Pounds Sterling
   HOME

TheInfoList



OR:

Sterling (
symbol A symbol is a mark, Sign (semiotics), sign, or word that indicates, signifies, or is understood as representing an idea, physical object, object, or wikt:relationship, relationship. Symbols allow people to go beyond what is known or seen by cr ...
: £; currency code: GBP) is the
currency A currency 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 definition is that a currency is a ''system of money'' in common use within a specific envi ...
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 Northwestern Europe, off the coast of European mainland, the continental mainland. It comprises England, Scotlan ...
and nine of its associated territories. The pound 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 in continuous use since its inception. In 2022, it was 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. By trading volume, ...
, after the
United States dollar The United States dollar (Currency symbol, symbol: Dollar sign, $; ISO 4217, currency code: USD) is the official currency of the United States and International use of the U.S. dollar, several other countries. The Coinage Act of 1792 introdu ...
, the
euro The euro (currency symbol, symbol: euro sign, €; ISO 4217, currency code: EUR) is the official currency of 20 of the Member state of the European Union, member states of the European Union. This group of states is officially known as the ...
, 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 and the euro. It is also widely used as a third reserve currency after the US dollar and the euro. Th ...
. Together with those three currencies and the
renminbi The renminbi ( ; currency symbol, symbol: Yen and yuan sign, ¥; ISO 4217, ISO code: CNY; abbreviation: RMB), also known as the Chinese yuan, is the official currency of the China, People's Republic of China. The renminbi is issued by the Peop ...
, it forms the
basket of currencies A currency basket is a portfolio of selected currencies with different weightings. A currency basket is commonly used by investors to minimize the risk of currency fluctuations and also governments when setting the market value of a country's ...
that calculate the value of IMF special drawing rights. As of late 2022, sterling is also the fourth most-held reserve currency in global reserves. The
Bank of England The Bank of England is the central bank of the United Kingdom and the model on which most modern central banks have been based. Established in 1694 to act as the Kingdom of England, English Government's banker and debt manager, and still one ...
is the
central bank A central bank, reserve bank, national bank, or monetary authority is an institution that manages the monetary policy of a country or monetary union. In contrast to a commercial bank, a central bank possesses a monopoly on increasing the mo ...
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 comprised the dominions, Crown colony, colonies, protectorates, League of Nations mandate, mandates, and other Dependent territory, territories ruled or administered by the United Kingdom and its predecessor states. It bega ...
.


Names


Etymology

The basic unit of currency in medieval England was the silver penny or sterling, weighing about of a tower pound. 240 of these coins made a "pound of sterlings". This term (shortened to "pound sterling" in later usage) continued to be used in accounting even after the sterling had ceased to circulate. The earliest known instances of the term occur in
Orderic Vitalis Orderic Vitalis (; 16 February 1075 – ) was an English chronicler and Benedictine monk who wrote one of the great contemporary chronicles of 11th- and 12th-century Normandy and Anglo-Norman England.Hollister ''Henry I'' p. 6 Working out of ...
's 12th-century ''Historia Ecclesiastica'', which makes mention of ''librae sterilensium''. The origin of the word ''sterling'' itself is unclear. It first appears in the 11th and 12th centuries, suggesting that it was coined to describe the new, heavier penny introduced by the
Normans The Normans (Norman language, Norman: ''Normaunds''; ; ) were a population arising in the medieval Duchy of Normandy from the intermingling between Norsemen, Norse Viking settlers and locals of West Francia. The Norse settlements in West Franc ...
. According to the ''
Oxford English Dictionary The ''Oxford English Dictionary'' (''OED'') is the principal historical dictionary of the English language, published by Oxford University Press (OUP), a University of Oxford publishing house. The dictionary, which published its first editio ...
'', the most plausible theory is that it represents
Old English Old English ( or , or ), or Anglo-Saxon, is the earliest recorded form of the English language, spoken in England and southern and eastern Scotland in the Early Middle Ages. It developed from the languages brought to Great Britain by Anglo-S ...
*, meaning "coin with a star" (a pair of stars having appeared on certain Norman pennies). The numismatist Philip Grierson rejects this, however, noting that the starred penny was only minted between 1077 and 1080 and formed a tiny fraction of the total coinage issued by the Normans. Grierson suggests instead that the first element is *, meaning "stout" or "strong". In support of this theory, he notes that the Roman solidus had a name with a very similar meaning and was also introduced to replace a lighter coin. An old theory that the sterling was so named because it was introduced to England by Easterlings, i.e. Hanseatic merchants, is untenable on historical and phonological grounds.


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 a monetary authority, such as the national central bank for the currency concerned. A symbol may be positioned in various ways, acc ...
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. 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 Sterling silver is an alloy composed mass fraction (chemistry), by weight of 92.5% silver and 7.5% other metals, usually copper. The sterling silver silver standards, standard has a minimum millesimal fineness of 925. ''Fineness, Fine silver'' ...
. In the British pre-decimal (
duodecimal The duodecimal system, also known as base twelve or dozenal, is a positional numeral system using twelve as its base. In duodecimal, the number twelve is denoted "10", meaning 1 twelve and 0 units; in the decimal system, this number is i ...
) currency system, the term
£sd file:Guildhall Museum Collection- Drusilla Dunford Money Table Sampler 3304.JPG, A Sampler (needlework), sampler in the Rochester Guildhall, Guildhall Museum of Rochester, Medway, Rochester illustrates the conversion between pence and shillings ...
(or Lsd) for pounds,
shilling The shilling is a historical coin, and the name of a unit of modern currency, currencies formerly used in the United Kingdom, Australia, New Zealand, other British Commonwealth countries and Ireland, where they were generally equivalent to 1 ...
s and pence referred to the Roman , '' solidus'', and ''
denarius The ''denarius'' (; : ''dēnāriī'', ) was the standard Ancient Rome, 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 cont ...
''. Notable style guides recommend that the pound sign be used without any abbreviation or qualification to indicate sterling (e.g., £12,000). 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 individ ...
code "GBP" (e.g., GBP 12,000) may also be seen should disambiguation become necessary.


Currency code

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 individ ...
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 ...
code for the United Kingdom ("GB") and the first letter of "pound". In historical sources and some specialist banking uses, the abbreviation stg (in various styles) has been used to indicate sterling. Many stocks on the
London Stock Exchange The London Stock Exchange (LSE) is a stock exchange based in London, England. the total market value of all companies trading on the LSE stood at US$3.42 trillion. Its current premises are situated in Paternoster Square close to St Paul's Cath ...
are quoted in penny sterling, using the unofficial code "GBX".


Cable

The exchange rate of sterling against the
US dollar The United States dollar (symbol: $; currency code: USD) is the official currency of the United States and several other countries. The Coinage Act of 1792 introduced the U.S. dollar at par with the Spanish silver dollar, divided it int ...
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. By trading volume, ...
s. The origins of this term are attributed to the fact that from the mid-19th century, the sterling/dollar exchange rate was transmitted via transatlantic cable.


Slang terms

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


Crown Dependencies and British Overseas Territories

The currency of all the
Crown Dependencies The Crown Dependencies are three dependent territory, offshore island territories in the British Islands that are self-governing possessions of the The Crown, British Crown: the Bailiwick of Guernsey and the Jersey, Bailiwick of Jersey, both lo ...
(
Guernsey Guernsey ( ; Guernésiais: ''Guernési''; ) is the second-largest island in the Channel Islands, located west of the Cotentin Peninsula, Normandy. It is the largest island in the Bailiwick of Guernsey, which includes five other inhabited isl ...
,
Jersey Jersey ( ; ), officially the Bailiwick of Jersey, is an autonomous and self-governing island territory of the British Islands. Although as a British Crown Dependency it is not a sovereign state, it has its own distinguishing civil and gov ...
,
Isle of Man The Isle of Man ( , also ), or Mann ( ), is a self-governing British Crown Dependency in the Irish Sea, between Great Britain and Ireland. As head of state, Charles III holds the title Lord of Mann and is represented by a Lieutenant Govern ...
) and a third of
British Overseas Territories The British Overseas Territories (BOTs) or alternatively referred to as the United Kingdom Overseas Territories (UKOTs) are the fourteen dependent territory, territories with a constitutional and historical link with the United Kingdom that, ...
( British Antarctic Territory;
Falkland Islands The Falkland Islands (; ), commonly referred to as The Falklands, 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 from Cape Dub ...
and
South Georgia and the South Sandwich Islands South Georgia and the South Sandwich Islands (SGSSI) is a British Overseas Territory in the southern Atlantic Ocean. It is a remote and inhospitable collection of islands, consisting of South Georgia and a chain of smaller islands known as the ...
;
Gibraltar Gibraltar ( , ) is a British Overseas Territories, British Overseas Territory and British overseas cities, city located at the southern tip of the Iberian Peninsula, on the Bay of Gibraltar, near the exit of the Mediterranean Sea into the A ...
; and
Saint Helena, Ascension and Tristan da Cunha Saint Helena, Ascension and Tristan da Cunha is a British Overseas Territories, British Overseas Territory located in the Atlantic Ocean, South Atlantic and consisting of the island of Saint Helena, Ascension Island, and the archipelago of Tri ...
) is either sterling or pegged to sterling at par. The other British Overseas Territories have a local currency that is pegged to the U.S. dollar or the
New Zealand dollar The New Zealand dollar (; currency sign, sign: $; ISO 4217, 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 Zeal ...
. The Sovereign Base Areas of Akrotiri and Dhekelia (in
Cyprus Cyprus (), officially the Republic of Cyprus, is an island country in the eastern Mediterranean Sea. Situated in West Asia, its cultural identity and geopolitical orientation are overwhelmingly Southeast European. Cyprus is the List of isl ...
) use the euro.


Subdivisions and other units


Decimal coinage

Since
decimalisation Decimalisation or decimalization (see American and British English spelling differences, spelling differences) is the conversion of a system of currency or of weights and measures to units related by Power of 10, powers of 10. Most countries have ...
on
Decimal Day Decimal Day () in the United Kingdom and in Republic of Ireland, Ireland was Monday 15 February 1971, the day on which each country decimalised its respective £sd currency of pound sterling, pounds, Shilling (British coin), shillings, and pe ...
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 ''denarius'' (; : ''dēnāriī'', ) was the standard Ancient Rome, 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 cont ...
'' (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/–), farthing (''d''),
sovereign ''Sovereign'' is a title that can be applied to the highest leader in various categories. The word is borrowed from Old French , which is ultimately derived from the Latin">-4; we might wonder whether there's a point at which it's appropriate to ...
(£1) and
guinea Guinea, officially the Republic of Guinea, is a coastal country in West Africa. It borders the Atlantic Ocean to the west, Guinea-Bissau to the northwest, Senegal to the north, Mali to the northeast, Côte d'Ivoire to the southeast, and Sier ...
(21s, 21/–, £1–1–0 or £1.05 in decimal notation). 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 Death and state funeral of Queen Victoria, her death in January 1901. Her reign of 63 year ...
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 sixpences, shillings (from any period after 1816) and florins (2 shillings) remained legal tender after decimalisation (as 2½p, 5p and 10p respectively) until 1980, 1990 and 1993 respectively, but are now officially demonetised.


History (600–1945)

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 1816.


Anglo-Saxon

The pound was a unit of account in
Anglo-Saxon England Anglo-Saxon England or early medieval England covers the period from the end of Roman Empire, Roman imperial rule in Roman Britain, Britain in the 5th century until the Norman Conquest in 1066. Compared to modern England, the territory of the ...
. By the ninth century it was equal to 240 silver pence. The accounting system of dividing one pound into twenty
shilling The shilling is a historical coin, and the name of a unit of modern currency, currencies formerly used in the United Kingdom, Australia, New Zealand, other British Commonwealth countries and Ireland, where they were generally equivalent to 1 ...
s, a shilling into twelve pence, and a penny into four farthings was adopted from the livre carolingienne system introduced by
Charlemagne Charlemagne ( ; 2 April 748 – 28 January 814) was List of Frankish kings, King of the Franks from 768, List of kings of the Lombards, King of the Lombards from 774, and Holy Roman Emperor, Emperor of what is now known as the Carolingian ...
to the Frankish Empire. The penny was abbreviated to "d", from ''
denarius The ''denarius'' (; : ''dēnāriī'', ) was the standard Ancient Rome, 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 cont ...
'', the Roman equivalent of the penny; the shilling to "s" from solidus (written with a
long s The long s, , also known as the medial ''s'' or initial ''s'', is an Archaism, archaic form of the lowercase letter , found mostly in works from the late 8th to early 19th centuries. It replaced one or both of the letters ''s'' in a double-''s ...
, , later evolving into a simple slash, ); and the pound to "L" (subsequently £) from '' Libra'' or ''
Livre Livre may refer to: Currency * French livre, one of a number of obsolete units of currency of France * Livre tournois, one particular obsolete unit of currency of France * Livre parisis, another particular obsolete unit of currency of France * Fre ...
''. 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 Sterling silver is an alloy composed mass fraction (chemistry), by weight of 92.5% silver and 7.5% other metals, usually copper. The sterling silver silver standards, standard has a minimum millesimal fineness of 925. ''Fineness, Fine 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 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 ( or ; ) is the Dutch language, Dutch-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 culture, la ...
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), became 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 conflict between the kingdoms of Kingdom of England, England and Kingdom of France, France and a civil war in France during the Late Middle Ages. It emerged from feudal disputes over the Duchy ...
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 of a guilder (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 made the English groat (4-pence) mutually exchangeable with the Burgundian ''double patard'' (or 2-''stuiver'') minted under Charles the Bold. 40 pence or th pound sterling made one Troy Ounce (480 grains, 31.1035 g) of sterling silver. It was approximately on a par with France's livre parisis of one French ounce (30.594 g), and in 1524 it would also be the model for a standardised German currency in the form of the Guldengroschen, which also weighed 1 German ounce of silver or .


Tudor, 1551

The last significant depreciation in sterling's silver standard occurred amidst the 16th century influx of precious metals from the Americas arriving through the
Habsburg Netherlands Habsburg Netherlands were the parts of the Low Countries that were ruled by sovereigns of the Holy Roman Empire's House of Habsburg. This rule began in 1482 and ended for the Northern Netherlands in 1581 and for the Southern Netherlands in 1797. ...
. 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 known for his Wives of Henry VIII, six marriages and his efforts to have his first marriage (to Catherine of Aragon) annulled. ...
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. 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 (: pence) in various countries. Borrowed from the Carolingian denarius (hence its former abbreviation d.), it is usually the smallest denomination within a currency system. At present, it is ...
(1''d''), half-groat (2''d''), and groat (4''d'') * Gold; see ''1351'': noble (20''d''), noble (40''d'') and noble or
angel An angel is a spiritual (without a physical body), heavenly, or supernatural being, usually humanoid with bird-like wings, often depicted as a messenger or intermediary between God (the transcendent) and humanity (the profane) in variou ...
(80''d''). After 1551 new denominations were introduced, weighing similarly to 1464-issued coins but increased in value times, namely: * In silver: the threepence (3''d''), replacing the half-groat; the sixpence (6''d''), replacing the groat; and a new
shilling The shilling is a historical coin, and the name of a unit of modern currency, currencies formerly used in the United Kingdom, Australia, New Zealand, other British Commonwealth countries and Ireland, where they were generally equivalent to 1 ...
or testoon (1s or 1/–). * In silver or gold: the crown (5/- (5s) or 60''d''), replacing the angel of 40''d''; and the half crown (2/6''d'' or 30''d''), replacing the angel of 20''d'' * And in gold: the new half sovereign (10/–) and
sovereign ''Sovereign'' is a title that can be applied to the highest leader in various categories. The word is borrowed from Old French , which is ultimately derived from the Latin">-4; we might wonder whether there's a point at which it's appropriate to ...
(£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, officially the Republic of Guinea, is a coastal country in West Africa. It borders the Atlantic Ocean to the west, Guinea-Bissau to the northwest, Senegal to the north, Mali to the northeast, Côte d'Ivoire to the southeast, and Sier ...
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, while clipped, hand-hammered shillings stayed in circulation (as Gresham's law describes). In the 17th century, English merchants tended to pay for imports in silver but were generally paid for exports in gold. This effect was notably driven by trade with the Far East, as the Chinese insisted on payments for their exports being settled in silver. From the mid-17th century, around of silver were received by China, principally from European powers, in exchange for Chinese tea and other goods. In order to be able to purchase Chinese exports in this period, England initially had to export to other European nations and request payment in silver, until the
British East India Company The East India Company (EIC) was an English, and later British, joint-stock company that was founded in 1600 and dissolved in 1874. It was formed to Indian Ocean trade, trade in the Indian Ocean region, initially with the East Indies (South A ...
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 England, great council of Lords Spi ...
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 () was an English polymath active as a mathematician, physicist, astronomer, alchemist, theologian, and author. Newton was a key figure in the Scientific Revolution and the Enlightenment that followed. His book (''Mathe ...
, Master of the Mint, 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 backed currency, monetary system in which the standard economics, 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 ...
. Silver and copper tokens issued by private entities partly relieved the problem of small change until the Great Recoinage of 1816.


Establishment of modern currency

The
Bank of England The Bank of England is the central bank of the United Kingdom and the model on which most modern central banks have been based. Established in 1694 to act as the Kingdom of England, English Government's banker and debt manager, and still one ...
was founded in 1694, followed by the Bank of Scotland a year later.} The Bank of England began to issue
banknote A banknote or bank notealso called a bill (North American English) or simply a noteis a type of paper money that is made and distributed ("issued") by a bank of issue, payable to the bearer on demand. Banknotes were originally issued by commerc ...
s from "the late 1600s".


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 Countries of the United Kingdom, country that is part of the United Kingdom. It is located on the island of Great Britain, of which it covers about 62%, and List of islands of England, more than 100 smaller adjacent islands. It ...
and
Scotland Scotland is a Countries of the United Kingdom, country that is part of the United Kingdom. It contains nearly one-third of the United Kingdom's land area, consisting of the northern part of the island of Great Britain and more than 790 adjac ...
merged into the
Kingdom of Great Britain Great Britain, also known as the Kingdom of Great Britain, was a sovereign state in Western Europe from 1707 to the end of 1800. The state was created by the 1706 Treaty of Union and ratified by the Acts of Union 1707, which united the Kingd ...
. 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 political state of Great Britain. The treaty, effective since 1707, brought the Kingdom of England (which already included Wales) and the Ki ...
, 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 (; , ) was a dependent territory of Kingdom of England, England and then of Kingdom of Great Britain, Great Britain from 1542 to the end of 1800. It was ruled by the monarchs of England and then List of British monarchs ...
were united to form the
United Kingdom of Great Britain and Ireland The United Kingdom of Great Britain and Ireland was the union of the Kingdom of Great Britain and the Kingdom of Ireland into one sovereign state, established by the Acts of Union 1800, Acts of Union in 1801. It continued in this form until ...
. However, the
Irish pound The pound ( Irish: ) was the currency 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 circulation unti ...
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 (), 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 United Kingdom of Great Britain an ...
restored Irish autonomy within the British Empire, the
Irish Free State The Irish Free State (6 December 192229 December 1937), also known by its Irish-language, Irish name ( , ), was a State (polity), state established in December 1922 under the Anglo-Irish Treaty of December 1921. The treaty ended the three-ye ...
established a new Irish pound, initially pegged at par to sterling.


Use in the Empire

Sterling circulated in much of the
British Empire The British Empire comprised the dominions, Crown colony, colonies, protectorates, League of Nations mandate, mandates, and other Dependent territory, territories ruled or administered by the United Kingdom and its predecessor states. It bega ...
. 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 (currency symbol, symbol: $; ISO 4217, code: CAD; ) is the currency of Canada. It is abbreviated with the dollar sign $. There is no standard disambiguating form, but the abbreviations Can$, CA$ and C$ are frequently used f ...
. Several colonies and dominions adopted the pound as their own currency. These included
Australia Australia, officially the Commonwealth of Australia, is a country comprising mainland Australia, the mainland of the Australia (continent), Australian continent, the island of Tasmania and list of islands of Australia, numerous smaller isl ...
,
Barbados Barbados, officially the Republic of Barbados, is an island country in the Atlantic Ocean. It is part of the Lesser Antilles of the West Indies and the easternmost island of the Caribbean region. It lies on the boundary of the South American ...
, British West Africa,
Cyprus Cyprus (), officially the Republic of Cyprus, is an island country in the eastern Mediterranean Sea. Situated in West Asia, its cultural identity and geopolitical orientation are overwhelmingly Southeast European. Cyprus is the List of isl ...
,
Fiji Fiji, 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 consists of an archipelago of more than 330 islands—of which about ...
,
British India The provinces of India, earlier presidencies of British India and still earlier, presidency towns, were the administrative divisions of British governance in South Asia. Collectively, they have been called British India. In one form or another ...
, the
Irish Free State The Irish Free State (6 December 192229 December 1937), also known by its Irish-language, Irish name ( , ), was a State (polity), state established in December 1922 under the Anglo-Irish Treaty of December 1921. The treaty ended the three-ye ...
,
Jamaica Jamaica is an island country in the Caribbean Sea and the West Indies. At , it is the third-largest island—after Cuba and Hispaniola—of the Greater Antilles and the Caribbean. Jamaica lies about south of Cuba, west of Hispaniola (the is ...
,
New Zealand New Zealand () is an island country in the southwestern Pacific Ocean. It consists of two main landmasses—the North Island () and the South Island ()—and List of islands of New Zealand, over 600 smaller islands. It is the List of isla ...
,
South Africa South Africa, officially the Republic of South Africa (RSA), is the Southern Africa, southernmost country in Africa. Its Provinces of South Africa, nine provinces are bounded to the south by of coastline that stretches along the Atlantic O ...
and
Southern Rhodesia Southern Rhodesia was a 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 known as South ...
. Some of these retained parity with sterling throughout their existence (e.g. the South African pound), while others deviated from parity after the end of the gold standard (e.g. the Australian pound). These currencies and others tied to sterling constituted the core of the sterling area. The original English colonies on mainland North America were not party to the sterling area because the above-mentioned silver shortage in England coincided with these colonies' formative years. As a result of equitable trade (and rather less equitable piracy), the Spanish milled dollar became the most common coin within the English colonies.


Gold standard

During the American War of Independence and the
Napoleonic wars {{Infobox military conflict , conflict = Napoleonic Wars , partof = the French Revolutionary and Napoleonic Wars , image = Napoleonic Wars (revision).jpg , caption = Left to right, top to bottom:Battl ...
,
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 Kingdom of England, English Government's banker and debt manager, and still one ...
notes were
legal tender Legal tender is a form of money that Standard of deferred payment, courts of law are required to recognize as satisfactory payment in court for any monetary debt. Each jurisdiction determines what is legal tender, but essentially it is anything ...
, 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 backed currency, monetary system in which the standard economics, 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 ...
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 that can be applied to the highest leader in various categories. The word is borrowed from Old French , which is ultimately derived from the Latin">-4; we might wonder whether there's a point at which it's appropriate to ...
was introduced, valued at 20/–. Struck in 22‑carat gold, it contained 113 grains or of fine gold and replaced the
guinea Guinea, officially the Republic of Guinea, is a coastal country in West Africa. It borders the Atlantic Ocean to the west, Guinea-Bissau to the northwest, Senegal to the north, Mali to the northeast, Côte d'Ivoire to the southeast, and Sier ...
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 Cochrane Seaman (born Elizabeth Jane Cochran; May 5, 1864 – January 27, 1922), better known by her pen name Nellie Bly, was an American journalist who was widely known for her record-breaking circumnavigation, trip around the world ...
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$4.87 in the
United States The United States of America (USA), also known as the United States (U.S.) or America, is a country primarily located in North America. It is a federal republic of 50 U.S. state, states and a federal capital district, Washington, D.C. The 48 ...
,
Can$ The Canadian dollar (currency symbol, symbol: $; ISO 4217, code: CAD; ) is the currency of Canada. It is abbreviated with the dollar sign $. There is no standard disambiguating form, but the abbreviations Can$, CA$ and C$ are frequently used f ...
4.87 in
Canada Canada is a country in North America. Its Provinces and territories of Canada, ten provinces and three territories extend from the Atlantic Ocean to the Pacific Ocean and northward into the Arctic Ocean, making it the world's List of coun ...
, ƒ12.11 in Dutch territories, F 25.22 in French territories (or equivalent currencies of the
Latin Monetary Union The Monetary Convention of 23 December 1865 was a unified system of coinage that provided a degree of monetary integration among several European countries, initially Belgium, France, Italy and Switzerland, at a time when the circulation of bank ...
), 20  43 in
Germany Germany, officially the Federal Republic of Germany, is a country in Central Europe. It lies between the Baltic Sea and the North Sea to the north and the Alps to the south. Its sixteen States of Germany, constituent states have a total popu ...
, Rbls 9.46 in
Russia Russia, or the Russian Federation, is a country spanning Eastern Europe and North Asia. It is the list of countries and dependencies by area, largest country in the world, and extends across Time in Russia, eleven time zones, sharing Borders ...
or K 24.02 in
Austria-Hungary Austria-Hungary, also referred to as the Austro-Hungarian Empire, the Dual Monarchy or the Habsburg Monarchy, was a multi-national constitutional monarchy in Central Europe#Before World War I, Central Europe between 1867 and 1918. A military ...
. After the International Monetary Conference of 1867 in Paris, the possibility of the UK joining the
Latin Monetary Union The Monetary Convention of 23 December 1865 was a unified system of coinage that provided a degree of monetary integration among several European countries, initially Belgium, France, Italy and Switzerland, at a time when the circulation of bank ...
was discussed, and a
Royal Commission A royal commission is a major ad-hoc formal public inquiry into a defined issue in some monarchies. They have been held in the United Kingdom, Australia, Canada, New Zealand, Norway, Malaysia, Mauritius and Saudi Arabia. In republics an equi ...
on International Coinage examined the issues, resulting in a decision against joining it.


First world war: suspension of the gold standard

The gold standard was suspended at the outbreak of First World War in 1914, with Bank of England and Treasury notes becoming legal tender. Before that war, the United Kingdom had one of the world's strongest Economy of the United Kingdom, economies, 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 and Chancellor of the Exchequer Austen Chamberlain tried to make up for the deficit with a deflationary policy, but this only led to the Depression of 1920–21. 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 fineness, .925 fine to just .500 fine. That was due to a drastic increase in silver prices from an average 27/6''d''. [£1.375] per troy pound in the period between 1894 and 1913, to 89/6''d''. [£4.475] in 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 in the United Kingdom, Great Depression, and sterling suffered an initial devaluation of some 25%. Since the suspension of the gold standard in 1931, sterling has been a fiat currency, with its value determined by its continued acceptance in the national and international economy.


World War II

In 1940, an agreement with the US pegged sterling to the
US dollar The United States dollar (symbol: $; currency code: USD) is the official currency of the United States and several other countries. The Coinage Act of 1792 introduced the U.S. dollar at par with the Spanish silver dollar, divided it int ...
at a rate of £1 = US$4.03. (Only the year before, it had been US$4.86.) This rate was maintained through the Second World War and became part of the Bretton Woods system which governed post-war exchange rates.


History (1946–present)


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 in the United Kingdom, exchange controls were tightened by the Harold Wilson, 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 1967 sterling devaluation, 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 (British coin), guinea coins were no longer in use. Formal parliamentary proposals to decimalise sterling were first made in 1824 when John Wrottesley, 1st Baron Wrottesley, Sir John Wrottesley, MP for Staffordshire (UK Parliament constituency), Staffordshire, asked in the House of Commons of the United Kingdom, House of Commons whether consideration had been given to decimalising the currency. Wrottesley raised the issue in the House of Commons again in 1833, and it was again raised by John Bowring, MP for Kilmarnock Burghs (UK Parliament constituency), 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 of the United Kingdom, Parliament 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 of the United Kingdom, House of Commons in June 1855, by Sir William Brown, 1st Baronet, of Richmond Hill, William Brown, MP for South Lancashire (UK Parliament constituency), 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 A royal commission is a major ad-hoc formal public inquiry into a defined issue in some monarchies. They have been held in the United Kingdom, Australia, Canada, New Zealand, Norway, Malaysia, Mauritius and Saudi Arabia. In republics an equi ...
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, 1st Baron Addington, 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 British Hong Kong, Hong Kong from 1863 to 1866; British Cyprus, Cyprus from 1955 until 1960 (and continued on the island as the division of the Cypriot pound 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, sterling floating currency, floated from August 1971 onwards. At first, it Currency appreciation and depreciation, appreciated a little, rising to almost in March 1972 from , the upper bound of the band in which it had been fixed. The sterling area effectively ended at this time, when the majority of its members also chose to float freely against sterling and the dollar.


1976 sterling crisis

James Callaghan became Prime Minister of the United Kingdom, Prime Minister in 1976. He was immediately told the economy was facing huge problems, according to documents released in 2006 by the The National Archives (United Kingdom), National Archives. The effects of the failed Barber Boom and the 1973 oil crisis were still being felt, with Stagflation of the 1970s, inflation rising to nearly 27% in 1975. Financial markets were beginning to believe the pound was overvalued, and in April that year ''The Wall Street Journal'' advised the sale of sterling investments in the face of high taxes, in a story that ended with "goodbye, Great Britain. It was nice knowing you". At the time the UK Government was running a budget deficit, and the Labour government's strategy emphasised high public spending. Callaghan was told there were three possible outcomes: a disastrous free fall in sterling, an internationally unacceptable siege economy, or a deal with key allies to prop up the pound while painful economic reforms were put in place. The US Government feared the crisis could endanger NATO and the European Economic Community (EEC), and in light of this, the US Treasury set out to force domestic policy changes. In November 1976, the International Monetary Fund (IMF) announced the conditions for a loan, including deep cuts in public expenditure.


1979–1989

The Conservative Party (UK), Conservative Party was elected to office in 1979 United Kingdom general election, 1979, on a programme of fiscal austerity. Initially, sterling rocketed, moving above £1 to US$2.40, as interest rates rose in response to the monetarist policy of targeting money supply. The high exchange rate was widely blamed for the deep Early 1980s recession, recession of 1981. Sterling fell sharply after 1980; at its lowest, £1 stood at just US$1.03 in March 1985, before rising to US$1.70 in December 1989.


Following the Deutsche Mark

In 1988, the Chancellor of the Exchequer, Nigel Lawson, decided that sterling should "shadow" the Deutsche Mark (DM), with the unintended result of a rapid rise in inflation as the economy boomed due to low interest rates. Following German reunification in 1990, the reverse held true, as high German borrowing costs to fund Eastern reconstruction, exacerbated by the political decision to convert the East German mark, Ostmark 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 (ERM), with £1 set at Deutsche Mark, DM 2.95. However, the country was forced to withdraw from the system on "Black Wednesday" (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 Party (UK), 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 Kingdom of England, English Government's banker and debt manager, and still one ...
(a policy that had originally been advocated by the Liberal Democrats (UK), 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 (United Kingdom), Consumer Price Index (CPI)) very close to 2% per annum. Should CPI inflation be more than one percentage point above or below the target, the Governor of the Bank of England is required to write an open letter to the Chancellor of the Exchequer explaining the reasons for this and the measures which will be taken to bring this measure of inflation back in line with the 2% target. On 17 April 2007, annual CPI inflation was reported at 3.1% (inflation of the Retail Prices Index 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, then Chancellor of the Exchequer, ruled out membership in the eurozone for the foreseeable future, saying that the decision not to join had been right for Britain and for Europe. On 1 January 2008, with the Republic of Cyprus switching its currency from the Cypriot pound to the euro, the British sovereign bases on Cyprus (Akrotiri and Dhekelia) 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 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 Cameron–Clegg coalition, 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 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 The euro (currency symbol, symbol: euro sign, €; ISO 4217, currency code: EUR) is the official currency of 20 of the Member state of the European Union, member states of the European Union. This group of states is officially known as the ...
as its currency. However, the subject was always politically controversial, and the UK negotiated an opt-out on this issue. Following the Brexit, 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 2008 financial crisis, 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 Kingdom of England, English Government's banker and debt manager, and still one ...
announced that it would pump £75 billion of new capital (economics), 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 of the Bank of England, Governor Mervyn King, Baron King of Lothbury, 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, following September 2022 United Kingdom mini-budget, a 'mini-budget' of tax cuts funded by borrowing, sterling's exchange rate 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, Baron King of Lothbury, 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 (United Kingdom), 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: , Retail Price Index, 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 (British coin), 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 (coin), 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 florin (English coin), gold florin) of the ''noble (English coin), 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 (coin), angel'' introduced at the noble's old value of 6/8''d''. The reign of Henry VII of England, Henry VII saw the introduction of two important coins: the
shilling The shilling is a historical coin, and the name of a unit of modern currency, currencies formerly used in the United Kingdom, Australia, New Zealand, other British Commonwealth countries and Ireland, where they were generally equivalent to 1 ...
(abbr.: ''s''; known as the ''testoon'', equivalent to twelve pence) in 1487 and the pound (known as the ''
sovereign ''Sovereign'' is a title that can be applied to the highest leader in various categories. The word is borrowed from Old French , which is ultimately derived from the Latin">-4; we might wonder whether there's a point at which it's appropriate to ...
'', abbr.: ''£'' before numerals or "''l''." (lower-case 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 (British coin), 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 known for his Wives of Henry VIII, six marriages and his efforts to have his first marriage (to Catherine of Aragon) annulled. ...
'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'', threepence (British coin), 3d, 4''d'' and sixpence (British coin), 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 (English coin), unite'' (20/–) and the ''rose ryal'' (30/–). The ''laurel (English coin), laurel'', worth 20/–, followed in 1619. The first base metal coins were also introduced: tin and copper farthing (British coin), farthings. Copper halfpenny (British coin), halfpenny coins followed in the reign of Charles I of England, 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 Guinea, officially the Republic of Guinea, is a coastal country in West Africa. It borders the Atlantic Ocean to the west, Guinea-Bissau to the northwest, Senegal to the north, Mali to the northeast, Côte d'Ivoire to the southeast, and Sier ...
'' 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, and 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 real, Spanish and Spanish colonial real, 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 that can be applied to the highest leader in various categories. The word is borrowed from Old French , which is ultimately derived from the Latin">-4; we might wonder whether there's a point at which it's appropriate to ...
. 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 A gold standard is a backed currency, monetary system in which the standard economics, 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 ...
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 coins of the pound sterling, decimal coins were introduced. These were cupro-nickel Five pence (British decimal coin), 5p and 10p coins which were the same size as, equivalent in value to, and circulated alongside, the Shilling (British coin), one shilling coin and the Florin (British coin), florin (two shilling coin) respectively. * 1969: The curved equilateral heptagonal cupro-nickel fifty pence (British decimal coin), 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 Halfpenny (British decimal coin), half new penny (p), new penny (1p), and Two pence (British decimal coin), two new pence (2p) coins and the withdrawal of the Penny (British pre-decimal coin), (old) penny (1''d'') and Threepence (British coin), (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 (British coin), crown, historically valued at five shillings (25p), was re-tariffed for future issues as a commemorative coin at £5. * 1990: A new, smaller five pence (British decimal coin), 5p coin was introduced, replacing the original size that had been the same as the Shilling (British coin), 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, smaller 10p coin was introduced, replacing the original size that had been the same as the Florin (British coin), 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: Penny (British decimal coin), 1p and Two pence (British decimal coin), 2p coins began to be minted in Copper electroplating, 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 coins, bi-metallic £2 coin was introduced. * 2007: By now the value of copper in the pre-1992 Penny (British decimal coin), 1p and Two pence (British decimal coin), 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 Penny (British decimal coin), 1p, Two pence (British decimal coin), 2p, five pence (British decimal coin), 5p, ten pence (British decimal coin), 10p, 20p, and 50p coins feature parts of the Royal coat of arms of the United Kingdom, 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 five pence (British decimal coin), 5p and Ten pence (British decimal coin), 10p coins were changed from cupro-nickel to Nickel electroplating, 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 Penny (British decimal coin), 1p and Two pence (British decimal coin), 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 Gresham's law, 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 Kingdom of England, English Government's banker and debt manager, and still one ...
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 {{Infobox military conflict , conflict = Napoleonic Wars , partof = the French Revolutionary and Napoleonic Wars , image = Napoleonic Wars (revision).jpg , caption = Left to right, top to bottom:Battl ...
. 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 HM Treasury, 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 (printmaking), intaglio and letterpress; and the notes incorporate a total of 85 specialized inks. The Bank of England produces notes named "Bank of England £1,000,000 note, giant" and "Bank of England £100,000,000 note, 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 (Northern Ireland), 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 A central bank, reserve bank, national bank, or monetary authority is an institution that manages the monetary policy of a country or monetary union. In contrast to a commercial bank, a central bank possesses a monopoly on increasing the mo ...
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 Kingdom of England, English Government's banker and debt manager, and still one ...
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 HM Treasury, 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 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 Kingdom of England, English Government's banker and debt manager, and still one ...
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 Isle of Man, Manx banknotes are legal tender only in their respective jurisdictions. Bank of England, Scottish, Northern Irish, Channel Islands, Isle of Man, Gibraltar, and Falkland banknotes may be offered anywhere in the UK, although there is no obligation to accept them as a means of payment, and acceptance varies. For example, merchants in England generally accept Scottish and Northern Irish notes, but some unfamiliar with them may reject them. However, Scottish and Northern Irish notes both tend to be accepted in Scotland and Northern Ireland, respectively. Merchants in England generally do not accept Jersey, Guernsey, Manx, Gibraltarian, and Falkland notes but Manx notes are generally accepted in Northern Ireland. Bank of England notes are generally accepted in the Falklands and Gibraltar, but for example, Scottish and Northern Irish notes are not. Since all of the notes are denominated in sterling, banks will exchange them for locally issued notes at face value, though some in the UK have had trouble exchanging Falkland Islands notes. Commemorative Five pounds (British decimal coin), £5 and British twenty-five pence coin, 25p (crown) coins, and Sixpence (British coin)#2016 decimal sixpence, decimal sixpences (6p, not the Sixpence (British coin), pre-decimalisation 6''d'', equivalent to p) made for traditional wedding ceremonies and Christmas gifts, although rarely if ever seen in circulation, are formally
legal tender Legal tender is a form of money that Standard of deferred payment, courts of law are required to recognize as satisfactory payment in court for any monetary debt. Each jurisdiction determines what is legal tender, but essentially it is anything ...
, as are the bullion coins issued by the Mint.


Pegged currencies

In Britain's
Crown Dependencies The Crown Dependencies are three dependent territory, offshore island territories in the British Islands that are self-governing possessions of the The Crown, British Crown: the Bailiwick of Guernsey and the Jersey, Bailiwick of Jersey, both lo ...
, the Manx pound, Jersey pound, and Guernsey pound are unregulated by the Bank of England and are issued independently. However, they are maintained at a fixed exchange rate by their respective governments, and Bank of England notes have been made legal tender on the islands, forming a sort of one-way de facto currency union. Internationally they are considered local issues of sterling so do not have
ISO 4217 ISO 4217 is a standard published by the International Organization for Standardization (ISO) that defines alpha codes and numeric codes for the representation of currencies and provides information about the relationships between individ ...
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) or alternatively referred to as the United Kingdom Overseas Territories (UKOTs) are the fourteen dependent territory, territories with a constitutional and historical link with the United Kingdom that, ...
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 smallest coin in 1971 was the p, worth about 6.4p in 2015 prices. 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 2023, the buying power of a pound fell by 94.4%. For example, the purchasing power of a pound in 2006 was slightly more than that of 10p in 1971; conversely, the purchasing power of a pound in 1971 was slightly less than that of £10 in 2006. The hypothetical "shopping basket" of goods and services that cost £10 in 1971 would cost £98.04 in 2006 (and £163.40 in 2022).


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. By trading volume, ...
s around the world, and its value relative to other currencies therefore fluctuates.


Reserve

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


See also

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


Footnotes


References


Further reading

* ''World Currency Monitor Annual, 1976–1989: Pound Sterling: The Value of the British Pound Sterling in Foreign Terms''. Bank of America/Meckler Mecklermedia (1990). . . * * Fernand Braudel, 1984. ''The Perspective of the World'', Vol III of ''Civilisation and Capitalism'', (in French 1979). * John Brennan (1983). ''The political pound: British investment overseas and exchange controls past—and future?''. Henderson Administration. . * Barry Eichengreen (Editor), Michael D. Bordo (Editor) (1993). ''A Retrospective on the Bretton Woods System: Lessons for International Monetary Reform (National Bureau of Economic Research Project Report)''. Published by University of Chicago Press, * Milton Friedman, Anna Jacobson Schwartz (1971). ''Monetary History of the United States, 1867–1960''. Princeton University Press. . * John Kevin Green. ''The international role of the pound sterling: Its benefits and costs to the United Kingdom''. * * Mary Poovey (2002). ''The Financial System in Nineteenth-Century Britain''. The Victorian Archives Series. Oxford University Press. . * * * Lewis D. Solomon (1996). ''Rethinking Our Centralised Monetary System: The Case for a System of Local Currencies''. Praeger Publishers . * Philip Stephens (1995). ''Politics and the Pound: The Conservatives' Struggle with Sterling''. . * Horst Ungerer, Jouko J. Hauvonen (1990)
''The European Monetary System: Developments and Perspectives''
Occasional Paper No. 73. International Monetary Fund. . . * J. K Whitaker and Maxwell W. Hudgins, Jr. (April 1977). "The Floating Pound Sterling of the Nineteen-Thirties: An Econometric Study". ''Southern Economic Journal''. Vol. 43, No. 4, pp. 1478-1485. . .


External links

* of the Royal Mint
Pound Sterling
– BBC News (Foreign exchange market news) {{DEFAULTSORT:Pound Sterling Pound sterling, Currencies of the United Kingdom Currencies of dependent territories of the United Kingdom Currencies of the British Empire Circulating currencies Currencies of England Currencies of Europe Currencies of North America Currencies of the Caribbean Currencies of Oceania Currencies of Scotland Currencies of South America Currencies of Zimbabwe Currencies with multiple banknote issuers Currencies of Africa Currencies of Asia Pound (currency)