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Sterling (abbreviation: stg; Other spelling styles, such as STG and Stg, are also seen. ISO code: GBP) is the
currency A currency, "in circulation", from la, currens, -entis, literally meaning "running" or "traversing" is a standardization of money in any form, in use or circulation as a medium of exchange, for example banknotes and coins. A more general ...
of the
United Kingdom The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain, is a country in Europe, off the north-western coast of the continental mainland. It comprises England, Scotland, Wales and North ...
and nine of its associated territories. The pound ( sign: £) is the main
unit Unit may refer to: Arts and entertainment * UNIT, a fictional military organization in the science fiction television series ''Doctor Who'' * Unit of action, a discrete piece of action (or beat) in a theatrical presentation Music * ''Unit'' (a ...
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 as ...
, after the
United States 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 officia ...
, the
euro The euro ( symbol: €; code: EUR) is the official currency of 19 out of the member states of the European Union (EU). This group of states is known as the eurozone or, officially, the euro area, and includes about 340 million citize ...
, and the
Japanese yen The is the official currency of Japan. It is the third-most traded currency in the foreign exchange market, after the United States dollar (US\$) and the euro. It is also widely used as a third reserve currency after the US dollar and the e ...
. 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 202 ...
, it forms the basket of currencies 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 glo ...
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 A reserve currency (or anchor currency) is a foreign currency that is held in significant quantities by central banks or other monetary authorities as part of their foreign exchange reserves. The reserve currency can be used in international t ...
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 b ...
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 ...
.

# 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 202 ...
" and " yuan" when discussing the official currency of the
People's Republic of China China, officially the People's Republic of China (PRC), is a country in East Asia. It is the world's most populous country, with a population exceeding 1.4 billion, slightly ahead of India. China spans the equivalent of five time zones ...
.

## Etymology

There are various theories regarding the origin of the word "sterling". '' The Oxford English Dictionary'' states that the "most plausible" etymology is a derivation from the Old English ''steorra'' for "star" with the added
diminutive A diminutive is a root word that has been modified to convey a slighter degree of its root meaning, either to convey the smallness of the object or quality named, or to convey a sense of intimacy or endearment. A ( abbreviated ) is a word-form ...
suffix "-ling", to yield "little star". The reference is to the silver penny 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 The Hanseatic League (; gml, Hanse, , ; german: label= Modern German, Deutsche Hanse) was a medieval commercial and defensive confederation of merchant guilds and market towns in Central and Northern Europe. Growing from a few North German ...
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 The (Latin for "British Encyclopædia") is a general knowledge English-language encyclopaedia. It is published by Encyclopædia Britannica, Inc.; the company has existed since the 18th century, although it has changed ownership various ti ...
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 typeface, $\mathfrak$) placed before the numerals, or an italic ''l.'' after them, was used in newspapers, books and letters. The
Royal Mint The Royal Mint is the United Kingdom's oldest company and the official maker of British coins. Operating under the legal name The Royal Mint Limited, it is a limited company that is wholly owned by His Majesty's Treasury and is under an exclu ...
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 The ancient Roman units of measurement were primarily founded on the Hellenic system, which in turn was influenced by the Egyptian system and the Mesopotamian system. The Roman units were comparatively consistent and well documented. Length ...
(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 id ...
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 writ ...
) currency system, the term
£sd £sd (occasionally written Lsd, spoken as "pounds, shillings and pence" or pronounced ) is the popular name for the pre-decimal currencies once common throughout Europe, especially in the British Isles and hence in several countries of the ...
(or Lsd) for pounds,
shilling The shilling is a historical coin, and the name of a unit of modern currencies formerly used in the United Kingdom, Australia, New Zealand, other British Commonwealth countries and Ireland, where they were generally equivalent to 12 pence ...
s and
pence 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 ...
referred to the Roman , ''
solidus Solidus (Latin for "solid") may refer to: * Solidus (coin) The ''solidus'' (Latin Latin (, or , ) is a classical language belonging to the Italic languages, Italic branch of the Indo-European languages. Latin was originally a dialect sp ...
'', and ''
denarius The denarius (, dēnāriī ) was the standard Roman silver coin from its introduction in the Second Punic War to the reign of Gordian III (AD 238–244), when it was gradually replaced by the antoninianus. It continued to be minted in very ...
''. 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 ...
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 ...
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 The pound is the currency of Guernsey. Since 1921, Guernsey has been in currency union with the United Kingdom and the Guernsey pound is not a separate currency but is a local issue of sterling banknotes and coins, in a similar way to the banknot ...
), JEP ( Jersey pound) and IMP ( Isle of Man pound). 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 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 officia ...
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 as ...
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 currencies formerly used in the United Kingdom, Australia, New Zealand, other British Commonwealth countries and Ireland, where they were generally equivalent to 12 pence ...
. 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'', 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 Br ...
is either sterling or is pegged to sterling at par. These are
Jersey Jersey ( , ; nrf, Jèrri, label= Jèrriais ), officially the Bailiwick of Jersey (french: Bailliage de Jersey, links=no; Jèrriais: ), is an island country and self-governing Crown Dependency near the coast of north-west France. It is the ...
,
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 Islan ...
, the
Isle of Man ) , anthem = " O Land of Our Birth" , image = Isle of Man by Sentinel-2.jpg , image_map = Europe-Isle_of_Man.svg , mapsize = , map_alt = Location of the Isle of Man in Europe , map_caption = Location of the Isle of Man (green) in Europ ...
, the
Falkland Islands The Falkland Islands (; es, Islas Malvinas, link=no ) is an archipelago in the South Atlantic Ocean on the Patagonian Shelf. The principal islands are about east of South America's southern Patagonian coast and about from Cape Dubouz ...
,
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 = Gib ...
,
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 Saint Helena () is a British overseas territory located in the South Atlantic Ocean. It is a remote volcanic tropical island west of the coast of south-western Africa, and east of Rio de Janeiro in South America. It is one of three consti ...
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 Tristan da Cunha (), colloquially Tristan, is a remote group of volcanic islands in the South Atlantic Ocean. It is the most remote inhabited archipelago in the world, lying approximately from Cape Town in South Africa, from Saint Helena a ...
. 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 officia ...
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 ...
. The
Sovereign Base Areas of 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 Territory o ...
(in
Cyprus Cyprus ; tr, Kıbrıs (), officially the Republic of Cyprus,, , lit: Republic of Cyprus is an island country located south of the Anatolian Peninsula in the eastern Mediterranean Sea. Its continental position is disputed; while it is g ...
) use the euro.

# Subdivisions and other units

## Decimal coinage

Since
decimalisation Decimalisation or decimalization (see spelling differences) is the conversion of a system of currency or of weights and measures to units related by powers of 10. Most countries have decimalised their currencies, converting them from non-decima ...
on
Decimal Day Decimal Day in the United Kingdom and in Ireland was Monday 15 February 1971, the day on which each country decimalised its respective £sd currency of pounds, shillings, and pence. Before this date, the British pound sterling (symbol "£" ...
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 The shilling is a historical coin, and the name of a unit of modern currencies formerly used in the United Kingdom, Australia, New Zealand, other British Commonwealth countries and Ireland, where they were generally equivalent to 12 pence ...
, and each shilling into 12
pence 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 ...
, 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 Latin (, or , ) is a classical language belonging to the Italic languages, Italic branch of the Indo-European languages. Latin was originally a dialect sp ...
''. The symbol for the penny was "''d''.", from the French ''denier'', from the Latin ''
denarius The denarius (, dēnāriī ) was the standard Roman silver coin from its introduction in the Second Punic War to the reign of Gordian III (AD 238–244), when it was gradually replaced by the antoninianus. It continued to be minted in very ...
'' (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 The Florentine florin was a gold coin struck from 1252 to 1533 with no significant change in its design or metal content standard during that time. It had 54 grains (3.499 grams, 0.113 troy ounce) of nominally pure or 'fine' gold with a purch ...
(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 (''d''),
sovereign ''Sovereign'' is a title which can be applied to the highest leader in various categories. The word is borrowed from Old French , which is ultimately derived from the Latin , meaning 'above'. The roles of a sovereign vary from monarch, ruler o ...
(£1) and
guinea Guinea ( ),, fuf, 𞤘𞤭𞤲𞤫, italic=no, Gine, wo, Gine, nqo, ߖߌ߬ߣߍ߫, bm, Gine officially the Republic of Guinea (french: République de Guinée), is a coastal country in West Africa. It borders the Atlantic Ocean to the we ...
('' q.v.''). 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 pounds sterling ( symbol "£", commercial GBP), and ranges in value from one penny sterling ...
and List of British coins and banknotes for details. By the 1950s, coins of Kings George III, 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 Victoria (Alexandrina Victoria; 24 May 1819 – 22 January 1901) was Queen of the United Kingdom of Great Britain and Ireland from 20 June 1837 until her death in 1901. Her reign of 63 years and 216 days was longer than that of any previ ...
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 ...
in 1947, and by the 1960s the silver coins were rarely seen. Silver/cupro-nickel shillings (from any period after 1816) and
florin The Florentine florin was a gold coin struck from 1252 to 1533 with no significant change in its design or metal content standard during that time. It had 54 grains (3.499 grams, 0.113 troy ounce) of nominally pure or 'fine' gold with a purch ...
s (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 in England . Here is a summary of changes to its value in terms of silver or gold until 1914.

## 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 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 ...
. The accounting system of dividing one pound into twenty
shilling The shilling is a historical coin, and the name of a unit of modern currencies formerly used in the United Kingdom, Australia, New Zealand, other British Commonwealth countries and Ireland, where they were generally equivalent to 12 pence ...
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 E ...
to the
Frankish Empire Francia, also called the Kingdom of the Franks ( la, Regnum Francorum), Frankish Kingdom, Frankland or Frankish Empire ( la, Imperium Francorum), was the largest post-Roman barbarian kingdom in Western Europe. It was ruled by the Franks dur ...
(see livre carolingienne). The penny was abbreviated to "d", from ''
denarius The denarius (, dēnāriī ) was the standard Roman silver coin from its introduction in the Second Punic War to the reign of Gordian III (AD 238–244), when it was gradually replaced by the antoninianus. It continued to be minted in very ...
'', the Roman equivalent of the penny; the shilling to "s" from
solidus Solidus (Latin for "solid") may refer to: * Solidus (coin) The ''solidus'' (Latin Latin (, or , ) is a classical language belonging to the Italic languages, Italic branch of the Indo-European languages. Latin was originally a dialect sp ...
(later evolving into a simple /); and the pound to "L" (subsequently £) from ''
Libra Libra generally refers to: * Libra (constellation), a constellation * Libra (astrology), an astrological sign based on the star constellation Libra may also refer to: Arts and entertainment * ''Libra'' (novel), a 1988 novel by Don DeLillo Mus ...
'' 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 symbo ...
''. 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 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'' coins in 1266, and their subsequent popularity, led to additional denominations in the form of groats worth four pence and half groats worth two pence. A
gold penny The gold penny was a medieval English coin with a value of twenty pence (i.e. pound sterling). Until the reign of King Henry III of England (1216–1272), any need in England for coins worth more than one penny, at the time a silver coin, was me ...
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, the introduction of gold coins received from
Flanders Flanders (, ; Dutch: ''Vlaanderen'' ) is the Flemish-speaking northern portion of Belgium and one of the communities, regions and language areas of Belgium. However, there are several overlapping definitions, including ones related to cultu ...
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 Plantage ...
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 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. 40 pence or th pound sterling made one
Troy Ounce Troy weight is a system of units of mass that originated in 15th-century England, and is primarily used in the precious metals industry. The troy weight units are the grain, the pennyweight (24 grains), the troy ounce (20 pennyweights), an ...
(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 The silver standard is a monetary system in which the standard economic unit of account is a fixed weight of silver. Silver was far more widespread than gold as the monetary standard worldwide, from the Sumerians 3000 BC until 1873. Followin ...
occurred amidst the 16th century influx of precious metals from the Americas arriving through the
Habsburg Netherlands Habsburg Netherlands was the Renaissance period fiefs in the Low Countries held by the Holy Roman Empire's House of Habsburg. The rule began in 1482, when the last Valois-Burgundy ruler of the Netherlands, Mary, wife of Maximilian I of Austr ...
. Enforcement of monetary standards amongst its constituent provinces was loose, spending under King
Henry VIII Henry VIII (28 June 149128 January 1547) was King of England from 22 April 1509 until his death in 1547. Henry is best known for his six marriages, and for his efforts to have his first marriage (to Catherine of Aragon) annulled. His disag ...
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 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 (''d''), halfpenny (''d''),
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 t ...
(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 inc ...
(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 currencies formerly used in the United Kingdom, Australia, New Zealand, other British Commonwealth countries and Ireland, where they were generally equivalent to 12 pence ...
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 (10/–) and
sovereign ''Sovereign'' is a title which can be applied to the highest leader in various categories. The word is borrowed from Old French , which is ultimately derived from the Latin , meaning 'above'. The roles of a sovereign vary from monarch, ruler o ...
(£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 Guinea ( ),, fuf, 𞤘𞤭𞤲𞤫, italic=no, Gine, wo, Gine, nqo, ߖߌ߬ߣߍ߫, bm, Gine officially the Republic of Guinea (french: République de Guinée), is a coastal country in West Africa. It borders the Atlantic Ocean to the we ...
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 In economics, Gresham's law is a monetary principle stating that "bad money drives out good". For example, if there are two forms of commodity money in circulation, which are accepted by law as having similar face value, the more valuable com ...
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 South ...
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 The Parliament of England was the legislature of the Kingdom of England from the 13th century until 1707 when it was replaced by the Parliament of Great Britain. Parliament evolved from the great council of bishops and peers that advised ...
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 standard of 95.83%. Silverware made purely from melted coins would be found wanting when the silversmith took his wares to the assay office, 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 g ...
, 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, XaAES ...
, 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 A gold standard is a monetary system in which the standard economic unit of account is based on a fixed quantity of gold. The gold standard was the basis for the international monetary system from the 1870s to the early 1920s, and from th ...
. Silver and copper tokens issued by private entities partly relieved the problem of small change until the
Great Recoinage of 1816 The Great Recoinage of 1816 was an attempt by the government of the United Kingdom of Great Britain and Ireland to re-stabilise its currency, the pound sterling, after the economic difficulties brought by the French Revolutionary Wars and the N ...
.

## 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 th ...
a year later. Both began to issue
paper money A banknote—also called a bill ( North American English), paper money, or simply a note—is a type of negotiable promissory note, made by a bank or other licensed authority, payable to the bearer on demand. Banknotes were originally issue ...
.

## 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 England is a country that is part of the United Kingdom. It shares land borders with Wales to its west and Scotland to its north. The Irish Sea lies northwest and the Celtic Sea to the southwest. It is separated from continental Europe ...
and
Scotland Scotland (, ) is a country that is part of the United Kingdom. Covering the northern third of the island of Great Britain, mainland Scotland has a border with England to the southeast and is otherwise surrounded by the Atlantic Ocean t ...
merged into the
Kingdom of Great Britain The Kingdom of Great Britain (officially Great Britain) was a sovereign country in Western Europe from 1 May 1707 to the end of 31 December 1800. The state was created by the 1706 Treaty of Union and ratified by the Acts of Union 1707, wh ...
. In accordance with the
Treaty of Union The Treaty of Union is the name usually now given to the treaty which led to the creation of the new state of Great Britain, stating that the Kingdom of England (which already included Wales) and the Kingdom of Scotland were to be "United ...
, 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 The United Kingdom of Great Britain and Ireland was a sovereign state in the British Isles that existed between 1801 and 1922, when it included all of Ireland. It was established by the Acts of Union 1800, which merged the Kingdom of Gre ...
. 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 ci ...
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 ...
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 ...
. 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 ...
. Several colonies and dominions adopted the pound as their own currency. These included
Australia Australia, officially the Commonwealth of Australia, is a sovereign country comprising the mainland of the Australian continent, the island of Tasmania, and numerous smaller islands. With an area of , Australia is the largest country b ...
,
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 Cyprus ; tr, Kıbrıs (), officially the Republic of Cyprus,, , lit: Republic of Cyprus is an island country located south of the Anatolian Peninsula in the eastern Mediterranean Sea. Its continental position is disputed; while it is g ...
,
Fiji Fiji ( , ,; fj, Viti, ; Fiji Hindi: फ़िजी, ''Fijī''), officially the Republic of Fiji, is an island country in Melanesia, part of Oceania in the South Pacific Ocean. It lies about north-northeast of New Zealand. Fiji cons ...
,
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 ...
,
Jamaica Jamaica (; ) is an island country situated in the Caribbean Sea. Spanning in area, it is the third-largest island of the Greater Antilles and the Caribbean (after Cuba and Hispaniola). Jamaica lies about south of Cuba, and west of His ...
,
New Zealand New Zealand ( mi, Aotearoa ) is an island country in the southwestern Pacific Ocean. It consists of two main landmasses—the North Island () and the South Island ()—and over 700 smaller islands. It is the sixth-largest island count ...
,
South Africa South Africa, officially the Republic of South Africa (RSA), is the southernmost country in Africa. It is bounded to the south by of coastline that stretch along the South Atlantic and Indian Oceans; to the north by the neighbouring count ...
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 kn ...
. 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 sterling area (or sterling bloc, legally scheduled territories) was a group of countries that either pegged their currencies to sterling, or actually used sterling as their own currency. The area began to appear informally during the ear ...
. 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 The Napoleonic Wars (1803–1815) were a series of major global conflicts pitting the French Empire and its allies, led by Napoleon I, against a fluctuating array of European states formed into various coalitions. It produced a period of Fre ...
,
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 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 p ...
, 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 A gold standard is a monetary system in which the standard economic unit of account is based on a fixed quantity of gold. The gold standard was the basis for the international monetary system from the 1870s to the early 1920s, and from th ...
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 ''Sovereign'' is a title which can be applied to the highest leader in various categories. The word is borrowed from Old French , which is ultimately derived from the Latin , meaning 'above'. The roles of a sovereign vary from monarch, ruler o ...
was introduced, valued at 20/–. Struck in 22‑carat gold, it contained 113 grains or of fine gold and replaced the
guinea Guinea ( ),, fuf, 𞤘𞤭𞤲𞤫, italic=no, Gine, wo, Gine, nqo, ߖߌ߬ߣߍ߫, bm, Gine officially the Republic of Guinea (french: République de Guinée), is a coastal country in West Africa. It borders the Atlantic Ocean to the we ...
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 The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major unincorporated territor ...
,
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 g ...
4.87 in
Canada Canada is a country in North America. Its ten provinces and three territories extend from the Atlantic Ocean to the Pacific Ocean and northward into the Arctic Ocean, covering over , making it the world's second-largest country by tota ...
, ƒ12.11 in Dutch territories, F 25.22 in French territories (or equivalent currencies of the
Latin Monetary Union The Latin Monetary Union (LMU) was a 19th-century system that unified several European currencies into a single currency that could be used in all member states when most national currencies were still made out of gold and silver. It was establ ...
), 20  43 in
Germany Germany,, officially the Federal Republic of Germany, is a country in Central Europe. It is the second most populous country in Europe after Russia, and the most populous member state of the European Union. Germany is situated betwe ...
, 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-ei ...
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 ...
. After the International Monetary Conference of 1867 in Paris, the possibility of the UK joining the
Latin Monetary Union The Latin Monetary Union (LMU) was a 19th-century system that unified several European currencies into a single currency that could be used in all member states when most national currencies were still made out of gold and silver. It was establ ...
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 World War I (28 July 1914 11 November 1918), often abbreviated as WWI, was one of the deadliest global conflicts in history. Belligerents included much of Europe, the Russian Empire, the United States, and the Ottoman Empire, with fighti ...
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 t ...
, 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 t ...
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 brief ...
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 pers ...
. 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 The Great Depression (19291939) was an economic shock that impacted most countries across the world. It was a period of economic depression that became evident after a major fall in stock prices in the United States. The economic contagio ...
, and sterling suffered an initial devaluation of some 25%. Since the suspension of the gold standard in 1931, sterling has been a
fiat currency Fiat money (from la, fiat, "let it be done") is a type of currency that is not backed by any commodity such as gold or silver. It is typically designated by the issuing government to be legal tender. Throughout history, fiat money was sometime ...
, 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 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 officia ...
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 World War II or the Second World War, often abbreviated as WWII or WW2, was a world war that lasted from 1939 to 1945. It involved the vast majority of the world's countries—including all of the great powers—forming two opposi ...
and became part of the
Bretton Woods system The Bretton Woods system of 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 Agreement. The Bretto ...
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 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, exchange controls 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 ...
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 Staffordshire (; postal abbreviation Staffs.) is a landlocked county in the West Midlands region of England. It borders Cheshire to the northwest, Derbyshire and Leicestershire to the east, Warwickshire to the southeast, the West Midlands C ...
House of Commons The House of Commons is the name for the elected lower house of the bicameral parliaments of the United Kingdom and Canada. In both of these countries, the Commons holds much more legislative power than the nominally upper house of parliamen ...
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 w ...
, 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, MP for Stirling Burghs, raised the issue of full decimalisation again in
Parliament In modern politics, and history, a parliament is a legislative body of government. Generally, a modern parliament has three functions: representing the electorate, making laws, and overseeing the government via hearings and inquiries. ...
in 1853, resulting in the Chancellor of the Exchequer, William Gladstone, 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 The House of Commons is the name for the elected lower house of the bicameral parliaments of the United Kingdom and Canada. In both of these countries, the Commons holds much more legislative power than the nominally upper house of parliamen ...
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 Hong Kong ( (US) or (UK); , ), officially the Hong Kong Special Administrative Region of the People's Republic of China ( abbr. Hong Kong SAR or HKSAR), is a city and special administrative region of China on the eastern Pearl River Delt ...
from 1863 to 1866;
Cyprus Cyprus ; tr, Kıbrıs (), officially the Republic of Cyprus,, , lit: Republic of Cyprus is an island country located south of the Anatolian Peninsula in the eastern Mediterranean Sea. Its continental position is disputed; while it is g ...
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 language, Latin via the Italian language, Italian ; Currency symbol, sign: £, sometimes £C for distinction), was the currency of Cyprus, including the So ...
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 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 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 Agreement. The Bretto ...
, 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 The sterling area (or sterling bloc, legally scheduled territories) was a group of countries that either pegged their currencies to sterling, or actually used sterling as their own currency. The area began to appear informally during the ear ...
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 Leonard James Callaghan, Baron Callaghan of Cardiff, ( ; 27 March 191226 March 2005), commonly known as Jim Callaghan, was Prime Minister of the United Kingdom from 1976 to 1979 and Leader of the Labour Party from 1976 to 1980. Callaghan is ...
became
Prime Minister A prime minister, premier or chief of cabinet is the head of the cabinet and the leader of the ministers in the executive branch of government, often in a parliamentary or semi-presidential system. Under those systems, a 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 and the
1973 oil crisis The 1973 oil crisis or first oil crisis began in October 1973 when the members of the Organization of Arab Petroleum Exporting Countries (OAPEC), led by Saudi Arabia, proclaimed an oil embargo. The embargo was targeted at nations that had s ...
were still being felt, with
inflation In economics, inflation is an increase in the general price level of goods and services in an economy. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation corresponds to a reductio ...
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 ''The Wall Street Journal'' is an American business-focused, international daily newspaper based in New York City, with international editions also available in Chinese and Japanese. The ''Journal'', along with its Asian editions, is published ...
'' 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 ga, Rialtas a Shoilse gd, Riaghaltas a Mhòrachd , image = HM Government logo.svg , image_size = 220px , image2 = Royal Coat of Arms of the United Kingdom (HM Government).svg , image_size2 = 180px , caption = Royal Arms , date_es ...
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 The federal government of the United States (U.S. federal government or U.S. government) is the national government of the United States, a federal republic located primarily in North America, composed of 50 states, a city within a fe ...
feared the crisis could endanger
NATO The North Atlantic Treaty Organization (NATO, ; french: Organisation du traité de l'Atlantique nord, ), also called the North Atlantic Alliance, is an intergovernmental military alliance between 30 member states – 28 European and two N ...
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 Lis ...
(EEC), and in light of this the US Treasury set out to force domestic policy changes. In November 1976, the
International Monetary Fund 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 gl ...
(IMF) announced the conditions for a loan, including deep cuts in public expenditure.

## 1979–1989

The Conservative Party 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 s ...
, 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 Monetarism is a school of thought in monetary economics that emphasizes the role of governments in controlling the amount of money in circulation. Monetarist theory asserts that variations in the money supply have major influences on national ...
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 The chancellor of the Exchequer, often abbreviated to chancellor, is a senior minister of the Crown within the Government of the United Kingdom, and head of His Majesty's Treasury. As one of the four Great Offices of State, the Chancellor i ...
, Nigel Lawson, decided that sterling should "shadow" the
Deutsche Mark The Deutsche Mark (; English: ''German mark''), abbreviated "DM" or "D-Mark" (), was the official currency of West Germany from 1948 until 1990 and later the unified Germany from 1990 until the adoption of the euro in 2002. In English, it was ...
(DM), with the unintended result of a rapid rise in inflation as the economy boomed due to low interest rates. Following
German reunification German reunification (german: link=no, Deutsche Wiedervereinigung) was the process of re-establishing Germany as a united and fully sovereign state, which took place between 2 May 1989 and 15 March 1991. The day of 3 October 1990 when the Ge ...
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 Pann ...
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 th ...
" (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 statist ...
(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 The chancellor of the Exchequer, often abbreviated to chancellor, is a senior minister of the Crown within the Government of the United Kingdom, and head of His Majesty's Treasury. As one of the four Great Offices of State, the Chancellor i ...
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 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 The chancellor of the Exchequer, often abbreviated to chancellor, is a senior minister of the Crown within the Government of the United Kingdom, and head of His Majesty's Treasury. As one of the four Great Offices of State, the Chancellor i ...
, 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 Cyprus ; tr, Kıbrıs (), officially the Republic of Cyprus,, , lit: Republic of Cyprus is an island country located south of the Anatolian Peninsula in the eastern Mediterranean Sea. Its continental position is disputed; while it is g ...
switching its currency from the
Cypriot pound The pound, or lira ( el, λίρα, plural , and tr, lira, ota, لیره, from the Latin language, Latin via the Italian language, Italian ; Currency symbol, sign: £, sometimes £C for distinction), was the currency of Cyprus, including the So ...
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 Territory o ...
) followed suit, making the Sovereign Base Areas 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" 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 (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 European Union (EU) is a supranational political and economic union of member states that are located primarily in Europe. The union has a total area of and an estimated total population of about 447million. The EU has often been ...
, the United Kingdom could have adopted the
euro The euro ( symbol: €; code: EUR) is the official currency of 19 out of the member states of the European Union (EU). This group of states is known as the eurozone or, officially, the euro area, and includes about 340 million citize ...
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, and shares in the
European Central Bank The European Central Bank (ECB) is the prime component of the monetary Eurosystem and the European System of Central Banks (ESCB) as well as one of seven institutions of the European Union. It is one of the world's most important centr ...
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 f ...
into the British economy, through a process known as
quantitative easing Quantitative easing (QE) is a monetary policy action whereby a central bank purchases predetermined amounts of government bonds or other financial assets in order to stimulate economic activity. Quantitative easing is a novel form of monetary ...
(QE). This was the first time in the United Kingdom's history that this measure had been used, although the Bank's
Governor A governor is an administrative leader and head of a polity or political region, ranking under the head of state and in some cases, such as governors-general, as the head of state's official representative. Depending on the type of political ...
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 c ...
s such as
government bond A government bond or sovereign bond is a form of bond issued by a government to support public spending. It generally includes a commitment to pay periodic interest, called coupon payments'','' and to repay the face value on the maturity da ...
s, 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 som ...
, 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 The chancellor of the Exchequer, often abbreviated to chancellor, is a senior minister of the Crown within the Government of the United Kingdom, and head of His Majesty's Treasury. As one of the four Great Offices of State, the Chancellor i ...
Alistair Darling 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 In economics, inflation is an increase in the general price level of goods and services in an economy. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation corresponds to a reductio ...
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 An interest rate is the amount of interest due per period, as a proportion of the amount lent, deposited, or borrowed (called the principal sum). The total interest on an amount lent or borrowed depends on the principal sum, the interest rate, th ...
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 statist ...
) 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 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 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 The gold penny was a medieval English coin with a value of twenty pence (i.e. pound sterling). Until the reign of King Henry III of England (1216–1272), any need in England for coins worth more than one penny, at the time a silver coin, was me ...
(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 inc ...
'' 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 currencies formerly used in the United Kingdom, Australia, New Zealand, other British Commonwealth countries and Ireland, where they were generally equivalent to 12 pence ...
(abbr.: ''s''; known as the ''testoon'', equivalent to twelve pence) in 1487 and the pound (known as the ''
sovereign ''Sovereign'' is a title which can be applied to the highest leader in various categories. The word is borrowed from Old French , which is ultimately derived from the Latin , meaning 'above'. The roles of a sovereign vary from monarch, ruler o ...
'', 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 Henry VIII (28 June 149128 January 1547) was King of England from 22 April 1509 until his death in 1547. Henry is best known for his six marriages, and for his efforts to have his first marriage (to Catherine of Aragon) annulled. His disag ...
's reign (1509–1547) saw a high level of
debasement A debasement of coinage is the practice of lowering the intrinsic value of coins, especially when used in connection with commodity money, such as gold or silver coins. A coin is said to be debased if the quantity of gold, silver, copper or nic ...
which continued into the reign of
Edward VI Edward VI (12 October 1537 – 6 July 1553) was King of England and Ireland from 28 January 1547 until his death in 1553. He was crowned on 20 February 1547 at the age of nine. Edward was the son of Henry VIII and Jane Seymour and the first E ...
(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 Elizabeth I (7 September 153324 March 1603) was Queen of England and Ireland from 17 November 1558 until her death in 1603. Elizabeth was the last of the five House of Tudor monarchs and is sometimes referred to as the "Virgin Queen". El ...
(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 James is a common English language surname and given name: *James (name), the typically masculine first name James * James (surname), various people with the last name James James or James City may also refer to: People * King James (disambigua ...
to the English throne, a new gold coinage was introduced, including the '' spur ryal'' (15/–), the '' unite'' (20/–) and the ''rose ryal'' (30/–). The ''
laurel Laurel may refer to: Plants * Lauraceae, the laurel family * Laurel (plant), including a list of trees and plants known as laurel People * Laurel (given name), people with the given name * Laurel (surname), people with the surname * Laurel (mus ...
'', worth 20/–, followed in 1619. The first base metal coins were also introduced:
tin Tin is a chemical element with the symbol Sn (from la, stannum) and atomic number 50. Tin is a silvery-coloured metal. Tin is soft enough to be cut with little force and a bar of tin can be bent by hand with little effort. When bent, ...
and
copper Copper is a chemical element with the symbol Cu (from la, cuprum) and atomic number 29. It is a soft, malleable, and ductile metal with very high thermal and electrical conductivity. A freshly exposed surface of pure copper has a pinkis ...
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 The English Civil War (1642–1651) was a series of civil wars and political machinations between Parliamentarians (" Roundheads") and Royalists led by Charles I (" Cavaliers"), mainly over the manner of England's governance and issues of r ...
, a number of siege coinages were produced, often in unusual denominations. Following the restoration of the monarchy in 1660, the coinage was reformed, with the ending of production of hammered coins in 1662. The ''
guinea Guinea ( ),, fuf, 𞤘𞤭𞤲𞤫, italic=no, Gine, wo, Gine, nqo, ߖߌ߬ߣߍ߫, bm, Gine officially the Republic of Guinea (french: République de Guinée), is a coastal country in West Africa. It borders the Atlantic Ocean to the we ...
'' 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 dollar The Spanish dollar, also known as the piece of eight ( es, Real de a ocho, , , or ), is a silver coin of approximately diameter worth eight Spanish reales. It was minted in the Spanish Empire following a monetary reform in 1497 with content ...
s (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 ''Sovereign'' is a title which can be applied to the highest leader in various categories. The word is borrowed from Old French , which is ultimately derived from the Latin , meaning 'above'. The roles of a sovereign vary from monarch, ruler o ...
. 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 The Florentine florin was a gold coin struck from 1252 to 1533 with no significant change in its design or metal content standard during that time. It had 54 grains (3.499 grams, 0.113 troy ounce) of nominally pure or 'fine' gold with a purch ...
'' was introduced, followed by the short-lived double florin in 1887. In 1860, copper was replaced by bronze in the farthing (quarter penny, ''d''), halfpenny and penny. During the
First World War World War I (28 July 1914 11 November 1918), often abbreviated as WWI, was one of the deadliest global conflicts in history. Belligerents included much of Europe, the Russian Empire, the United States, and the Ottoman Empire, with fighti ...
, 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 A gold standard is a monetary system in which the standard economic unit of account is based on a fixed quantity of gold. The gold standard was the basis for the international monetary system from the 1870s to the early 1920s, and from th ...
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 ...
, with the exception of Maundy coinage 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 ...
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
heptagon In geometry, a heptagon or septagon is a seven-sided polygon or 7-gon. The heptagon is sometimes referred to as the septagon, using "sept-" (an elision of '' septua-'', a Latin-derived numerical prefix, rather than '' hepta-'', a Greek-derive ...
al cupro-nickel 50p coin replaced the ten shilling note (10/–). * 1970: The half crown (2/6''d'', 12.5p) was demonetised. * 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 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 Steel is an alloy made up of iron with added carbon to improve its strength and fracture resistance compared to other forms of iron. Many other elements may be present or added. Stainless steels that are corrosion- and oxidation-resistan ...
(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 ...
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 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
entrepreneur Entrepreneurship is the creation or extraction of economic value. With this definition, entrepreneurship is viewed as change, generally entailing risk beyond what is normally encountered in starting a business, which may include other values t ...
s was becoming worthwhile (with a premium of up to 11%, with smelting costs reducing this to around 4%)—although this is illegal, and the
market value Market value 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 th ...
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. * 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 The Napoleonic Wars (1803–1815) were a series of major global conflicts pitting the French Empire and its allies, led by Napoleon I, against a fluctuating array of European states formed into various coalitions. It produced a period of Fre ...
. 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 th ...
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 Davi ...
was still the currency of Scotland, these notes were denominated in sterling in values up to £100. From 1727, the
Royal Bank of Scotland The Royal Bank of Scotland plc (RBS; gd, Banca Rìoghail na h-Alba) is a major retail and commercial bank in Scotland. It is one of the retail banking subsidiaries of NatWest Group, together with NatWest (in England and Wales) and Ulster B ...
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 World War II or the Second World War, often abbreviated as WWII or WW2, was a world war that lasted from 1939 to 1945. It involved the vast majority of the world's countries—including all of the great powers—forming two opposi ...
had a drastic effect on the note production of the Bank of England. Fearful of mass forgery by the
Nazi Nazism ( ; german: Nazismus), the common name in English for National Socialism (german: Nationalsozialismus, ), is the far-right totalitarian political ideology and practices associated with Adolf Hitler and the Nazi Party (NSDAP) i ...
s (see Operation Bernhard), 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 lamps. Three printing techniques are involved: offset litho,
intaglio Intaglio, the process of cutting a design into a surface, may refer to: * Intaglio, a type of engraved gem or metal signet ring * Intaglio (printmaking), a group of printmaking techniques, including engraving and etching * Intaglio (rock art) * I ...
and
letterpress Letterpress printing is a technique of relief printing. Using a printing press, the process allows many copies to be produced by repeated direct impression of an inked, raised surface against sheets or a continuous roll of paper. A worker co ...
; and the notes incorporate a total of 85 specialized inks. The Bank of England produces notes named "
giant In folklore, giants (from Ancient Greek: '' gigas'', cognate giga-) are beings of human-like appearance, but are at times prodigious in size and strength or bear an otherwise notable appearance. The word ''giant'' is first attested in 1297 f ...
" and " titan". 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, 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 banknote ...
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 b ...
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, ofte ...
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 His Majesty's Treasury (HM Treasury), occasionally referred to as the Exchequer, or more informally the Treasury, is a department of His Majesty's Government responsible for developing and executing the government's public finance policy and e ...
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 The Royal Mint is the United Kingdom's oldest company and the official maker of British coins. Operating under the legal name The Royal Mint Limited, it is a limited company that is wholly owned by His Majesty's Treasury and is under an exclu ...
, 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 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 p ...
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 England and Wales () is one of the three legal jurisdictions of the United Kingdom. It covers the constituent countries England and Wales and was formed by the Laws in Wales Acts 1535 and 1542. The substantive law of the jurisdiction is En ...
, 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 World War II or the Second World War, often abbreviated as WWII or WW2, was a world war that lasted from 1939 to 1945. It involved the vast majority of the world's countries—including all of the great powers—forming two opposi ...
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 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 £5 and 25p (crown) coins, and decimal sixpences (6p, not the 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 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 p ...
, as are the
bullion coin Bullion is non-ferrous metal that has been refined to a high standard of elemental purity. The term is ordinarily applied to bulk metal used in the production of coins and especially to precious metals such as gold and silver. It comes from t ...
s issued by the Mint.

## Pegged currencies

In Britain's Crown Dependencies, the
Manx 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. Pa ...
, Jersey pound, and
Guernsey pound The pound is the currency of Guernsey. Since 1921, Guernsey has been in currency union with the United Kingdom and the Guernsey pound is not a separate currency but is a local issue of sterling banknotes and coins, in a similar way to the banknot ...
are unregulated by the Bank of England and are issued independently. However, they are maintained at a
fixed exchange rate A fixed exchange rate, often called a pegged exchange rate, is a type of exchange rate regime in which a currency's value is fixed or pegged by a monetary authority against the value of another currency, a basket of other currencies, or another ...
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 A currency union (also known as monetary union) is an intergovernmental agreement that involves two or more states sharing the same currency. These states may not necessarily have any further integration (such as an economic and monetary 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 ...
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 Br ...
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 The pound (sign: £; ISO code: GIP) is the currency of Gibraltar. It is pegged to – and exchangeable with – sterling at par value. Coins and banknotes of the Gibraltar pound are issued by the Government of Gibraltar. History Until 1872, t ...
, and
Saint Helena pound The pound is the currency of the Atlantic islands of Saint Helena and Ascension, which are constituent parts of the British Overseas Territory of Saint Helena, Ascension and Tristan da Cunha. It is fixed at parity with sterling, and so both cur ...
are set at a fixed 1:1 exchange rate with the British pound by local governments.

# Value

In 2006, the
House of Commons Library The House of Commons Library is the library and information resource of the lower house of the British Parliament. It was established in 1818, although its original 1828 construction was destroyed during the burning of Parliament in 1834. The ...
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 The Napoleonic Wars (1803–1815) were a series of major global conflicts pitting the French Empire and its allies, led by Napoleon I, against a fluctuating array of European states formed into various coalitions. It produced a period of Fre ...
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 In economics, inflation is an increase in the general price level of goods and services in an economy. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation corresponds to a reductio ...
has had a dramatic effect during and after
World War II World War II or the Second World War, often abbreviated as WWII or WW2, was a world war that lasted from 1939 to 1945. It involved the vast majority of the world's countries—including all of the great powers—forming two opposi ...
: 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 as ...
s around the world, and its value relative to other currencies therefore fluctuates.

# Reserve

Sterling is used as a
reserve currency A reserve currency (or anchor currency) is a foreign currency that is held in significant quantities by central banks or other monetary authorities as part of their foreign exchange reserves. The reserve currency can be used in international t ...
around the world. , it is ranked fourth in value held as reserves.

* Commonwealth banknote-issuing institutions *
List of British currencies A variety of currencies are tender in the United Kingdom, its overseas territories and crown dependencies. This list covers all of those currently in circulation. References See also * Sterling area * Bank of England * Currencies of the B ...
* List of currencies in Europe * List of the largest trading partners of United Kingdom *
Pound (currency) Pound is the name for a unit of currency. It is used in some countries today and previously was used in many others. The English word ''pound'' derives from the Latin expression , in which lībra is a noun meaning "pound" and ''pondō'' is an adv ...
other currencies with a "pound" unit of account.

# References

* * ''The Perspective of the World'', Vol III of ''Civilisation and Capitalism'',
Fernand Braudel Fernand Braudel (; 24 August 1902 – 27 November 1985) was a French historian and leader of the Annales School. His scholarship focused on three main projects: ''The Mediterranean'' (1923–49, then 1949–66), ''Civilization and Capitalism'' ...
, 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 The University of Chicago Press is the largest and one of the oldest university presses in the United States. It is operated by the University of Chicago and publishes a wide variety of academic titles, including '' The Chicago Manual of Style'' ...
(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 Princeton University Press is an independent publisher with close connections to Princeton University. Its mission is to disseminate scholarship within academia and society at large. The press was founded by Whitney Darrow, with the financia ...
(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 Oxford University Press (OUP) is the university press of the University of Oxford. It is the largest university press in the world, and its printing history dates back to the 1480s. Having been officially granted the legal right to print books ...
(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) * * *