Pound sterling
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Sterling (ISO code: GBP) is the currency of the United Kingdom and nine of its associated territories.[3] The pound (sign: £) is the main unit of sterling,[4] and the word pound is also used to refer to the British currency generally,[5] often qualified in international contexts as the British pound or the pound sterling.[4]
Sterling is the world's oldest currency that is still in use and that has been in continuous use since its inception.
The Bank of England is the central bank for sterling, issuing its own banknotes, and regulating issuance of banknotes by private banks in Scotland and Northern Ireland. Sterling banknotes issued by other jurisdictions are not regulated by the Bank of England; their governments guarantee convertibility at par. Historically, sterling was also used to varying degrees by the colonies and territories of the British Empire.
Names
Sterling is the name of the currency as a whole while pound and penny are the units of account. This is analogous to the distinction between
Etymology
There are various theories regarding the origin of the word "sterling".
Another argument, according to which the Hanseatic League was the origin of both its definition and manufacture as well as its name is that the German name for the Baltic is "Ostsee", or "East Sea", and from this the Baltic merchants were called "Osterlings", or "Easterlings".[10] In 1260, Henry III granted them a charter of protection and land for their Kontor, the Steelyard of London, which by the 1340s was also called "Easterlings Hall", or Esterlingeshalle.[11] Because the League's money was not frequently debased like that of England, English traders stipulated to be paid in pounds of the "Easterlings", which was contracted to "'sterling".[12] The OED dismisses this theory as unlikely, since the stressed first syllable would not have been elided.[9]
Encyclopædia Britannica states the (pre-Norman) Anglo-Saxon kingdoms had silver coins called sterlings and that the compound noun pound sterling was derived from a pound (weight) of these sterlings.[13]
The English word pound derives from the
Symbol
The
Notable style guides recommend that the pound sign be used without any abbreviation or qualification to indicate sterling (e.g., £12,000).[24][25][26] The ISO 4217 code "GBP" (e.g., GBP 12,000 or 12,000 GBP) may also be seen should disambiguation become necessary.
Currency code
The ISO 4217 currency code for sterling is "GBP",[27] formed from the ISO 3166-1 alpha-2 code for the United Kingdom ("GB") and the first letter of "pound".[28] In historical sources and some specialist banking uses, the abbreviation stg (in various styles) has been used to indicate sterling.[29][30] Many stocks on the London Stock Exchange are quoted in penny sterling, using the unofficial code "GBX".[31]
Cable
The exchange rate of sterling against the
Slang terms
Historically almost every British coin had a widely recognised nickname, such as "tanner" for the sixpence and "bob" for the shilling.[34] Since decimalisation these have mostly fallen out of use except as parts of proverbs.
A common[35] slang term for the pound unit is "quid" (singular and plural, except in the common phrase "quids in").[36] The term may have come via Italian immigrants from scudo, the name for a number of currency units used in Italy until the 19th century; or from Latin quid via the common phrase quid pro quo, literally, "what for what", or, figuratively, "An equal exchange or substitution".[37] The term "nicker" (also both singular and plural) may also refer to the pound.[35]
Crown Dependencies and British Overseas Territories
The currency of all the
Some British Overseas Territories have a local currency that is
) use the euro.Subdivisions and other units
Decimal coinage
Since decimalisation on Decimal Day in 1971, the pound has been divided into 100 pence (denoted on coinage, until 1981, as "new pence"). The symbol for the penny is "p"; hence an amount such as 50p (£0.50) properly pronounced "fifty pence" is often pronounced "fifty pee" /fɪfti piː/. The old sign d was not reused for the new penny in order to avoid confusion between the two units. A decimal halfpenny (1/2p, worth 1.2 old pennies) was issued until 1984 but was withdrawn due to inflation.[41]
Pre-decimal
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Unit | |||||
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Unit | pound | ||||
Plural | Pounds | ||||
Symbol | £ | ||||
Denominations | |||||
Superunit | |||||
1.05 | Guinea | ||||
Subunit | |||||
1⁄20 | Shilling | ||||
1⁄240 | Penny | ||||
Plural | |||||
Shilling | Shillings | ||||
Penny | Pence | ||||
Symbol | |||||
Shilling | s or / | ||||
Penny | d | ||||
Banknotes | |||||
Freq. used | |||||
Rarely used | |||||
Coins |
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This infobox shows the latest status before this currency was rendered obsolete. |
Before
By the 1950s, coins of Kings
History (600–1945)
The pound sterling emerged after the adoption of the Carolingian monetary system in England c. 800. Here is a summary of changes to its value in terms of silver or gold until 1816.[44][45]
year | silver | gold | ||
---|---|---|---|---|
grams | troy ounces | grams | troy ounces | |
800 | 349.9 g | 11.25 ozt | – | – |
1158 | 323.7 g | 10.41 ozt | – | – |
1351 | 258.9 g | 8.32 ozt | 23.21 g | 0.746 ozt |
1412 | 215.8 g | 6.94 ozt | 20.89 g | 0.672 ozt |
1464 | 172.6 g | 5.55 ozt | 15.47 g | 0.497 ozt |
1551 | 115.1 g | 3.70 ozt | 10.31 g | 0.331 ozt |
1601 | 111.4 g | 3.58 ozt | variable | |
1717 | 111.4 g | 3.58 ozt | 7.32238 g | 0.235420 ozt |
1816 | – | – | 7.32238 g | 0.235420 ozt |
Anglo-Saxon
This section needs additional citations for verification. (July 2021) |
The pound was a unit of account in
The accounting
]The origins of sterling lie in the reign of
Halfpennies and farthings worth 1⁄2 and 1⁄4 penny respectively were also minted, but small change was more commonly produced by cutting up a whole penny.[50]
Medieval, 1158
The early pennies were struck from fine silver (as pure as was available).
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.[51] A gold penny weighing twice the silver penny and valued at 20 silver pence was also issued in 1257 but was not successful.[52]
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.[53]
Edward III, 1351
During the reign of King Edward III, the introduction of gold coins received from Flanders as payment for English wool provided substantial economic and trade opportunities but also unsettled the currency for the next 200 years.[44]: 41 The first monetary changes in 1344 consisted of
- English pennies reduced to 20+1⁄4 grains (1.312 g; 0.042 ozt) of sterling silver (or 20.25gr @ 0.925 fine = 18.73 gr pure silver) and
- Gold double florins weighing 108 gr (6.998 g; 0.225 ozt) and valued at 6 shillings (or 72 pence).[44] (or 108gr @ 0.9948 fine = 107.44 gr 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 18 gr (1.2 g; 0.038 ozt) of sterling silver (or 18 @ 0.925 fine = 15.73 gr pure silver) and
- New gold nobles weighing 120 grains (7.776 grams; 0.250 troy ounces) of the finest gold possible at the time (191/192 or 99.48% fine),[54] (meaning 120gr @ 0.9948 fine = 119.38 gr pure gold) and valued at 6 shillings and 8 pence (80 pence, or 1⁄3rd of a pound). The pure gold-silver ratio was thus 1:(80 × 15.73 / 119.38) = 1:10.5.
These gold nobles, together with half-nobles (40 pence) and farthings or quarter-nobles (20 pence),[54] became the first English gold coins produced in quantity.[55]
Henry IV, 1412
The exigencies of the Hundred Years' War 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)[clarification needed] and the half-noble reduced to 54 grains (3.481 g fine gold).[clarification needed][44] The gold-silver ratio went down to 40 × 0.899 / 3.481 = 10.3.
After the French monetary reform of 1425, the gold half-noble (1⁄6th 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).[56] Also, after the Flemish monetary reform of 1434, the new Dutch florin was valued close to 40 pence while the Dutch stuiver (shilling) of 1.63 g fine silver was valued close to 2 pence sterling at 1.8 g.[57] This approximate pairing of English half-nobles and half-groats to Continental livres and sols persisted up to the 1560s.
Great slump, 1464
The
40 pence or 1⁄6th 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 29.232 g (0.9398 ozt).[44]: 361
Tudor, 1551
The last significant depreciation in sterling's silver standard occurred amidst the 16th century influx of precious metals from the Americas arriving through the Habsburg Netherlands. Enforcement of monetary standards amongst its constituent provinces was loose, spending under King Henry VIII was extravagant, and England loosened the importation of cheaper continental coins for exchange into full-valued English coins.[58][60] All these contributed to the Great Debasement which resulted in a significant 1⁄3rd reduction in the bullion content of each pound sterling in 1551.[61][45]
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 0.4795 g (0.01542 ozt) fine silver).[45] The gold half-angel of 40 grains (2.578 g (0.0829 ozt) fine gold) was raised in price from 40 pence to 60 pence (5 shillings or 1⁄4 pound) and was henceforth known as the Crown.
Prior to 1551, English coin denominations closely matched with corresponding sol (2d) and livre (40d) denominations in the Continent, namely:
- Silver; see farthing (1⁄4d), halfpenny (1⁄2d), penny (1d), half-groat (2d), and groat (4d)
- Gold; see 1351: 1⁄4 noble (20d), 1⁄2 noble (40d) and noble or angel (80d).
After 1551 new denominations were introduced,[62] weighing similarly to 1464-issued coins but increased in value 1+1⁄2 times, namely:
- In silver: the threepence (3d), replacing the half-groat; the sixpence (6d), replacing the groat; and a new shilling or testoon (1s or 1/–).
- In silver or gold: the crown (5/- (5s) or 60d), replacing the 1⁄2 angel of 40d; and the half crown (2/6d or 30d), replacing the 1⁄4 angel of 20d
- And in gold: the new half sovereign (10/–) and sovereign (£1 or 20/–)
1601 to 1816
This section needs additional citations for verification. (August 2022) |
The silver basis of sterling remained essentially unchanged until the 1816 introduction of the Gold Standard, save for the increase in the number of pennies in a troy ounce from 60 to 62 (hence, 0.464 g fine silver in a penny). Its gold basis remained unsettled, however, until the gold guinea was fixed at 21 shillings in 1717.
The guinea was introduced in 1663 with 44+1⁄2 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).[65]
In the 17th century, English merchants tended to pay for imports in silver but were generally paid for exports in gold.[
Domestic demand for silver bullion in Britain further reduced silver coinage in circulation, as the improving fortunes of the merchant class led to increased demand for tableware. Silversmiths had always regarded coinage as a source of raw material, already verified for fineness by the government. As a result, sterling silver coins were being melted and fashioned into "sterling silverware" at an accelerating rate. An Act of the Parliament of England in 1697 tried to stem this tide by raising the minimum acceptable fineness on wrought plate from sterling's 92.5% to a new Britannia silver 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.[citation needed]
During the time of Sir Isaac Newton, 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. Silver and copper tokens issued by private entities partly relieved the problem of small change until the Great Recoinage of 1816.[67]
Establishment of modern currency
The
Currency of Great Britain (1707) and the United Kingdom (1801)
In the 17th century
In 1707, the kingdoms of England and Scotland merged into the Kingdom of Great Britain. In accordance with the Treaty of Union, the currency of Great Britain was sterling, with the pound Scots soon being replaced by sterling at the pegged value.
In 1801, Great Britain and the Kingdom of Ireland were united to form the United Kingdom of Great Britain and Ireland. However, the Irish pound was not replaced by sterling until January 1826.[69] The conversion rate had long been £13 Irish to £12 sterling.[citation needed] In 1928, six years after the Anglo-Irish Treaty restored Irish autonomy within the British Empire, the Irish Free State established a new Irish pound, initially pegged at par to sterling.[70]
Use in the Empire
Sterling circulated in much of the
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
By the 19th century, sterling notes were widely accepted outside Britain. The American journalist
First world war: suspension of the gold standard
The gold standard was suspended at the outbreak of
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
Interwar period: gold standard reinstated
To try to resume stability, a version of the gold standard was reintroduced in 1925, under which the currency was fixed to gold at its pre-war peg, but one could only exchange currency for gold bullion, not for coins. On 21 September 1931, this was abandoned during the Great Depression, and sterling suffered an initial devaluation of some 25%.[78]
Since the suspension of the gold standard in 1931, sterling has been a fiat currency, with its value determined by its continued acceptance in the national and international economy.
World War II
In 1940, an agreement with the US pegged sterling to the US dollar at a rate of £1 = US$4.03. (Only the year before, it had been US$4.86.)[79] 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.[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
Decimalisation
Until decimalisation, amounts in sterling were expressed in
Formal parliamentary proposals to decimalise sterling were first made in 1824 when Sir John Wrottesley, MP for Staffordshire, asked in the House of Commons whether consideration had been given to decimalising the currency.[82] Wrottesley raised the issue in the House of Commons again in 1833,[83] and it was again raised by John Bowring, MP for Kilmarnock Burghs, in 1847[84] 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.
However, sterling was decimalised in various British colonial territories before the United Kingdom (and in several cases in line with William Brown's proposal that the pound be divided into 1,000 parts, called mils). These included Hong Kong from 1863 to 1866;[90] 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.[91]
Later, in 1966, the UK Government decided to include in the
Free-floating pound
With the breakdown of the
1976 sterling crisis
1979–1989
The
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.[99]
Following German reunification in 1990, the reverse held true, as high German borrowing costs to fund Eastern reconstruction, exacerbated by the political decision to convert the Ostmark 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 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.[100][101]
"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[102] for a lower GBP/DM exchange rate were vindicated since the cheaper pound encouraged exports and contributed to the economic prosperity of the 1990s.[citation needed]
Following inflation targets
In 1997, the newly elected
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.[105]
On 1 January 2008, with the
The government of former Prime Minister
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.[107] 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.[108] Sterling did not join the Second European Exchange Rate Mechanism (ERM II) after the euro was created. Denmark and the UK had opt-outs from entry to the euro. Theoretically, every EU nation but Denmark must eventually sign up.
As a member of the European Union, the United Kingdom could have adopted the euro as its currency. However, the subject was always politically controversial, and the UK negotiated an opt-out on this issue. Following the UK's withdrawal from the EU, on 31 January 2020, the Bank of England ended its membership of the European System of Central Banks,[109] and shares in the European Central Bank were reallocated to other EU banks.[110]
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.[111] From mid-2003 to mid-2007, the pound/euro rate remained within a narrow range (€1.45 ± 5%).[112]
Following the
On 5 March 2009, the Bank of England announced that it would pump £75 billion of new capital into the British economy, through a process known as quantitative easing (QE). This was the first time in the United Kingdom's history that this measure had been used, although the Bank's Governor Mervyn King suggested it was not an experiment.[117]
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.[118] 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.[119] It was expected that the process would continue for three months, with results only likely in the long term.[117] 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.[120]
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.[121] 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.[122] 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%.[123]
In September 2022, under the influence of inflation and tax cuts funded by borrowing,[124] sterling's value reached an all-time low of just over $1.03.[125]
Annual inflation rate
The Bank of England had stated in 2009 that the decision had been taken to prevent the rate of
The inflation rate rose in following years, reaching 5.2% per year (based on the
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
The reign of
Following the succession of the Scottish King
Following the restoration of the monarchy in 1660, the coinage was reformed, with the ending of production of hammered coins in 1662. The
To alleviate the shortage of silver coins, between 1797 and 1804, the Bank of England counterstamped Spanish dollars (8 reales) and other Spanish and Spanish colonial coins for circulation. A small counterstamp of the King's head was used. Until 1800, these circulated at a rate of 4/9d 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 1/6d and 3/– between 1811 and 1816.
In 1816, a new silver coinage was introduced in denominations of 6d, 1/–, 2/6d (half-crown) and 5/– (crown). The crown was only issued intermittently until 1900. It was followed by a new gold coinage in 1817 consisting of 10/– and £1 coins, known as the half sovereign and sovereign. The silver 4d coin was reintroduced in 1836, followed by the 3d in 1838, with the 4d coin issued only for colonial use after 1855. In 1848, the 2/– florin was introduced, followed by the short-lived double florin in 1887. In 1860, copper was replaced by bronze in the farthing (quarter penny, 1⁄4d), halfpenny and penny.
During the
Decimal coins
£1 coin (new design, 2016)
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Elizabeth II | English rose, Welsh leek, Scottish thistle, and Northern Irish shamrock |
British coinage timeline:
- 1968: The first 10p coins which were the same size as, equivalent in value to, and circulated alongside, the one shilling coin and the florin (two shilling coin)respectively.
- 1969: The curved equilateral 50p coin replaced the ten shilling note(10/–).
- 1970: The demonetised.
- 1971: The decimal coinage was completed when decimalisation came into effect in 1971 with the introduction of the bronze half new penny (1⁄2p), new penny (1p), and two new pence (2p) coins and the withdrawal of the (old) penny (1d) and (old) threepence (3d) coins.
- 1980: Withdrawal of the sixpence (6d) coin, which had continued in circulation at a value of 2+1⁄2p.
- 1982: The word "new" was dropped from the coinage and a 20p coinwas introduced.
- 1983: A (round, brass) £1 coinwas introduced.
- 1983: The 1⁄2p coin was last produced.
- 1984: The 1⁄2p coin was withdrawn from circulation.
- 1990: The crown, historically valued at five shillings (25p), was re-tariffed for future issues as a commemorative coin at £5.
- 1990: A new 5p coin was introduced, replacing the original size that had been the same as the shilling coinsof the same value that it had in turn replaced. These first generation 5p coins and any remaining old shilling coins were withdrawn from circulation in 1991.
- 1992: A new 10p coin was introduced, replacing the original size that had been the same as the florin or two shilling coinsof 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: coins continued in circulation).
- 1997: A new 50pcoin 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 £2 coinwas introduced.
- 2007: By now the value of copper in the pre-1992 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 valueof copper has subsequently fallen dramatically from these earlier peaks.
- In April 2008, an extensive redesign of the coinage was unveiled. The Royal Shieldon 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 10p coins were changed from cupro-nickel to nickel-plated steel.
- 2017: A more secure twelve-sided bi-metallic £1 coin was introduced to reduce forgery. The old round £1 coin ceased to be legal tender on 15 October 2017.[128]
As of 2020[update], the oldest circulating coins in the UK are the 1p and 2p copper coins introduced in 1971. No other coins from before 1982 are in circulation. Prior to the withdrawal from circulation in 1992, the oldest circulating coins usually dated from 1947: although older coins were still legal tender, inflation meant that their silver content was worth more than their face value, so they tended to be removed from circulation and hoarded. Before decimalisation in 1971, a handful of change might have contained coins over 100 years old, bearing any of five monarchs' heads, especially in the copper coins.
Banknotes
The first sterling notes were issued by the
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 65 miles (105 km) from London were given permission to issue their own paper money. From 1844, new banks were excluded from issuing notes in England and Wales but not in Scotland and Ireland. Consequently, the number of private banknotes dwindled in England and Wales but proliferated in Scotland and Ireland. The last English private banknotes were issued in 1921.
In 1914, the
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.[129] 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
The Bank of England produces notes named "
Polymer banknotes
The
Monetary policy
As the central bank of the United Kingdom which has been delegated authority by the government, the Bank of England sets the monetary policy for the British pound by controlling the amount of money in circulation. It has a monopoly on the issuance of banknotes in England and Wales and regulates the amount of banknotes issued by seven authorized banks in Scotland and Northern Ireland.[134] 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.[135]
Unlike banknotes which have separate issuers in Scotland and Northern Ireland, all British coins are issued by the Royal Mint, an independent enterprise (wholly owned by the Treasury) which also mints coins for other countries.
Legal tender and national issues
Legal tender in the United Kingdom is defined such that "a debtor cannot successfully be sued for non-payment if he pays into court in legal tender." Parties can alternatively settle a debt by other means with mutual consent. Strictly speaking, it is necessary for the debtor to offer the exact amount due as there is no obligation for the other party to provide change.[136]
Throughout the UK, £1 and £2 coins are legal tender for any amount, with the other coins being legal tender only for limited amounts. Bank of England notes are legal tender for any amount in England and Wales, but not in Scotland or Northern Ireland.[136] (Bank of England 10/– and £1 notes were legal tender, as were Scottish banknotes, during World War II under the Currency (Defence) Act 1939, which was repealed on 1 January 1946.) Channel Islands and Manx banknotes are legal tender only in their respective jurisdictions.[137]
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.[138] 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.[139] Bank of England notes are generally accepted in the Falklands and Gibraltar, but for example, Scottish and Northern Irish notes are not.[140] Since all of the notes are denominated in sterling, banks will exchange them for locally issued notes at face value,[141][failed verification] though some in the UK have had trouble exchanging Falkland Islands notes.[142]
Commemorative
Coin | Maximum usable as legal tender[144] |
---|---|
£100 (produced from 2015)[136] | unlimited |
£20 (produced from 2013) | unlimited |
£5 (post-1990 crown) | unlimited |
£2 | unlimited |
£1 | unlimited |
50p | £10 |
25p (pre-1990 crown) | £10 |
20p | £10 |
10p | £5 |
5p | £5 |
2p | 20p |
1p | 20p |
Pegged currencies
In Britain's
British Overseas Territories are responsible for the monetary policy of their own currencies (where they exist),[146] 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.[147]
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.[148]
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 1⁄2p, 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.[149]
The table shows that from 1971 to 2018, the buying power of a pound fell by 92.74%.
Year | Equivalent buying power | Year | Equivalent buying power | Year | Equivalent buying power | Year | Equivalent buying power | Year | Equivalent buying power | Year | Equivalent buying power |
---|---|---|---|---|---|---|---|---|---|---|---|
1971 | £1.00 | 1981 | £0.271 | 1991 | £0.152 | 2001 | £0.117 | 2011 | £0.0900 | 2021 | £0.0678 |
1972 | £0.935 | 1982 | £0.250 | 1992 | £0.146 | 2002 | £0.115 | 2012 | £0.0850 | 2022 | £0.0612 |
1973 | £0.855 | 1983 | £0.239 | 1993 | £0.144 | 2003 | £0.112 | 2013 | £0.0826 | ||
1974 | £0.735 | 1984 | £0.227 | 1994 | £0.141 | 2004 | £0.109 | 2014 | £0.0800 | ||
1975 | £0.592 | 1985 | £0.214 | 1995 | £0.136 | 2005 | £0.106 | 2015 | £0.0780 | ||
1976 | £0.510 | 1986 | £0.207 | 1996 | £0.133 | 2006 | £0.102 | 2016 | £0.0777 | ||
1977 | £0.439 | 1987 | £0.199 | 1997 | £0.123 | 2007 | £0.0980 | 2017 | £0.0744 | ||
1978 | £0.407 | 1988 | £0.190 | 1998 | £0.125 | 2008 | £0.0943 | 2018 | £0.0726 | ||
1979 | £0.358 | 1989 | £0.176 | 1999 | £0.123 | 2009 | £0.0952 | 2019 | £0.0707 | ||
1980 | £0.303 | 1990 | £0.161 | 2000 | £0.119 | 2010 | £0.0910 | 2020 | £0.0695 |
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 mythical "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 markets around the world, and its value relative to other currencies therefore fluctuates.
Current GBP exchange rates | |
---|---|
From Google Finance: | AUD CAD CHF CNY EUR HKD JPY USD |
From Yahoo! Finance: | AUD CAD CHF CNY EUR HKD JPY USD |
From XE.com: | AUD CAD CHF CNY EUR HKD JPY USD |
From OANDA: | AUD CAD CHF CNY EUR HKD JPY USD |
Reserve
Sterling is used as a reserve currency around the world. As of 2020[update], it is ranked fourth in value held as reserves.
2022 | 2021 | 2020 | 2019 | 2018 | 2017 | 2016 | 2015 | 2014 | 2013 | 2012 | 2011 | 2010 | 2009 | 2008 | 2007 | 2006 | 2005 | 2004 | 2003 | 2002 | 2001 | 2000 | 1995 | 1990 | 1985 | 1980 | 1975 | 1970 | 1965 | |
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
US dollar | 58.36% | 58.81% | 58.92% | 60.75% | 61.76% | 62.73% | 65.36% | 65.73% | 65.14% | 61.24% | 61.47% | 62.59% | 62.14% | 62.05% | 63.77% | 63.87% | 65.04% | 66.51% | 65.51% | 65.45% | 66.50% | 71.51% | 71.13% | 58.96% | 47.14% | 56.66% | 57.88% | 84.61% | 84.85% | 72.93% |
Euro (until 1999 - ECU) | 20.47% | 20.64% | 21.29% | 20.59% | 20.67% | 20.17% | 19.14% | 19.14% | 21.20% | 24.20% | 24.05% | 24.40% | 25.71% | 27.66% | 26.21% | 26.14% | 24.99% | 23.89% | 24.68% | 25.03% | 23.65% | 19.18% | 18.29% | 8.53% | 11.64% | 14.00% | 17.46% | |||
Japanese yen | 5.51% | 5.57% | 6.03% | 5.87% | 5.19% | 4.90% | 3.95% | 3.75% | 3.54% | 3.82% | 4.09% | 3.61% | 3.66% | 2.90% | 3.47% | 3.18% | 3.46% | 3.96% | 4.28% | 4.42% | 4.94% | 5.04% | 6.06% | 6.77% | 9.40% | 8.69% | 3.93% | 0.61% | ||
Pound sterling | 4.95% | 4.78% | 4.73% | 4.64% | 4.43% | 4.54% | 4.35% | 4.71% | 3.70% | 3.98% | 4.04% | 3.83% | 3.94% | 4.25% | 4.22% | 4.82% | 4.52% | 3.75% | 3.49% | 2.86% | 2.92% | 2.70% | 2.75% | 2.11% | 2.39% | 2.03% | 2.40% | 3.42% | 11.36% | 25.76% |
Chinese renminbi
|
2.69% | 2.79% | 2.29% | 1.94% | 1.89% | 1.23% | 1.08% | |||||||||||||||||||||||
Canadian dollar | 2.38% | 2.38% | 2.08% | 1.86% | 1.84% | 2.03% | 1.94% | 1.77% | 1.75% | 1.83% | 1.42% | |||||||||||||||||||
Australian dollar | 1.96% | 1.81% | 1.83% | 1.70% | 1.63% | 1.80% | 1.69% | 1.77% | 1.59% | 1.82% | 1.46% | |||||||||||||||||||
Swiss franc | 0.23% | 0.20% | 0.17% | 0.15% | 0.14% | 0.18% | 0.16% | 0.27% | 0.24% | 0.27% | 0.21% | 0.08% | 0.13% | 0.12% | 0.14% | 0.16% | 0.17% | 0.15% | 0.17% | 0.23% | 0.41% | 0.25% | 0.27% | 0.33% | 0.84% | 1.40% | 2.25% | 1.34% | 0.61% | |
Deutsche Mark | 15.75% | 19.83% | 13.74% | 12.92% | 6.62% | 1.94% | 0.17% | |||||||||||||||||||||||
French franc | 2.35% | 2.71% | 0.58% | 0.97% | 1.16% | 0.73% | 1.11% | |||||||||||||||||||||||
Dutch guilder | 0.32% | 1.15% | 0.78% | 0.89% | 0.66% | 0.08% | ||||||||||||||||||||||||
Other currencies | 3.45% | 3.01% | 2.65% | 2.51% | 2.45% | 2.43% | 2.33% | 2.86% | 2.83% | 2.84% | 3.26% | 5.49% | 4.43% | 3.04% | 2.20% | 1.83% | 1.81% | 1.74% | 1.87% | 2.01% | 1.58% | 1.31% | 1.49% | 4.87% | 4.89% | 2.13% | 1.29% | 1.58% | 0.43% | 0.03% |
Source: World Currency Composition of Official Foreign Exchange Reserves International Monetary Fund |
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
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Further reading
- "Bank of England Banknotes FAQ". Archived from the original on 12 October 2007. Retrieved 7 May 2006.
- The Perspective of the World, Vol III of Civilisation and Capitalism, ISBN 1-84212-289-4(in French 1979).
- A Retrospective on the Bretton Woods System : Lessons for International Monetary Reform (National Bureau of Economic Research Project Report) By Barry Eichengreen (Editor), Michael D. Bordo (Editor) Published by ISBN 0-226-06587-1
- The political pound: British investment overseas and exchange controls past—and future? By John Brennan Published By Henderson Administration (1983) ISBN 0-9508735-0-0
- Monetary History of the United States, 1867–1960 by Milton Friedman, Anna Jacobson Schwartz Published by ISBN 0-691-00354-8
- The international role of the pound sterling: Its benefits and costs to the United Kingdom By John Kevin Green
- The Financial System in Nineteenth-Century Britain (The Victorian Archives Series), By Mary Poovey Published by ISBN 0-19-515057-0
- Rethinking our Centralised Monetary System: The Case for a System of Local Currencies By Lewis D. Solomon Published by Praeger Publishers (1996) ISBN 0-275-95376-9
- Politics and the Pound: The Conservatives' Struggle With Sterling by Philip Stephens Trans-Atlantic Publications (1995) ISBN 0-333-63296-6
- The European Monetary System: Developments and Perspectives (Occasional Paper, No. 73) by Horst Ungerer, Jouko J. Hauvonen Published by International Monetary Fund (1990) ISBN 1-55775-172-2
- The floating pound sterling of the nineteen-thirties: An exploratory study By J. K Whitaker Dept. of the Treasury (1986)
- World Currency Monitor Annual, 1976–1989: Pound Sterling : The Value of the British Pound Sterling in Foreign Terms Published by Mecklermedia (1990) ISBN 0-88736-543-4
- Krause, Chester L.; Clifford Mishler (1991). ISBN 0873411501.
- Pick, Albert (1994). ISBN 0-87341-207-9.
- Pick, Albert (1990). ISBN 0-87341-149-8.
External links
- Official website of the Royal Mint
- Pound Sterling – BBC News (Foreign exchange market news)