdom of France and its predecessor state of West Francia from 781 to 1794. Several different livres existed, some concurrently. The livre was the name of coins ...
). The penny was abbreviated to "d", from '' denarius'', the Roman equivalent of the penny; the shilling to "s" from
solidus Solidus (Latin for "solid") may refer to: * Solidus (coin) The ''solidus'' (Latin 'solid';  ''solidi'') or nomisma ( grc-gre, νόμισμα, ''nómisma'',  'coin') was a highly pure gold coin issued in the Late Roman Empire and By ...
(later evolving into a simple /); and the pound to "L" (subsequently £) from '' Libra'' or ''
Livre LIVRE (, L), previously known as LIVRE/Tempo de Avançar (, L/TDA), is a green political party in Portugal founded in 2014. Its founding principles are ecology, universalism, freedom, equity, solidarity, socialism and Europeanism. Its symbol ...
''. The origins of sterling lie in the reign of King Offa of Mercia (757–796), who introduced a "sterling" coin made by physically dividing a Tower pound (5,400 grains, 349.9 grams) of silver into 240 parts. In practice, the weights of the coins were not consistent, 240 of them seldom added up to a full pound; there were no shilling or pound coins and these units were used only as an accounting convenience. Halfpennies and farthings worth and penny respectively were also minted, but small change was more commonly produced by cutting up a whole penny.


Medieval, 1158

The early pennies were struck from fine silver (as pure as was available). In 1158, a new coinage was introduced by King Henry II (known as the '' Tealby penny''), with a Tower Pound (5,400 grains, 349.9 g) of 92.5% silver minted into 240 pennies, each penny containing 20.82 grains (1.349 g) of fine silver. Called sterling silver, the alloy is harder than the 99.9%
fine silver The fineness of a precious metal object (coin, bar, jewelry, etc.) represents the weight of ''fine metal'' therein, in proportion to the total weight which includes alloying base metals and any impurities. Alloy metals are added to increase hardn ...
that was traditionally used, and sterling silver coins did not wear down as rapidly as fine silver ones. The introduction of the larger French ''
gros tournois The tornesel, tornesol, or was a silver coin of Europe in the Late Middle Ages and the early modern era. It took its name from the ', the of Tours. Marco Polo referred to the tornesel in recounts of his travels to East Asia when describing the ...
'' coins in 1266, and their subsequent popularity, led to additional denominations in the form of
groats Groats (or in some cases, "berries") are the hulled kernels of various cereal grains, such as oat, wheat, rye, and barley. Groats are whole grains that include the cereal germ and fiber-rich bran portion of the grain, as well as the endosp ...
worth four pence and half groats worth two pence. A gold penny weighing twice the silver penny and valued at 20 silver pence was also issued in 1257 but was not successful. The English penny remained nearly unchanged from 800 and was a prominent exception in the progressive debasements of coinage which occurred in the rest of Europe. The Tower Pound, originally divided into 240 pence, devalued to 243 pence by 1279.


Edward III, 1351

During the reign of
King Edward III Edward III (13 November 1312 – 21 June 1377), also known as Edward of Windsor before his accession, was King of England and Lord of Ireland from January 1327 until his death in 1377. He is noted for his military success and for restoring r ...
, the introduction of gold coins received from Flanders as payment for English wool provided substantial economic and trade opportunities but also unsettled the currency for the next 200 years. The first monetary changes in 1344 consisted of * English pennies reduced to grains () of sterling silver (or pure silver) and * Gold double florins weighing and valued at 6 shillings (or 72 pence). (or pure gold). The resulting gold-silver ratio of 1:12.55 was much higher than the ratio of 1:11 prevailing in the Continent, draining England of its silver coinage and requiring a more permanent remedy in 1351 in the form of * Pennies reduced further to of sterling silver (or pure silver) and * New gold nobles weighing of the finest gold possible at the time (191/192 or 99.48% fine), (meaning pure gold) and valued at 6 shillings and 8 pence (80 pence, or rd of a pound). The pure gold-silver ratio was thus . These gold nobles, together with half-nobles (40 pence) and farthings or quarter-nobles (20 pence), would become the first English gold coins produced in quantity.


Henry IV, 1412

The exigencies of the
Hundred Years' War The Hundred Years' War (; 1337–1453) was a series of armed conflicts between the kingdoms of England and France during the Late Middle Ages. It originated from disputed claims to the French throne between the English House of Planta ...
during the reign of King Henry IV resulted in further debasements toward the end of his reign, with the English penny reduced to 15 grains sterling silver (0.899 g fine silver) and the half-noble reduced to 54 grains (3.481 g fine gold). The gold-silver ratio went down to . After the French monetary reform of 1425, the gold half-noble (th pound, 40 pence) was worth close to one Livre Parisis (French pound) or 20 sols, while the silver half-groat (2 pence, fine silver 1.798 g) was worth close to 1 sol parisis (1.912 g). Also, after the Flemish monetary reform of 1434, the new Dutch florin was valued close to 40 pence while the Dutch
stuiver The stuiver was a coin used in the Netherlands, worth Dutch Guilders ( 16 ''penning'' or 8 ''duit'', later 5 cents). It was also minted on the Lower Rhine region and the Dutch colonies. The word can still refer to the 5 euro cent coin, which ...
(shilling) of 1.63 g fine silver was valued close to 2 pence sterling at 1.8 g. which gives the fine silver content of a Stuiver as 3.4 × 0.479 or almost 1.63 g. This approximate pairing of English half-nobles and half-groats to Continental ''livres'' and ''sols'' persisted up to the 1560s.


Great slump, 1464

The
Great Bullion Famine The Great Bullion Famine was a shortage of precious metals that struck Europe in the 15th century, with the worst years of the famine lasting from 1457 to 1464. During the Middle Ages, gold and silver coins saw widespread use as currency in Euro ...
and the Great Slump of the mid-15th century resulted in another reduction in the English penny to 12 grains sterling silver (0.719 g fine silver) and the introduction of a new half-angel gold coin of 40 grains (2.578 g), worth th pound or 40 pence. The gold-silver ratio rose again to . The reduction in the English penny approximately matched those with the French ''sol Parisis'' and the Flemish ''stuiver''; furthermore, from 1469 to 1475 an agreement between England and the
Burgundian Netherlands In the history of the Low Countries, the Burgundian Netherlands (french: Pays-Bas bourguignons, nl, Bourgondische Nederlanden, lb, Burgundeschen Nidderlanden, wa, Bas Payis borguignons) or the Burgundian Age is the period between 1384 and ...
made the English groat (4-pence) mutually exchangeable with the Burgundian ''double patard'' (or 2-''stuiver'') minted under
Charles the Rash Charles I (Charles Martin; german: Karl Martin; nl, Karel Maarten; 10 November 1433 – 5 January 1477), nicknamed the Bold (German: ''der Kühne''; Dutch: ''de Stoute''; french: le Téméraire), was Duke of Burgundy from 1467 to 1477. ...
. 40 pence or th pound sterling made one Troy Ounce (480 grains, 31.1035 g) of sterling silver. It was approximately on a par with France's livre parisis of one French ounce (30.594 g), and in 1524 it would also be the model for a standardised German currency in the form of the
Guldengroschen The ''Guldengroschen'' or ''Guldiner'' was a large silver coin originally minted in Tirol in 1486, but which was introduced into the Duchy of Saxony in 1500. The name "''Guldengroschen''" came from the fact that it has an equivalent denominati ...
, which also weighed 1 German ounce of silver or .


Tudor, 1551

The last significant depreciation in sterling's silver standard occurred amidst the 16th century influx of precious metals from the Americas arriving through the Habsburg Netherlands. Enforcement of monetary standards amongst its constituent provinces was loose, spending under King Henry VIII was extravagant, and England loosened the importation of cheaper continental coins for exchange into full-valued English coins. All these contributed to
The Great Debasement The Great Debasement (1544–1551) was a currency debasement policy introduced in 1544 England under the order of Henry VIII which saw the amount of precious metal in gold and silver coins reduced and in some cases replaced entirely with cheaper ba ...
which resulted in a significant rd reduction in the bullion content of each pound sterling in 1551. The troy ounce of sterling silver was henceforth raised in price by 50% from 40 to 60 silver pennies (each penny weighing 8 grains sterling silver and containing fine silver). The gold half-angel of 40 grains ( fine gold) was raised in price from 40 pence to 60 pence (5 shillings or pound) and was henceforth known as the
Crown A crown is a traditional form of head adornment, or hat, worn by monarchs as a symbol of their power and dignity. A crown is often, by extension, a symbol of the monarch's government or items endorsed by it. The word itself is used, partic ...
. Prior to 1551, English coin denominations closely matched with corresponding sol (2''d'') and livre (40''d'') denominations in the Continent, namely: * Silver; see
farthing Farthing or farthings may refer to: Coinage *Farthing (British coin), an old British coin valued one quarter of a penny ** Half farthing (British coin) ** Third farthing (British coin) ** Quarter farthing (British coin) *Farthing (English co ...
(''d''), halfpenny (''d''), penny (1''d''), half-groat (2''d''), and groat (4''d'') * Gold; see ''1351'': noble (20''d''), noble (40''d'') and noble or
angel In various theistic religious traditions an angel is a supernatural spiritual being who serves God. Abrahamic religions often depict angels as benevolent celestial intermediaries between God (or Heaven) and humanity. Other roles include ...
(80''d''). After 1551 new denominations were introduced, weighing similarly to 1464-issued coins but increased in value times, namely: * In silver: the threepence (3''d''), replacing the half-groat; the sixpence (6''d''), replacing the groat; and a new
shilling The shilling is a historical coin, and the name of a unit of modern currency, currencies formerly used in the United Kingdom, Australia, New Zealand, other British Commonwealth countries and Ireland, where they were generally equivalent to 1 ...
or testoon (1/–). * In silver or gold: the half crown (2/6''d'' or 30''d''), replacing the angel of 20''d''; and the
crown A crown is a traditional form of head adornment, or hat, worn by monarchs as a symbol of their power and dignity. A crown is often, by extension, a symbol of the monarch's government or items endorsed by it. The word itself is used, partic ...
(5/- or 60''d''), replacing the angel of 40''d''. * And in gold: the new
half sovereign The half sovereign is a British gold coin with a nominal value of half of one pound sterling. It is half the weight (and has half the gold content) of its counterpart 'full' sovereign coin. The half sovereign was first introduced in 1544 under He ...
(10/–) and sovereign (£1 or 20/–)


1601 to 1816

The silver basis of sterling remained essentially unchanged until the 1816 introduction of the Gold Standard, save for the increase in the number of pennies in a troy ounce from 60 to 62 (hence, 0.464 g fine silver in a penny). Its gold basis remained unsettled, however, until the gold guinea was fixed at 21 shillings in 1717. The guinea was introduced in 1663 with guineas minted out of 12 troy ounces of 22-karat gold (hence, 7.6885 g fine gold) and initially worth £1 or 20 shillings. While its price in shillings was not legally fixed at first, its persistent trade value above 21 shillings reflected the poor state of clipped underweight silver coins tolerated for payment. Milled shillings of full weight were hoarded and exported to
the Continent Continental Europe or mainland Europe is the contiguous continent of Europe, excluding its surrounding islands. It can also be referred to ambiguously as the European continent, – which can conversely mean the whole of Europe – and, by ...
, while clipped, hand-hammered shillings stayed in circulation (as Gresham's law describes). In the 17th century, English merchants tended to pay for imports in silver but were generally paid for exports in gold. This effect was notably driven by trade with the Far East, as the Chinese insisted on payments for their exports being settled in silver. From the mid-17th century, around of silver were received by China, principally from European powers, in exchange for Chinese tea and other goods. In order to be able to purchase Chinese exports in this period, England initially had to export to other European nations and request payment in silver, until the
British East India Company The East India Company (EIC) was an English, and later British, joint-stock company founded in 1600 and dissolved in 1874. It was formed to trade in the Indian Ocean region, initially with the East Indies (the Indian subcontinent and Southea ...
was able to foster the indirect sale of opium to the Chinese. Domestic demand for silver bullion in Britain further reduced silver coinage in circulation, as the improving fortunes of the merchant class led to increased demand for tableware. Silversmiths had always regarded coinage as a source of raw material, already verified for fineness by the government. As a result, sterling silver coins were being melted and fashioned into "sterling silverware" at an accelerating rate. An Act of the Parliament of England in 1697 tried to stem this tide by raising the minimum acceptable fineness on wrought plate from sterling's 92.5% to a new
Britannia silver Britannia silver is an alloy of silver containing 11 ozt 10 dwt (i.e. 11½ troy oz.) silver in the pound troy, equivalent to , or 95.833% by weight (mass) silver, the rest usually being copper. This standard was introduced in England by Act of ...
standard of 95.83%. Silverware made purely from melted coins would be found wanting when the silversmith took his wares to the
assay office Assay offices are institutions set up to assay (test the purity of) precious metals. This is often done to protect consumers from buying fake items. Upon successful completion of an assay (i.e. if the metallurgical content is found be equal or bett ...
, thus discouraging the melting of coins. During the time of
Sir Isaac Newton Sir Isaac Newton (25 December 1642 – 20 March 1726/27) was an English mathematician, physicist, astronomer, alchemist, theologian, and author (described in his time as a "natural philosopher"), widely recognised as one of the gre ...
, Master of the
Mint MiNT is Now TOS (MiNT) is a free software alternative operating system kernel for the Atari ST system and its successors. It is a multi-tasking alternative to TOS and MagiC. Together with the free system components fVDI device drivers, XaAE ...
, the gold guinea was fixed at 21 shillings (£1/1/-) in 1717. But without addressing the problem of underweight silver coins, and with the high resulting gold-silver ratio of 15.2, it gave sterling a firmer footing in gold guineas rather than silver shillings, resulting in a de facto gold standard. Silver and copper tokens issued by private entities partly relieved the problem of small change until the Great Recoinage of 1816.


Establishment of modern currency

The
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 to act as the English Government's banker, and still one of the bankers for the Government o ...
was founded in 1694, followed by the
Bank of Scotland The Bank of Scotland plc (Scottish Gaelic: ''Banca na h-Alba'') is a commercial and clearing bank based in Scotland and is part of the Lloyds Banking Group, following the Bank of Scotland's implosion in 2008. The bank was established by the ...
a year later. Both began to issue paper money.


Currency of Great Britain (1707) and the United Kingdom (1801)

In the 17th century Scots currency was pegged to sterling at a value of £12 Scots = £1 sterling. In 1707, the kingdoms of England and Scotland merged into the Kingdom of Great Britain. In accordance with the Treaty of Union, the currency of Great Britain was sterling, with the pound Scots soon being replaced by sterling at the pegged value. In 1801, Great Britain and the
Kingdom of Ireland The Kingdom of Ireland ( ga, label=Classical Irish, an Ríoghacht Éireann; ga, label=Modern Irish, an Ríocht Éireann, ) was a monarchy on the island of Ireland that was a client state of England and then of Great Britain. It existed fro ...
were united to form the United Kingdom of Great Britain and Ireland. However, the
Irish pound The pound ( Irish: ) was the currency of the Republic of Ireland until 2002. Its ISO 4217 code was IEP, and the symbol was £ (or IR£ for distinction). The Irish pound was replaced by the euro on 1 January 1999. Euro currency did not begin c ...
was not replaced by sterling until January 1826. The conversion rate had long been £13 Irish to £12 sterling. In 1928, six years after the
Anglo-Irish Treaty The 1921 Anglo-Irish Treaty ( ga , An Conradh Angla-Éireannach), commonly known in Ireland as The Treaty and officially the Articles of Agreement for a Treaty Between Great Britain and Ireland, was an agreement between the government of the ...
restored Irish autonomy within the British Empire, the
Irish Free State The Irish Free State ( ga, Saorstát Éireann, , ; 6 December 192229 December 1937) was a state established in December 1922 under the Anglo-Irish Treaty of December 1921. The treaty ended the three-year Irish War of Independence between the ...
established a new Irish pound, pegged at par to sterling.


Use in the Empire

Sterling circulated in much of the
British Empire The British Empire was composed of the dominions, colonies, protectorates, mandates, and other territories ruled or administered by the United Kingdom and its predecessor states. It began with the overseas possessions and trading posts esta ...
. In some areas it was used alongside local currencies. For example, the gold sovereign was legal tender in Canada despite the use of the
Canadian dollar The Canadian dollar (symbol: $; code: CAD; french: dollar canadien) is the currency of Canada. It is abbreviated with the dollar sign $, there is no standard disambiguating form, but the abbreviation Can$ is often suggested by notable style g ...
. Several colonies and dominions adopted the pound as their own currency. These included Australia,
Barbados Barbados is an island country in the Lesser Antilles of the West Indies, in the Caribbean region of the Americas, and the most easterly of the Caribbean Islands. It occupies an area of and has a population of about 287,000 (2019 estimate). ...
,
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 the formal colonial administrative entity. British West Africa as a colonial entity was orig ...
, Cyprus, Fiji,
British India The provinces of India, earlier presidencies of British India and still earlier, presidency towns, were the administrative divisions of British governance on the Indian subcontinent. Collectively, they have been called British India. In one ...
, the
Irish Free State The Irish Free State ( ga, Saorstát Éireann, , ; 6 December 192229 December 1937) was a state established in December 1922 under the Anglo-Irish Treaty of December 1921. The treaty ended the three-year Irish War of Independence between the ...
, Jamaica, New Zealand, South Africa and
Southern Rhodesia Southern Rhodesia was a landlocked self-governing British Crown colony in southern Africa, established in 1923 and consisting of British South Africa Company (BSAC) territories lying south of the Zambezi River. The region was informally kno ...
. Some of these retained parity with sterling throughout their existence (e.g. the South African pound), while others deviated from parity after the end of the gold standard (e.g. the Australian pound). These currencies and others tied to sterling constituted the core of the sterling area. The original English colonies on mainland North America were not party to the sterling area because the above-mentioned silver shortage in England coincided with these colonies' formative years. As a result of equitable trade (and rather less equitable piracy), the Spanish milled dollar became the most common coin within the English colonies.


Gold standard

During the
American War of Independence The American Revolutionary War (April 19, 1775 – September 3, 1783), also known as the Revolutionary War or American War of Independence, was a major war of the American Revolution. Widely considered as the war that secured the independence of t ...
and the Napoleonic wars,
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 to act as the English Government's banker, and still one of the bankers for the Government o ...
notes were legal tender, 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 was adopted officially, with silver coins minted at a rate of 66 shillings to a troy pound (weight) of sterling silver, thus rendering them as "token" issues (i.e. not containing their value in precious metal). In 1817, the sovereign was introduced, valued at 20/–. Struck in 22‑carat gold, it contained 113 grains or of fine gold and replaced the guinea as the standard British gold coin without changing the gold standard. By the 19th century, sterling notes were widely accepted outside Britain. The American journalist
Nellie Bly Elizabeth Cochran Seaman (born Elizabeth Jane Cochran; May 5, 1864 – January 27, 1922), better known by her pen name Nellie Bly, was an American journalist, industrialist, inventor, and charity worker who was widely known for her record-breaki ...
carried Bank of England notes on her 1889–1890 trip around the world in 72 days. 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. £1 sterling was equal to US$4.87 in the United States,
Can$ The Canadian dollar ( symbol: $; code: CAD; french: dollar canadien) is the currency of Canada. It is abbreviated with the dollar sign $, there is no standard disambiguating form, but the abbreviation Can$ is often suggested by notable style ...
4.87 in Canada, ƒ12.11 in Dutch territories, F 25.22 in
French territories Overseas France (french: France d'outre-mer) consists of 13 French-administered territories outside Europe, mostly the remains of the French colonial empire that chose to remain a part of the French state under various statuses after decol ...
(or equivalent currencies of the Latin Monetary Union), 20  43 in Germany, Rbls 9.46 in
Russia Russia (, , ), or the Russian Federation, is a transcontinental country spanning Eastern Europe and Northern Asia. It is the largest country in the world, with its internationally recognised territory covering , and encompassing one-eight ...
or K 24.02 in
Austria-Hungary Austria-Hungary, often referred to as the Austro-Hungarian Empire,, the Dual Monarchy, or Austria, was a constitutional monarchy and great power in Central Europe between 1867 and 1918. It was formed with the Austro-Hungarian Compromise of 1 ...
. After the International Monetary Conference of 1867 in Paris, the possibility of the UK joining the Latin Monetary Union was discussed, and a Royal Commission on International Coinage examined the issues, resulting in a decision against joining monetary union.


First world war: suspension of the gold standard

The gold standard was suspended at the outbreak of First World War in 1914, with Bank of England and Treasury notes becoming legal tender. Before that war, the United Kingdom had one of the world's strongest
economies An economy is an area of the production, distribution and trade, as well as consumption of goods and services. In general, it is defined as a social domain that emphasize the practices, discourses, and material expressions associated with the p ...
, holding 40% of the world's overseas investments. But after the end of the war, the country was highly indebted: Britain owed £850 million (about £ today) with interest costing the country some 40% of all government spending. The British government under Prime Minister
David Lloyd George David Lloyd George, 1st Earl Lloyd-George of Dwyfor, (17 January 1863 – 26 March 1945) was Prime Minister of the United Kingdom from 1916 to 1922. He was a Liberal Party politician from Wales, known for leading the United Kingdom during ...
and Chancellor of the Exchequer
Austen Chamberlain Sir Joseph Austen Chamberlain (16 October 1863 – 16 March 1937) was a British statesman, son of Joseph Chamberlain and older half-brother of Prime Minister Neville Chamberlain. He served as Chancellor of the Exchequer (twice) and was briefly ...
tried to make up for the deficit with a deflationary policy, but this only led to the
Depression of 1920–21 Depression may refer to: Mental health * Depression (mood), a state of low mood and aversion to activity * Mood disorders characterized by depression are commonly referred to as simply ''depression'', including: ** Dysthymia, also known as pe ...
. By 1917, production of gold sovereigns had almost halted (the remaining production was for collector's sets and other very specific occasions), and by 1920, the silver coinage was debased from its original .925 fine to just .500 fine. That was due to a drastic increase in silver prices from an average 27/6''d''. �1.375per troy pound in the period between 1894 and 1913, to 89/6''d''. �4.475in August 1920.


Interwar period: gold standard reinstated

To try to resume stability, a version of the gold standard was reintroduced in 1925, under which the currency was fixed to gold at its pre-war peg, but one could only exchange currency for gold bullion, not for coins. On 21 September 1931, this was abandoned during the Great Depression, and sterling suffered an initial devaluation of some 25%. Since the suspension of the gold standard in 1931, sterling has been a fiat currency, with its value determined by its continued acceptance in the national and international economy.


World War II

In 1940, an agreement with the US pegged sterling to the US dollar at a rate of £1 = US$4.03. (Only the year before, it had been US$4.86.) This rate was maintained through the Second World War and became part of the
Bretton Woods system The Bretton Woods system of Monetary system, monetary management established the rules for commercial and financial relations among the United States, Canada, Western European countries, Australia, and Japan after the 1944 Bretton Woods Agree ...
which governed post-war exchange rates.


History (1946 to present day)


Bretton Woods

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 US$2.80. The
1949 sterling devaluation The devaluation of sterling in 1949 (or 1949 sterling crisis) was a major currency crisis in the United Kingdom that led to a 30.5% devaluation of sterling from $4.04 per pound to $2.80. Although the devaluation was made in the United Kingdom, ove ...
prompted several other currencies to be devalued against the dollar. In 1961, 1964, and 1966, sterling came under renewed pressure, as speculators were selling pounds for dollars. In summer 1966, with the value of the pound falling in the
currency markets The foreign exchange market (Forex, FX, or currency market) is a global decentralized or over-the-counter (OTC) market for the trading of currencies. This market determines foreign exchange rates for every currency. It includes all aspe ...
,
exchange controls Foreign exchange controls are various forms of controls imposed by a government on the purchase/sale of foreign currencies by residents, on the purchase/sale of local currency by nonresidents, or the transfers of any currency across national bor ...
were tightened by the
Wilson Wilson may refer to: People *Wilson (name) ** List of people with given name Wilson ** List of people with surname Wilson * Wilson (footballer, 1927–1998), Brazilian manager and defender * Wilson (footballer, born 1984), full name Wilson R ...
government. Among the measures, tourists were banned from taking more than £50 out of the country in travellers' cheques and remittances, plus £15 in cash; this restriction was not lifted until 1979. Sterling was devalued by 14.3% to £1 = US$2.40 on 18 November 1967.


Decimalisation

Until decimalisation, amounts in sterling were expressed in pounds, shillings, and pence, with various widely understood notations. The same amount could be stated as 32''s''. 6''d''., 32/6, £1. 12''s''. 6''d''., or £1/12/6. It was customary to specify some prices (for example professional fees and auction prices for works of art) in guineas (abbr: gn. or gns.), although guinea coins were no longer in use. Formal parliamentary proposals to decimalise sterling were first made in 1824 when Sir John Wrottesley, MP for Staffordshire, asked in the House of Commons whether consideration had been given to decimalising the currency. Wrottesley raised the issue in the House of Commons again in 1833, and it was again raised by
John Bowring Sir John Bowring , or Phraya Siamanukulkij Siammitrmahayot, , , group=note (17 October 1792 – 23 November 1872) was a British political economist, traveller, writer, literary translator, polyglot and the fourth Governor of Hong Kong. He was a ...
, MP for Kilmarnock Burghs, in 1847 whose efforts led to the introduction in 1848 of what was in effect the first decimal coin in the United Kingdom, the florin, valued at one-tenth of a pound. However, full decimalisation was resisted, although the florin coin, re-designated as ''ten new pence'', survived the transfer to a full decimal system in 1971, with examples surviving in British coinage until 1993.
John Benjamin Smith John Benjamin Smith (7 February 1794 – 15 September 1879) was an English Liberal Party politician who sat in the House of Commons from 1847 to 1874. Life Smith was the son of Benjamin Smith, a merchant of Manchester. He was himself a merchant ...
, MP for Stirling Burghs, raised the issue of full decimalisation again in Parliament in 1853, resulting in the Chancellor of the Exchequer,
William Gladstone William Ewart Gladstone ( ; 29 December 1809 – 19 May 1898) was a British statesman and Liberal politician. In a career lasting over 60 years, he served for 12 years as Prime Minister of the United Kingdom, spread over four non-conse ...
, announcing soon afterwards that "the great question of a decimal coinage" was "now under serious consideration". A full proposal for the decimalisation of sterling was then tabled in the House of Commons in June 1855, by William Brown, MP for Lancashire Southern, with the suggestion that the pound sterling be divided into one thousand parts, each called a "mil", or alternatively a farthing, as the pound was then equivalent to 960 farthings which could easily be rounded up to one thousand farthings in the new system. This did not result in the conversion of sterling into a decimal system, but it was agreed to establish a Royal Commission to look into the issue. However, largely due to the hostility to decimalisation of two of the appointed commissioners, Lord Overstone (a banker) and John Hubbard ( Governor of the Bank of England), decimalisation in Britain was effectively quashed for over a hundred years. However, sterling was decimalised in various British colonial territories before the United Kingdom (and in several cases in line with William Brown's proposal that the pound be divided into 1,000 parts, called mils). These included Hong Kong from 1863 to 1866; Cyprus from 1955 until 1960 (and continued on the island as the division of the
Cypriot pound The pound, or lira ( el, λίρα, plural , and tr, lira, ota, لیره, from the Latin via the Italian ; sign: £, sometimes £C for distinction), was the currency of Cyprus, including the Sovereign Base Areas in Akrotiri and Dhekelia, from ...
until 1983); and the Palestine Mandate from 1926 until 1948. Later, in 1966, the UK Government decided to include in the
Queen's Speech A speech from the throne, or throne speech, is an event in certain monarchies in which the reigning sovereign, or a representative thereof, reads a prepared speech to members of the nation's legislature when a session is opened, outlining th ...
a plan to convert sterling into a decimal currency. As a result of this, on 15 February 1971, the UK decimalised sterling, replacing the shilling and the penny with a single subdivision, the ''new penny'', which was worth 2.4''d''. For example, a price tag of £1/12/6. became . The word "new" was omitted from coins minted after 1981.


Free-floating pound

With the breakdown of the
Bretton Woods system The Bretton Woods system of Monetary system, monetary management established the rules for commercial and financial relations among the United States, Canada, Western European countries, Australia, and Japan after the 1944 Bretton Woods Agree ...
, sterling floated from August 1971 onwards. At first, it appreciated a little, rising to almost US$2.65 in March 1972 from US$2.42, the upper bound of the band in which it had been fixed. The sterling area effectively ended at this time, when the majority of its members also chose to float freely against sterling and the dollar.


1976 sterling crisis

James Callaghan became Prime Minister 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 failed
Barber Boom Anthony Perrinott Lysberg Barber, Baron Barber, (4 July 1920 – 16 December 2005) was a British Conservative politician who served as Chancellor of the Exchequer from 1970 to 1974. After serving in both the Territorial Army and the Royal A ...
and the 1973 oil crisis were still being felt, with inflation rising to nearly 27% in 1975. Financial markets were beginning to believe the pound was overvalued, and in April that year '' The Wall Street Journal'' advised the sale of sterling investments in the face of high taxes, in a story that ended with "goodbye, Great Britain. It was nice knowing you". At the time the UK Government was running a budget deficit, and the Labour government at the time'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
European Economic Community The European Economic Community (EEC) was a regional organization created by the Treaty of Rome of 1957,Today the largely rewritten treaty continues in force as the ''Treaty on the functioning of the European Union'', as renamed by the Lisbo ...
(EEC), and in light of this the
US Treasury The Department of the Treasury (USDT) is the national treasury and finance department of the federal government of the United States, where it serves as an executive department. The department oversees the Bureau of Engraving and Printing and ...
set out to force domestic policy changes. In November 1976, the International Monetary Fund (IMF) announced the conditions for a loan, including deep cuts in
public expenditure Public expenditure is spending made by the government of a country on collective needs and wants, such as pension, provisions, security, infrastructure, etc. Until the 19th century, public expenditure was limited as laissez faire philosophie ...
.


1979–1989

The
Conservative Party The Conservative Party is a name used by many political parties around the world. These political parties are generally right-wing though their exact ideologies can range from center-right to far-right. Political parties called The Conservative P ...
was elected to office in
1979 Events January * January 1 ** United Nations Secretary-General Kurt Waldheim heralds the start of the ''International Year of the Child''. Many musicians donate to the ''Music for UNICEF Concert'' fund, among them ABBA, who write the song ...
, on a programme of fiscal austerity. Initially, sterling rocketed, moving above £1 to US$2.40, as interest rates rose in response to the monetarist policy of targeting
money supply In macroeconomics, the money supply (or money stock) refers to the total volume of currency held by the public at a particular point in time. There are several ways to define "money", but standard measures usually include currency in circul ...
. The high exchange rate was widely blamed for the deep recession of 1981. Sterling fell sharply after 1980; at its lowest, £1 stood at just US$1.03 in March 1985, before rising to US$1.70 in December 1989.


Following the Deutsche Mark

In 1988, the Chancellor of the Exchequer,
Nigel Lawson Nigel Lawson, Baron Lawson of Blaby, (born 11 March 1932) is a British Conservative Party politician and journalist. He was a Member of Parliament representing the constituency of Blaby from 1974 to 1992, and served in the cabinet of Margar ...
, decided that sterling should "shadow" the Deutsche Mark (DM), with the unintended result of a rapid rise in inflation as the economy boomed due to low interest rates. Following German reunification in 1990, the reverse held true, as high German borrowing costs to fund Eastern reconstruction, exacerbated by the political decision to convert the
Ostmark Ostmark is a German term meaning either Eastern march when applied to territories or Eastern Mark when applied to currencies. Ostmark may refer to: *the medieval March of Austria and its predecessors ''Bavarian Eastern March'' and ''March of Pan ...
to the D–Mark on a 1:1 basis, meant that interest rates in other countries shadowing the D–Mark, 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 ( Third Thatcher ministry) decided to join the
European Exchange Rate Mechanism The European Exchange Rate Mechanism (ERM II) is a system introduced by the European Economic Community on 1 January 1999 alongside the introduction of a single currency, the euro (replacing ERM 1 and the euro's predecessor, the ECU) as ...
(ERM), with £1 set at DM 2.95. However, the country was forced to withdraw from the system on "
Black Wednesday Black Wednesday (or the 1992 Sterling crisis) occurred on 16 September 1992 when the UK Government was forced to withdraw sterling from the European Exchange Rate Mechanism (ERM), after a failed attempt to keep its exchange rate above the ...
" (16 September 1992) as Britain's economic performance made the exchange rate unsustainable. The event was also triggered by comments by Bundesbank president Helmut Schlesinger who suggested the pound would eventually have to be devalued. "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 DM 2.20. Those who had argued for a lower GBP/DM exchange rate were vindicated since the cheaper pound encouraged exports and contributed to the economic prosperity of the 1990s.


Following inflation targets

In 1997, the newly elected Labour government handed over day-to-day control of interest rates to the
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 to act as the English Government's banker, and still one of the bankers for the Government o ...
(a policy that had originally been advocated by the Liberal Democrats). The Bank is now responsible for setting its base rate of interest so as to keep inflation (as measured by the
Consumer Price Index A consumer price index (CPI) is a price index, the price of a weighted average market basket of consumer goods and services purchased by households. Changes in measured CPI track changes in prices over time. Overview A CPI is a statistic ...
(CPI)) very close to 2% per annum. 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 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, annual CPI inflation was reported at 3.1% (inflation of the
Retail Prices Index In the United Kingdom, the Retail Prices Index or Retail Price Index (RPI) is a measure of inflation published monthly by the Office for National Statistics. It measures the change in the cost of a representative sample of retail goods and se ...
was 4.8%). Accordingly, and for the first time, the Governor had to write publicly to the UK Government explaining why inflation was more than one percentage point higher than its target.


Euro

In 2007,
Gordon Brown James Gordon Brown (born 20 February 1951) is a British former politician who served as Prime Minister of the United Kingdom and Leader of the Labour Party from 2007 to 2010. He previously served as Chancellor of the Exchequer in Tony B ...
, then Chancellor of the Exchequer, ruled out membership in the eurozone for the foreseeable future, saying that the decision not to join had been right for Britain and for Europe. On 1 January 2008, with the Republic of Cyprus switching its currency from the
Cypriot pound The pound, or lira ( el, λίρα, plural , and tr, lira, ota, لیره, from the Latin via the Italian ; sign: £, sometimes £C for distinction), was the currency of Cyprus, including the Sovereign Base Areas in Akrotiri and Dhekelia, from ...
to the euro, the British sovereign bases on Cyprus (
Akrotiri and Dhekelia Akrotiri and Dhekelia, officially the Sovereign Base Areas of Akrotiri and Dhekelia (SBA),, ''Periochés Kyríarchon Váseon Akrotiríou ke Dekélias''; tr, Ağrotur ve Dikelya İngiliz Egemen Üs Bölgeleri is a British Overseas Territories ...
) followed suit, making the
Sovereign Base Areas Akrotiri and Dhekelia, officially the Sovereign Base Areas of Akrotiri and Dhekelia (SBA),, ''Periochés Kyríarchon Váseon Akrotiríou ke Dekélias''; tr, Ağrotur ve Dikelya İngiliz Egemen Üs Bölgeleri is a British Overseas Territory o ...
the only territory under British sovereignty to officially use the euro. The government of former Prime Minister
Tony Blair Sir Anthony Charles Lynton Blair (born 6 May 1953) is a British former politician who served as Prime Minister of the United Kingdom from 1997 to 2007 and Leader of the Labour Party from 1994 to 2007. He previously served as Leader of th ...
had pledged to hold a public referendum to decide on the adoption of the Euro should "
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 (EMU), and so adopt the euro as its official c ...
" be met, to increase the likelihood that any adoption of the euro would be in the national interest. In addition to these internal (national) criteria, the UK would have to meet the European Union's economic
convergence criteria The euro convergence criteria (also known as the Maastricht criteria) are the criteria which European Union member states are required to meet to enter the third stage of the Economic and Monetary Union (EMU) and adopt the euro as their curre ...
(Maastricht criteria) before being allowed to adopt the euro. The Conservative and Liberal Democrat coalition government (2010–2015) ruled out joining the euro for that parliamentary term. The idea of replacing sterling with the euro was always controversial with the British public, partly because of sterling's identity as a symbol of British sovereignty and because it would, according to some critics, have led to suboptimal interest rates, harming the British economy. In December 2008, the results of a
BBC #REDIRECT BBC Here i going to introduce about the best teacher of my life b BALAJI sir. He is the precious gift that I got befor 2yrs . How has helped and thought all the concept and made my success in the 10th board exam. ...
poll of 1,000 people suggested that 71% would vote no to the euro, 23% would vote yes, while 6% said they were unsure. Sterling did not join the Second European Exchange Rate Mechanism (ERM II) after the euro was created. Denmark and the UK had opt-outs from entry to the euro. Theoretically, every EU nation but Denmark must eventually sign up. As a member of the European Union, the United Kingdom could have adopted the euro as its currency. However, the subject was always politically controversial, and the UK negotiated an opt-out on this issue. Following the UK's withdrawal from the EU, on 31 January 2020, the Bank of England ended its membership of the
European System of Central Banks The European System of Central Banks (ESCB) is an institution that comprises the European Central Bank (ECB) and the national central banks (NCBs) of all 27 member states of the European Union (EU). Its objective is to ensure price stability t ...
, and shares in the European Central Bank were reallocated to other EU banks.


Recent exchange rates

Sterling 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 sterling to appreciate against other major currencies and, with the US dollar depreciating at the same time, sterling hit a 15-year high against the US dollar on 18 April 2007, with £1 reaching US$2 the day before, for the first time since 1992. Sterling and many other currencies continued to appreciate against the dollar; sterling hit a 26-year high of £1 to US$2.1161 on 7 November 2007 as the dollar fell worldwide. From mid-2003 to mid-2007, the pound/euro rate remained within a narrow range (€1.45 ± 5%). Following the global financial crisis in late 2008, sterling depreciated sharply, declining to £1 to US$1.38 on 23 January 2009 and falling below £1 to €1.25 against the euro in April 2008. There was a further decline during the remainder of 2008, most dramatically on 29 December when its euro rate hit an all-time low at €1.0219, while its US dollar rate depreciated. Sterling appreciated in early 2009, reaching a peak against the euro of £1 to €1.17 in mid-July. In the following months sterling remained broadly steady against the euro, with £1 valued on 27 May 2011 at €1.15 and US$1.65. On 5 March 2009, the
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 to act as the English Government's banker, and still one of the bankers for the Government o ...
announced that it would pump £75 billion of new
capital Capital may refer to: Common uses * Capital city, a municipality of primary status ** List of national capital cities * Capital letter, an upper-case letter Economics and social sciences * Capital (economics), the durable produced goods used fo ...
into the British economy, through a process known as quantitative easing (QE). This was the first time in the United Kingdom's history that this measure had been used, although the Bank's Governor Mervyn King suggested it was not an experiment. The process saw the Bank of England creating new money for itself, which it then used to purchase
asset In financial accounting, an asset is any resource owned or controlled by a business or an economic entity. It is anything (tangible or intangible) that can be used to produce positive economic value. Assets represent value of ownership that can b ...
s such as government bonds, secured
commercial paper Commercial paper, in the global financial market, is an unsecured promissory note with a fixed maturity of rarely more than 270 days. In layperson terms, it is like an "IOU" but can be bought and sold because its buyers and sellers have some ...
, or
corporate bond A corporate bond is a bond issued by a corporation in order to raise financing for a variety of reasons such as to ongoing operations, M&A, or to expand business. The term is usually applied to longer-term debt instruments, with maturity of ...
s. The initial amount stated to be created through this method was £75 billion, although Chancellor of the Exchequer
Alistair Darling Alistair Maclean Darling, Baron Darling of Roulanish, (born 28 November 1953) is a British politician who served as Chancellor of the Exchequer under Prime Minister Gordon Brown from 2007 to 2010. A member of the Labour Party, he was a Member ...
had given permission for up to £150 billion to be created if necessary. It was expected that the process would continue for three months, with results only likely in the long term. By 5 November 2009, some £175 billion had been injected using QE, and the process remained less effective in the long term. In July 2012, the final increase in QE meant it had peaked at £375 billion, then holding solely UK Government bonds, representing one third of the UK national debt. The result of the 2016 UK referendum on EU membership caused a major decline in sterling against other world currencies as the future of international trade relationships and domestic political leadership became unclear. The referendum result weakened sterling against the euro by 5% overnight. The night before the vote, sterling was trading at £1 to €1.30; the next day, this had fallen to £1 to €1.23. By October 2016, the exchange rate was £1 to €1.12, a fall of 14% since the referendum. By the end of August 2017 sterling was even lower, at £1 to €1.08. Against the US dollar, meanwhile, sterling fell from £1 to $1.466 to £1 to $1.3694 when the referendum result was first revealed, and down to £1 to $1.2232 by October 2016, a fall of 16%. In September 2022, under the influence of inflation and tax cuts funded by borrowing, sterling's value reached an all-time low of just over $1.03.


Annual inflation rate

The Bank of England had stated in 2009 that the decision had been taken to prevent the rate of inflation falling below the 2% target rate. Mervyn King, the Governor of the Bank of England, had also suggested there were no other monetary options left, as interest rates had already been cut to their lowest level ever (0.5%) and it was unlikely that they would be cut further. The inflation rate rose in following years, reaching 5.2% per year (based on the
Consumer Price Index A consumer price index (CPI) is a price index, the price of a weighted average market basket of consumer goods and services purchased by households. Changes in measured CPI track changes in prices over time. Overview A CPI is a statistic ...
) in September 2011, then decreased to around 2.5% the following year. After a number of years when inflation remained near or below the Bank's 2% target, 2021 saw a significant and sustained increase on all indices: , RPI had reached 7.1%,
CPI A consumer price index (CPI) is a price index, the price of a weighted average market basket of consumer goods and services purchased by households. Changes in measured CPI track changes in prices over time. Overview A CPI is a statistica ...
5.1% and CPIH 4.6%.


Coins


Pre-decimal coins

The silver penny (plural: ''pence''; abbreviation: ''d'') was the principal and often the only coin in circulation from the 8th century until the 13th century. Although some fractions of the penny were struck (see
farthing Farthing or farthings may refer to: Coinage *Farthing (British coin), an old British coin valued one quarter of a penny ** Half farthing (British coin) ** Third farthing (British coin) ** Quarter farthing (British coin) *Farthing (English co ...
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 (equal in value to 20 silver pennies) a rare example. However, in 1279, the '' groat'', worth 4''d'', 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) of the ''
noble A noble is a member of the nobility. Noble may also refer to: Places Antarctica * Noble Glacier, King George Island * Noble Nunatak, Marie Byrd Land * Noble Peak, Wiencke Island * Noble Rocks, Graham Land Australia * Noble Island, Gr ...
'' worth six shillings and eight pence (6/8''d'') (i.e. 3 nobles 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 In various theistic religious traditions an angel is a supernatural spiritual being who serves God. Abrahamic religions often depict angels as benevolent celestial intermediaries between God (or Heaven) and humanity. Other roles include ...
'' introduced at the noble's old value of 6/8''d''. The reign of Henry VII saw the introduction of two important coins: the
shilling The shilling is a historical coin, and the name of a unit of modern currency, currencies formerly used in the United Kingdom, Australia, New Zealand, other British Commonwealth countries and Ireland, where they were generally equivalent to 1 ...
(abbr.: ''s''; known as the ''testoon'', equivalent to twelve pence) in 1487 and the pound (known as the '' sovereign'', abbr.: ''£'' before numerals or "''l''." after them, equivalent to twenty shillings) in 1489. In 1526, several new denominations of gold coins were added, including the ''
crown A crown is a traditional form of head adornment, or hat, worn by monarchs as a symbol of their power and dignity. A crown is often, by extension, a symbol of the monarch's government or items endorsed by it. The word itself is used, partic ...
'' and '' half crown'', worth five shillings (''5/–'') and two shillings and six pence (''2/6'', ''two and six'') respectively. Henry VIII's reign (1509–1547) saw a high level of debasement which continued into the reign of Edward VI (1547–1553). This debasement was halted in 1552, and new silver coinage was introduced, including coins for 1''d'', 2''d'', 3d, 4''d'' and 6''d'', 1/–, 2/6''d'' and 5/–. In the reign of Elizabeth I (1558–1603), silver ''d'' and ''d'' coins were added, but these denominations did not last. Gold coins included the half-crown, crown, angel, half-sovereign (10/–) and sovereign (£1). 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 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 shi ...
'' (15/–), the ''
unite Unite may refer to: Arts, entertainment, and media Music Albums * ''Unite'' (A Friend in London album), 2013 album by Danish band A Friend in London * ''Unite'' (Kool & the Gang album), 1993 * ''Unite'' (The O.C. Supertones album), 2005 Songs ...
'' (20/–) and the ''rose ryal'' (30/–). The '' laurel'', worth 20/–, followed in 1619. The first base metal coins were also introduced: tin and copper farthings. Copper halfpenny coins followed in the reign of
Charles I Charles I may refer to: Kings and emperors * Charlemagne (742–814), numbered Charles I in the lists of Holy Roman Emperors and French kings * Charles I of Anjou (1226–1285), also king of Albania, Jerusalem, Naples and Sicily * Charles I of ...
. During the English Civil War, 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'' was introduced in 1663, soon followed by the , 2 and 5 guinea coins. The silver coinage consisted of denominations of 1''d'', 2''d'', 3''d'', 4''d'' and 6''d'', 1/–, 2/6''d'' 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 6''d'' and 1/– stopping production in the 1780s. In response, copper 1''d'' and 2''d'' coins and a gold guinea (7/–) were introduced 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 dollars (8 reales) and other
Spanish Spanish might refer to: * Items from or related to Spain: **Spaniards are a nation and ethnic group indigenous to Spain **Spanish language, spoken in Spain and many Latin American countries **Spanish cuisine Other places * Spanish, Ontario, Can ...
and Spanish colonial coins for circulation. A small counterstamp of the King's head was used. Until 1800, these circulated at a rate of 4/9''d'' 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''d'' and 3/– between 1811 and 1816. In 1816, a new silver coinage was introduced in denominations of 6''d'', 1/–, 2/6''d'' (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 4''d'' coin was reintroduced in 1836, followed by the 3''d'' in 1838, with the 4''d'' coin issued only for colonial use after 1855. In 1848, the 2/– '' florin'' was introduced, followed by the short-lived
double florin The double florin, or four-shilling piece, was a British coin produced by the Royal Mint between 1887 and 1890. One of the shortest-lived of all British coin denominations, it was struck in only four years. Its obverse, designed by Joseph Boe ...
in 1887. In 1860, copper was replaced by bronze in the farthing (quarter penny, ''d''), halfpenny and penny. During the First World War, production of the sovereign and
half-sovereign The half sovereign is a British gold coin with a nominal value of half of one pound sterling. It is half the weight (and has half the gold content) of its counterpart 'full' sovereign coin. The half sovereign was first introduced in 1544 under He ...
was suspended, and although the gold standard was later 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 3''d'' coin was introduced; the last silver 3''d'' coins were issued seven years later. In 1947, the remaining silver coins were replaced with
cupro-nickel Cupronickel or copper-nickel (CuNi) is an alloy of copper that contains nickel and strengthening elements, such as iron and manganese. The copper content typically varies from 60 to 90 percent. (Monel is a nickel-copper alloy that contains a min ...
, with the exception of
Maundy coinage Royal Maundy is a religious service in the Church of England held on Maundy Thursday, the day before Good Friday. At the service, the British monarch or a royal official ceremonially distributes small silver coins known as "Maundy money" (legal ...
which was then restored to .925. 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 Cupronickel or copper-nickel (CuNi) is an alloy of copper that contains nickel and strengthening elements, such as iron and manganese. The copper content typically varies from 60 to 90 percent. (Monel is a nickel-copper alloy that contains a min ...
5p and 10p coins which were the same size as, equivalent in value to, and circulated alongside, the one shilling coin and the florin (two shilling coin) respectively. * 1969: The curved equilateral heptagonal cupro-nickel 50p coin replaced the ten shilling note (10/–). * 1970: The half crown (2/6''d'', 12.5p) was
demonetised Legal tender is a form of money that courts of law are required to recognize as satisfactory payment for any monetary debt. Each jurisdiction determines what is legal tender, but essentially it is anything which when offered ("tendered") in pa ...
. * 1971: The decimal coinage was completed when decimalisation came into effect in 1971 with the introduction of the bronze half new penny (p), new penny (1p), and two new pence (2p) coins and the withdrawal of the (old) penny (1''d'') and (old) threepence (3''d'') coins. * 1980: Withdrawal of the sixpence (6''d'') coin, which had continued in circulation at a value of p. * 1982: The word "new" was dropped from the coinage and a 20p coin was introduced. * 1983: A (round, brass)
£1 coin The British one pound (£1) coin is a denomination of Coins of the United Kingdom, sterling coinage. Its obverse bears the Latin engraving ELIZABETH II D G REG () F D () meaning, 'Elizabeth II, by the grace of God, Queen, Defender of the Faith ...
was introduced. * 1983: The p coin was last produced. * 1984: The p coin was withdrawn from circulation. * 1990: The
crown A crown is a traditional form of head adornment, or hat, worn by monarchs as a symbol of their power and dignity. A crown is often, by extension, a symbol of the monarch's government or items endorsed by it. The word itself is used, partic ...
, historically valued at five shillings (25p), was re-tariffed for future issues as a commemorative coin at £5. * 1990: A new 5p coin was introduced, replacing the original size that had been the same as the shilling coins of the same value that it had in turn replaced. These first generation 5p coins and any remaining old shilling coins were withdrawn from circulation in 1991. *1992: A new 10p coin was introduced, replacing the original size that had been the same as the florin or two shilling coins of the same value that it had in turn replaced. These first generation 10p coins and any remaining old florin coins were withdrawn from circulation over the following two years. * 1992: 1p and 2p coins began to be minted in copper-plated steel (the original
bronze Bronze is an alloy consisting primarily of copper, commonly with about 12–12.5% tin and often with the addition of other metals (including aluminium, manganese, nickel, or zinc) and sometimes non-metals, such as phosphorus, or metalloids such ...
coins continued in circulation). * 1997: A new 50p coin was introduced, replacing the original size that had been in use since 1969, and the first generation 50p coins were withdrawn from circulation. * 1998: The bi-metallic
£2 coin The United Kingdom, British two pound (£2) coin is a denomination of Coins of the United Kingdom, sterling coinage. Its obverse has featured the profile of Queen Elizabeth II since the coin’s introduction. Three different portraits of the Quee ...
was introduced. * 2007: By now the value of copper in the pre-1992 1p and 2p coins (which are 97% copper) exceeded those coins' face value to such an extent that melting down the coins by entrepreneurs 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 or OMV (Open Market Valuation) 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 the ...
of copper has subsequently fallen dramatically from these earlier peaks. * In April 2008, an extensive redesign of the coinage was unveiled. The 1p, 2p, 5p, 10p, 20p, and 50p coins feature parts of the Royal Shield on their reverse; and the reverse of the pound coin showed the whole shield. The coins were issued gradually into circulation, starting in mid-2008. They have the same sizes, shapes and weights as those with the old designs which, apart from the round pound coin which was withdrawn in 2017, continue to circulate. * 2012: The 5p and 10p coins were changed from cupro-nickel to
nickel-plated steel Nickel plating may refer to: *Nickel electroplating, a technique of electroplating a thin layer of nickel onto a metal object *Electroless nickel plating Electroless nickel-phosphorus plating is a chemical process that deposits an even layer of ...
. * 2017: A more secure twelve-sided bi-metallic £1 coin was introduced to reduce forgery. The old round £1 coin ceased to be legal tender on 15 October 2017. , the oldest circulating coins in the UK are the 1p and 2p copper coins introduced in 1971. No other coins from before 1982 are in circulation. Prior to the withdrawal from circulation in 1992, the oldest circulating coins usually dated from 1947: although older coins were still legal tender, inflation meant that their silver content was worth more than their face value, so they tended to be removed from circulation and hoarded. Before decimalisation in 1971, a handful of change might have contained coins over 100 years old, bearing any of five monarchs' heads, especially in the copper coins.


Banknotes

The first sterling notes were issued by the
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 to act as the English Government's banker, and still one of the bankers for the Government o ...
shortly after its foundation in 1694. Denominations were initially handwritten on the notes at the time of issue. From 1745, the notes were printed in denominations between £20 and £1,000, with any odd shillings added by hand. £10 notes were added in 1759, followed by £5 in 1793 and £1 and £2 in 1797. The lowest two denominations were withdrawn after the end of the Napoleonic wars. In 1855, the notes were converted to being entirely printed, with denominations of £5, £10, £20, £50, £100, £200, £300, £500 and £1,000 issued. The
Bank of Scotland The Bank of Scotland plc (Scottish Gaelic: ''Banca na h-Alba'') is a commercial and clearing bank based in Scotland and is part of the Lloyds Banking Group, following the Bank of Scotland's implosion in 2008. The bank was established by the ...
began issuing notes in 1695. Although the
pound Scots The pound (Modern and Middle Scots: ''Pund'') was the currency of Scotland prior to the 1707 Treaty of Union between the Kingdom of Scotland and the Kingdom of England, which created the Kingdom of Great Britain. It was introduced by Da ...
was still the currency of Scotland, these notes were denominated in sterling in values up to £100. From 1727, the Royal Bank of Scotland 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 Group plc ( ga, Banc na hÉireann) is a commercial bank operation in Ireland and one of the traditional Big Four Irish banks. Historically the premier banking organisation in Ireland, the Bank occupies a unique position in Iris ...
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 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 A treasury is either *A government department related to finance and taxation, a finance ministry. *A place or location where treasure, such as currency or precious items are kept. These can be state or royal property, church treasure or ...
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. 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 was an exercise by Nazi Germany to forge British bank notes. The initial plan was to drop the notes over Britain to bring about a collapse of the British economy during the Second World War. The first phase was run from early ...
), 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. Due to repeated devaluations and spiralling inflation the Bank of England reintroduced £10 notes in 1964. In 1969, the 10/– note was replaced by the 50p coin, again due to inflation. £20 Bank of England notes were reintroduced in 1970, followed by £50 in 1981. A £1 coin was introduced in 1983, and 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. UK notes include raised print (e.g. on the words "Bank of England"); watermarks; embedded metallic thread; holograms; and fluorescent ink visible only under
UV lamp Ultraviolet (UV) is a form of electromagnetic radiation with wavelength from 10 nm (with a corresponding frequency around 30  PHz) to 400 nm (750  THz), shorter than that of visible light, but longer than X-rays. UV radiation i ...
s. Three printing techniques are involved:
offset litho Offset printing is a common printing technique in which the inked image is transferred (or "offset") from a plate to a rubber blanket and then to the printing surface. When used in combination with the lithographic process, which is based on t ...
, intaglio and letterpress; and the notes incorporate a total of 85 specialized inks. The Bank of England produces notes named " giant" and "
titan Titan most often refers to: * Titan (moon), the largest moon of Saturn * Titans, a race of deities in Greek mythology Titan or Titans may also refer to: Arts and entertainment Fictional entities Fictional locations * Titan in fiction, fictiona ...
". A giant is a one million pound note, and a titan is a one hundred million pound bank note. Giants and titans are used only within the
banking system A bank is a financial institution that accepts deposits from the public and creates a demand deposit while simultaneously making loans. Lending activities can be directly performed by the bank or indirectly through capital markets. Becaus ...
.


Polymer banknotes

The
Northern Bank £5 note The Northern Bank £5 note was a banknote issued by Northern Bank for circulation in Northern Ireland, United Kingdom. It was the smallest denomination note issued by the bank. Following the takeover of Northern Bank by Danske Bank in 2004, produc ...
, issued by Northern Ireland's Northern Bank (now
Danske Bank Danske Bank A/S is a Danish multinational banking and financial services corporation. Headquartered in Copenhagen, it is the largest bank in Denmark and a major retail bank in the northern European region with over 5 million retail customers. ...
) in 2000, was the only
polymer banknote Polymer banknotes are banknotes made from a synthetic polymer such as biaxially oriented polypropylene (BOPP). Such notes incorporate many security features not available in paper banknotes, including the use of metameric inks. Polymer banknot ...
in circulation until 2016. The Bank of England introduced £5 polymer banknotes in September 2016, and the paper £5 notes were withdrawn on 5 May 2017. A polymer £10 banknote was introduced on 14 September 2017, and the paper note was withdrawn on 1 March 2018. A polymer £20 banknote was introduced on 20 February 2020, followed by a polymer £50 in 2021.


Monetary policy

As the
central bank A central bank, reserve bank, or monetary authority is an institution that manages the currency and monetary policy of a country or monetary union, and oversees their commercial banking system. In contrast to a commercial bank, a central ba ...
of the United Kingdom which has been delegated authority by the government, the
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 to act as the English Government's banker, and still one of the bankers for the Government o ...
sets the
monetary policy Monetary policy is the policy adopted by the monetary authority of a nation to control either the interest rate payable for very short-term borrowing (borrowing by banks from each other to meet their short-term needs) or the money supply, often ...
for the British pound by controlling the amount of money in circulation. It has a monopoly on the issuance of banknotes in England and Wales and regulates the amount of banknotes issued by seven authorized banks in Scotland and Northern Ireland. HM Treasury has reserve powers to give orders to the committee "if they are required in the public interest and by extreme economic circumstances" but such orders must be endorsed by Parliament within 28 days. Unlike banknotes which have separate issuers in Scotland and Northern Ireland, all British coins are issued by the Royal Mint, an independent enterprise (wholly owned by the
Treasury A treasury is either *A government department related to finance and taxation, a finance ministry. *A place or location where treasure, such as currency or precious items are kept. These can be state or royal property, church treasure or ...
) which also mints coins for other countries.


Legal tender and national issues

Legal tender in the United Kingdom is defined such that "a debtor cannot successfully be sued for non-payment if he pays into court in legal tender." Parties can alternatively settle a debt by other means with mutual consent. Strictly speaking, it is necessary for the debtor to offer the exact amount due as there is no obligation for the other party to provide change. Throughout the UK, £1 and £2 coins are legal tender for any amount, with the other coins being legal tender only for limited amounts.
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 to act as the English Government's banker, and still one of the bankers for the Government o ...
notes are legal tender for any amount in England and Wales, but not in Scotland or Northern Ireland. (Bank of England 10/– and £1 notes were legal tender, as were Scottish banknotes, during World War II under the Currency (Defence) Act 1939, which was repealed on 1 January 1946.)
Channel Islands The Channel Islands ( nrf, Îles d'la Manche; french: îles Anglo-Normandes or ''îles de la Manche'') are an archipelago in the English Channel, off the French coast of Normandy. They include two Crown Dependencies: the Bailiwick of Jersey ...
and Isle of Man, Manx banknotes are legal tender only in their respective jurisdictions. Bank of England, Scottish, Northern Irish, Channel Islands, Isle of Man, Gibraltar, and Falkland banknotes may be offered anywhere in the UK, although there is no obligation to accept them as a means of payment, and acceptance varies. For example, merchants in England generally accept Scottish and Northern Irish notes, but some unfamiliar with them may reject them. However, Scottish and Northern Irish notes both tend to be accepted in Scotland and Northern Ireland, respectively. Merchants in England generally do not accept Jersey, Guernsey, Manx, Gibraltarian, and Falkland notes but Manx notes are generally accepted in Northern Ireland. Bank of England notes are generally accepted in the Falklands and Gibraltar, but for example, Scottish and Northern Irish notes are not. Since all of the notes are denominated in sterling, banks will exchange them for locally issued notes at face value, though some in the UK have had trouble exchanging Falkland Islands notes. Commemorative Five pounds (British decimal coin), £5 and British twenty-five pence coin, 25p (crown) coins, and Sixpence (British coin)#2016 decimal sixpence, decimal sixpences (6p, not the Sixpence (British coin), pre-decimalisation 6''d'', equivalent to p) made for traditional wedding ceremonies and Christmas gifts, although rarely if ever seen in circulation, are formally legal tender, as are the bullion coins issued by the Mint.


Pegged currencies

In Britain's Crown Dependencies, the Manx pound, Jersey pound, and Guernsey pound are unregulated by the Bank of England and are issued independently. However, they are maintained at a fixed exchange rate by their respective governments, and Bank of England notes have been made legal tender on the islands, forming a sort of one-way de facto currency union. Internationally they are considered local issues of sterling so do not have
ISO 4217 ISO 4217 is a standard published by the International Organization for Standardization (ISO) that defines alpha codes and numeric codes for the representation of currencies and provides information about the relationships between individual cu ...
codes. "GBP" is usually used to represent all of them; informal abbreviations resembling ISO codes are used where the distinction is important.
British Overseas Territories The British Overseas Territories (BOTs), also known as the United Kingdom Overseas Territories (UKOTs), are fourteen territories with a constitutional and historical link with the United Kingdom. They are the last remnants of the former Bri ...
are responsible for the monetary policy of their own currencies (where they exist), and have their own ISO 4217 codes. The Falkland Islands pound, Gibraltar pound, and Saint Helena pound are set at a fixed 1:1 exchange rate with the British pound by local governments.


Value

In 2006, the House of Commons Library published a research paper which included an index of prices for each year between 1750 and 2005, where 1974 was indexed at 100. 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 to around 10.0 and remaining in the range 8.5–10.0 at the end of the 19th 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 has had a dramatic effect during and after World War II: 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 and services that, in a particular year, could be purchased with £1. The table shows that from 1971 to 2018 £1 sterling. lost 92.74% of its buying power. The smallest coin in 1971 was the p, worth about 6.4p in 2015 prices.


Exchange rate

Sterling is freely bought and sold on the
foreign exchange market The foreign exchange market (Forex, FX, or currency market) is a global decentralized or over-the-counter (OTC) market for the trading of currencies. This market determines foreign exchange rates for every currency. It includes all asp ...
s around the world, and its value relative to other currencies therefore fluctuates.


Reserve

Sterling is used as a reserve currency around the world. , it is ranked fourth in value held as reserves.


See also

* Commonwealth banknote-issuing institutions * List of British currencies * List of currencies in Europe * List of the largest trading partners of United Kingdom * Pound (currency)other currencies with a "pound" unit of account.


Footnotes


References


Further reading

* * ''The Perspective of the World'', Vol III of ''Civilisation and Capitalism'', Fernand Braudel, 1984 (in French 1979). * ''A Retrospective on the Bretton Woods System : Lessons for International Monetary Reform (National Bureau of Economic Research Project Report)'' By Barry Eichengreen (Editor), Michael D. Bordo (Editor) Published by University of Chicago Press (1993) * ''The political pound: British investment overseas and exchange controls past—and future?'' By John Brennan Published By Henderson Administration (1983) * ''Monetary History of the United States, 1867–1960'' by Milton Friedman, Anna Jacobson Schwartz Published by Princeton University Press (1971) * ''The international role of the pound sterling: Its benefits and costs to the United Kingdom'' By John Kevin Green * ''The Financial System in Nineteenth-Century Britain (The Victorian Archives Series)'', By Mary Poovey Published by Oxford University Press (2002) * ''Rethinking our Centralised Monetary System: The Case for a System of Local Currencies'' By Lewis D. Solomon Published by Praeger Publishers (1996) * ''Politics and the Pound: The Conservatives' Struggle With Sterling'' by Philip Stephens Trans-Atlantic Publications (1995) * ''The European Monetary System: Developments and Perspectives (Occasional Paper, No. 73)'' by Horst Ungerer, Jouko J. Hauvonen Published by International Monetary Fund (1990) * ''The floating pound sterling of the nineteen-thirties: An exploratory study'' By J. K Whitaker Dept. of the Treasury (1986) * ''World Currency Monitor Annual, 1976–1989: Pound Sterling : The Value of the British Pound Sterling in Foreign Terms'' Published by Mecklermedia (1990) * * *


External links


Royal Mint

Pound Sterling – BBC News
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