UK pound

Sterling (abbreviation: stg; Other spelling styles, such as STG and Stg, are also seen. ISO code: GBP) is the currency of the United Kingdom and nine of its associated territories. The pound ( sign: £) is the main unit of sterling, and the word "pound" is also used to refer to the British currency generally, often qualified in international contexts as the British pound or the pound sterling.

Sterling is the world's oldest currency that is still in use and that has been in continuous use since its inception. It is currently the fourth most-traded currency in the foreign exchange market, after the United States dollar, the euro, and the Japanese yen. Together with those three currencies and Renminbi, it forms the basket of currencies which calculate the value of IMF special drawing rights. As of mid-2021, sterling is also the fourth most-held reserve currency in global reserves.

The Bank of England is the central bank 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.

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" and " yuan" when discussing the official currency of the People's Republic of China.

Etymology

There are various theories regarding the origin of the word "sterling". ''The Oxford English Dictionary'' states that the "most plausible" etymology is a derivation from the Old English ''steorra'' for "star" with the added diminutive suffix "-ling", to yield "little star". The reference is to the silver penny used in Norman England in the twelfth century, which bore a small star.

Another argument, according to which the Hanseatic League was the origin of both its definition and manufacture as well as its name is that the German name for the Baltic is "Ostsee", or "East Sea", and from this the Baltic merchants were called "Osterlings", or "Easterlings". In 1260, Henry III granted them a charter of protection and land for their Kontor, the Steelyard of London, which by the 1340s was also called "Easterlings Hall", or Esterlingeshalle. Because the League's money was not frequently debased like that of England, English traders stipulated to be paid in pounds of the "Easterlings", which was contracted to "'sterling". The OED dismisses this theory as unlikely, since the stressed first syllable would not have been elided.

Encyclopædia Britannica states the (pre-Norman) Anglo-Saxon kingdoms had silver coins called "sterlings" and that the compound noun "pound sterling" was derived from a pound (weight) of these sterlings.

Symbol

The currency sign 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 was still using this style of notation as late as 1939. The glyphs and may occasionally be encountered. Use of the letter for pound derives from medieval Latin documents: "L" was the abbreviation for , the Roman pound (weight), which in time became an English 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) currency system, the term £sd (or Lsd) for pounds, shillings and pence referred to the Roman , ''solidus'', and ''denarius''.

Notable style guides recommend that the pound sign be used without any abbreviation or qualification to indicate sterling (e.g., £12,000). Notations with a more explicit sterling abbreviation such as ''£ ..nbsp;stg.'' (e.g., £12,000 stg.), ''£stg.'' (e.g., ), ''stg'' or ''STG'' (e.g., Stg. 12,000 or STG 12,000), or the ISO 4217 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 code for the United Kingdom, "GB", and the first letter of "pound". Banking and finance often use the abbreviation ''stg'' or the pseudo-ISO code '' STG''. The Crown Dependencies use their own abbreviations which are not ISO codes but may be used like them: GGP ( Guernsey pound), JEP (Jersey pound) and IMP ( Isle of Man pound). Stock prices are often quoted in pence, so traders may refer to penny sterling, GBX (sometimes GBp), when listing stock prices.

Cable

The exchange rate of sterling against the US dollar is referred to as "cable" in the wholesale foreign exchange markets. 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. 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 is either sterling or is pegged to sterling at par. These are Jersey, Guernsey, the Isle of Man, the Falkland Islands, Gibraltar, South Georgia and the South Sandwich Islands, Saint Helena and the British Antarctic Territory, and Tristan da Cunha.

Some British Overseas Territories have a local currency that is pegged to the U.S. dollar or the New Zealand dollar. The Sovereign Base Areas of Akrotiri and Dhekelia (in Cyprus) use the euro.

Subdivisions and other units

Decimal coinage

Since decimalisation on Decimal Day in 1971, the pound has been divided into 100 pence (denoted on coinage, until 1981, as "new pence"). The symbol for the penny is "p"; hence an amount such as 50p (£0.50) properly pronounced "fifty pence" is often pronounced "fifty pee" /fɪfti piː/. The old sign ''d'' was not reused for the ''new penny'' in order to avoid confusion between the two units. A decimal halfpenny (p, worth 1.2 old pennies) was issued until 1984 but was withdrawn due to inflation.

Pre-decimal

Before decimalisation in 1971, the pound was divided into 20 shillings, and each shilling into 12 pence, making 240 pence to the pound. The symbol for the shilling was "''s''." not from the first letter of "shilling", but from the Latin ''solidus''. The symbol for the penny was "''d''.", from the French ''denier'', from the Latin ''denarius'' (the solidus and denarius were Roman coins). A mixed sum of shillings and pence, such as 3 shillings and 6 pence, was written as "3/6" or "3''s''. 6''d''." and spoken as "three and six" or "three and sixpence" except for "1/1", "2/1" etc., which were spoken as "one and a penny", "two and a penny", etc. 5 shillings, for example, was written as "5''s''." or, more commonly, "5/–" (five shillings, no pence).
Various coin denominations had, and in some cases continue to have, special names, such as florin (2/–), crown (5/–), half crown (2/6''d''), farthing (''d''), sovereign (£1) and guinea (''q.v.''). See Coins of the pound 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 onwards could be found in circulation. Silver coins were replaced by those in cupro-nickel in 1947, and by the 1960s the silver coins were rarely seen. Silver/cupro-nickel shillings (from any period after 1816) and florins (2 shillings) remained 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 poll of 1,000 people suggested that 71% would vote no to the euro, 23% would vote yes, while 6% said they were unsure. Sterling did not join the Second European Exchange Rate Mechanism (ERM II) after the euro was created. Denmark and the UK had opt-outs from entry to the euro. Theoretically, every EU nation but Denmark must eventually sign up.

As a member of the European Union, the United Kingdom could have adopted the euro as its currency. However, the subject was always politically controversial, and the UK negotiated an opt-out on this issue. Following the UK's withdrawal from the EU, on 31 January 2020, the Bank of England ended its membership of the European System of Central Banks, and shares in the European Central Bank were reallocated to other EU banks.

Recent exchange rates

Sterling and the euro fluctuate in value against one another, although there may be correlation between movements in their respective exchange rates with other currencies such as the US dollar. Inflation concerns in the UK led the Bank of England to raise interest rates in late 2006 and 2007. This caused sterling to appreciate against other major currencies and, with the US dollar depreciating at the same time, sterling hit a 15-year high against the US dollar on 18 April 2007, with £1 reaching US$2 the day before, for the first time since 1992. Sterling and many other currencies continued to appreciate against the dollar; sterling hit a 26-year high of £1 to US$2.1161 on 7 November 2007 as the dollar fell worldwide. From mid-2003 to mid-2007, the pound/euro rate remained within a narrow range (€1.45 ± 5%).

Following the global financial crisis in late 2008, sterling depreciated sharply, declining to £1 to US$1.38 on 23 January 2009 and falling below £1 to €1.25 against the euro in April 2008. There was a further decline during the remainder of 2008, most dramatically on 29 December when its euro rate hit an all-time low at €1.0219, while its US dollar rate depreciated. Sterling appreciated in early 2009, reaching a peak against the euro of £1 to €1.17 in mid-July. In the following months sterling remained broadly steady against the euro, with £1 valued on 27 May 2011 at €1.15 and US$1.65.

On 5 March 2009, the Bank of England announced that it would pump £75 billion of new capital into the British economy, through a process known as quantitative easing (QE). This was the first time in the United Kingdom's history that this measure had been used, although the Bank's Governor Mervyn King suggested it was not an experiment.

The process saw the Bank of England creating new money for itself, which it then used to purchase assets such as government bonds, secured commercial paper, or corporate bonds. The initial amount stated to be created through this method was £75 billion, although Chancellor of the Exchequer 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 falling below the 2% target rate. Mervyn King, the Governor of the Bank of England, had also suggested there were no other monetary options left, as interest rates had already been cut to their lowest level ever (0.5%) and it was unlikely that they would be cut further.

The inflation rate rose in following years, reaching 5.2% per year (based on the Consumer Price Index) 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 (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'' 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'' 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 (abbr.: ''s''; known as the ''testoon'', equivalent to twelve pence) in 1487 and the pound (known as the '' sovereign'', abbr.: ''£'' before numerals or "''l''." after them, equivalent to twenty shillings) in 1489. In 1526, several new denominations of gold coins were added, including the ''crown'' and '' half crown'', worth five shillings (''5/–'') and two shillings and six pence (''2/6'', ''two and six'') respectively. Henry VIII's reign (1509–1547) saw a high level of debasement which continued into the reign of Edward VI (1547–1553). This debasement was halted in 1552, and new silver coinage was introduced, including coins for 1''d'', 2''d'', 3d, 4''d'' and 6''d'', 1/–, 2/6''d'' and 5/–. In the reign of Elizabeth I (1558–1603), silver ''d'' and ''d'' coins were added, but these denominations did not last. Gold coins included the half-crown, crown, angel, half-sovereign (10/–) and sovereign (£1). Elizabeth's reign also saw the introduction of the horse-drawn screw press to produce the first "milled" coins.

Following the succession of the Scottish King James VI to the English throne, a new gold coinage was introduced, including the ''spur ryal'' (15/–), the ''unite'' (20/–) and the ''rose ryal'' (30/–). The ''laurel'', worth 20/–, followed in 1619. The first base metal coins were also introduced: tin and copper farthings. Copper halfpenny coins followed in the reign of Charles I. During the English Civil War, a number of siege coinages were produced, often in unusual denominations.

Following the restoration of the monarchy in 1660, the coinage was reformed, with the ending of production of hammered coins in 1662. The '' guinea'' was introduced in 1663, soon followed by the , 2 and 5 guinea coins. The silver coinage consisted of denominations of 1''d'', 2''d'', 3''d'', 4''d'' and 6''d'', 1/–, 2/6''d'' and 5/–. Due to the widespread export of silver in the 18th century, the production of silver coins gradually came to a halt, with the half crown and crown not issued after the 1750s, the 6''d'' and 1/– stopping production in the 1780s. In response, copper 1''d'' and 2''d'' coins and a gold guinea (7/–) were introduced in 1797. The copper penny was the only one of these coins to survive long.

To alleviate the shortage of silver coins, between 1797 and 1804, the Bank of England counterstamped Spanish dollars (8 reales) and other Spanish and Spanish colonial coins for circulation. A small counterstamp of the King's head was used. Until 1800, these circulated at a rate of 4/9''d'' for 8 reales. After 1800, a rate of 5/– for 8 reales was used. The Bank then issued silver tokens for 5/– (struck over Spanish dollars) in 1804, followed by tokens for 1/6''d'' and 3/– between 1811 and 1816.

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

During the First World War, production of the sovereign and half-sovereign was suspended, and although the gold standard was later restored, the coins saw little circulation thereafter. In 1920, the silver standard, maintained at .925 since 1552, was reduced to .500. In 1937, a nickel-brass 3''d'' coin was introduced; the last silver 3''d'' coins were issued seven years later. In 1947, the remaining silver coins were replaced with cupro-nickel, 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 5p and 10p coins which were the same size as, equivalent in value to, and circulated alongside, the one shilling coin and the florin (two shilling coin) respectively.
* 1969: The curved equilateral heptagonal cupro-nickel 50p coin replaced the ten shilling note (10/–).
* 1970: The half crown (2/6''d'', 12.5p) was demonetised.
* 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, historically valued at five shillings (25p), was re-tariffed for future issues as a commemorative coin at £5.
* 1990: A new 5p coin was introduced, replacing the original size that had been the same as the shilling coins of the same value that it had in turn replaced. These first generation 5p coins and any remaining old shilling coins were withdrawn from circulation in 1991.
*1992: A new 10p coin was introduced, replacing the original size that had been the same as the florin or two shilling coins of the same value that it had in turn replaced. These first generation 10p coins and any remaining old florin coins were withdrawn from circulation over the following two years.
* 1992: 1p and 2p coins began to be minted in copper-plated steel (the original bronze 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 entrepreneurs was becoming worthwhile (with a premium of up to 11%, with smelting costs reducing this to around 4%)—although this is illegal, and the market value 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 shortly after its foundation in 1694. Denominations were initially handwritten on the notes at the time of issue. From 1745, the notes were printed in denominations between £20 and £1,000, with any odd shillings added by hand. £10 notes were added in 1759, followed by £5 in 1793 and £1 and £2 in 1797. The lowest two denominations were withdrawn after the end of the Napoleonic wars. In 1855, the notes were converted to being entirely printed, with denominations of £5, £10, £20, £50, £100, £200, £300, £500 and £1,000 issued.

The Bank of Scotland began issuing notes in 1695. Although the pound Scots was still the currency of Scotland, these notes were denominated in sterling in values up to £100. From 1727, the Royal Bank of Scotland also issued notes. Both banks issued some notes denominated in guineas as well as pounds. In the 19th century, regulations limited the smallest note issued by Scottish banks to be the £1 denomination, a note not permitted in England.

With the extension of sterling to Ireland in 1825, the Bank of Ireland 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 introduced notes for 10/– and £1 to replace gold coins. These circulated until 1928 when they were replaced by Bank of England notes. Irish independence reduced the number of Irish banks issuing sterling notes to five operating in Northern Ireland. The Second World War had a drastic effect on the note production of the Bank of England. Fearful of mass forgery by the Nazis (see Operation Bernhard), 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 and letterpress; and the notes incorporate a total of 85 specialized inks.

The Bank of England produces notes named "giant" 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.

Polymer banknotes

The Northern Bank £5 note, issued by Northern Ireland's Northern Bank (now Danske Bank) in 2000, was the only 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 of the United Kingdom which has been delegated authority by the government, the Bank of England sets the monetary policy for the British pound by controlling the amount of money in circulation. It has a monopoly on the issuance of banknotes in England and Wales and regulates the amount of banknotes issued by seven authorized banks in Scotland and Northern Ireland. HM Treasury has reserve powers to give orders to the committee "if they are required in the public interest and by extreme economic circumstances" but such orders must be endorsed by Parliament within 28 days.

Unlike banknotes which have separate issuers in Scotland and Northern Ireland, all British coins are issued by the Royal Mint, an independent enterprise (wholly owned by the Treasury) which also mints coins for other countries.

Legal tender and national issues

Legal tender in the United Kingdom is defined such that "a debtor cannot successfully be sued for non-payment if he pays into court in legal tender." Parties can alternatively settle a debt by other means with mutual consent. Strictly speaking, it is necessary for the debtor to offer the exact amount due as there is no obligation for the other party to provide change.

Throughout the UK, £1 and £2 coins are legal tender for any amount, with the other coins being legal tender only for limited amounts. Bank of England notes are legal tender for any amount in England and Wales, but not in Scotland or Northern Ireland. (Bank of England 10/– and £1 notes were legal tender, as were Scottish banknotes, during World War II under the Currency (Defence) Act 1939, which was repealed on 1 January 1946.) Channel Islands 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, as are the bullion coins issued by the Mint.

Pegged currencies

In Britain's Crown Dependencies, the Manx pound, Jersey pound, and Guernsey pound are unregulated by the Bank of England and are issued independently. However, they are maintained at a fixed exchange rate by their respective governments, and Bank of England notes have been made legal tender on the islands, forming a sort of one-way de facto currency union. Internationally they are considered local issues of sterling so do not have ISO 4217 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 are responsible for the monetary policy of their own currencies (where they exist), and have their own ISO 4217 codes. The Falkland Islands pound, Gibraltar pound, and Saint Helena pound are set at a fixed 1:1 exchange rate with the British pound by local governments.

Value

In 2006, the House of Commons Library published a research paper which included an index of prices for each year between 1750 and 2005, where 1974 was indexed at 100.

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

The value of the index in 1751 was 5.1, increasing to a peak of 16.3 in 1813 before declining very soon after the end of the Napoleonic Wars to around 10.0 and remaining in the range 8.5–10.0 at the end of the 19th century. The index was 9.8 in 1914 and peaked at 25.3 in 1920, before declining to 15.8 in 1933 and 1934—prices were only about three times as high as they had been 180 years earlier.

Inflation has had a dramatic effect during and after World War II: the index was 20.2 in 1940, 33.0 in 1950, 49.1 in 1960, 73.1 in 1970, 263.7 in 1980, 497.5 in 1990, 671.8 in 2000 and 757.3 in 2005.

The following table shows the equivalent amount of goods and services that, in a particular year, could be purchased with £1.

The table shows that from 1971 to 2018 £1 sterling. lost 92.74% of its buying power.

The smallest coin in 1971 was the p, worth about 6.4p in 2015 prices.

Exchange rate

Sterling is freely bought and sold on the foreign exchange markets around the world, and its value relative to other currencies therefore fluctuates.

Reserve

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

See also

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

Footnotes

References

Further reading

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

Royal Mint

Pound Sterling – BBC News
( Foreign exchange market news)

{{DEFAULTSORT:Pound Sterling

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