Banknotes of the pound sterling

Sterling banknotes are the banknotes in circulation in the British Islands (encompassing the United Kingdom and the British Crown dependencies), denominated in pounds sterling (symbol: £; ISO 4217 currency code GBP). One pound is equivalent to 100 pence.

The pound is the official currency of the United Kingdom and the Crown dependencies of Britain. Three British Overseas Territories also have currencies called pounds which are at par with the pound sterling.

In most countries of the world the issue of banknotes is handled exclusively by a single central bank or government, but in the United Kingdom seven retail banks have the right to print their own banknotes in addition to the Bank of England; Sterling banknote issue is thus not automatically tied in with one national identity or the activity of the state. The arrangements in the UK are unusual but not unique, as a comparable system is used in Hong Kong, where three banks issue their own banknotes in addition to the Hong Kong government.

History

Until the middle of the 19th century, privately owned banks in Great Britain and Ireland were free to issue their own banknotes and money issued by provincial English,Welsh, Scottish and Irish banking companies circulated freely as a means of payment. As gold shortages affected the supply of money, note-issuing powers of the banks were gradually restricted by various Acts of Parliament, until the Bank Charter Act 1844 gave exclusive note-issuing powers to the central Bank of England. Under the Act, no new banks could start issuing notes and note-issuing banks gradually vanished through mergers and closures. The last private English banknotes were issued in 1921 by Fox, Fowler and Company, a Somerset bank.

However, some of the monopoly provisions of the Bank Charter Act only applied to England and Wales. The Bank Notes (Scotland) Act was passed the following year, and to this day, three retail banks retain the right to issue their own sterling banknotes in Scotland, and four in Northern Ireland. Notes issued in excess of the value of notes outstanding in 1844 (1845 in Scotland) must be backed up by an equivalent value of Bank of England notes.

Following the Partition of Ireland, the Irish Free State created an Irish pound in 1928; the new currency was pegged to sterling until 1979. The issue of banknotes for the Irish pound fell under the authority of the Currency Commission of Ireland, who set about replacing the private banknotes with a single Consolidated Banknote Issue in 1928. In 1928 a Westminster act of parliament reduced the fiduciary limit for Irish banknotes circulating in Northern Ireland to take account of the reduced size of the territory concerned.

Key dates

The following events and acts of parliament affected the course of banknote history in Great Britain and Ireland:

Year Event Countries Impact

1694 Bank of England Act 1694 England & Wales Incorporation of the Bank of England

1695 An Act creating the Governor and Company of the Bank of Scotland Scotland Creation of the Bank of Scotland, principally as a trading bank

1707 Acts of Union 1707

England & Wales

Scotland

English and Scottish parliaments merged into the Parliament of Great Britain

1708 1709

Bank of England Act 1708

Bank of England Act 1709 England & Wales Prohibition of companies or partnerships of more than six people to set up banks and issue notes, preventing smaller banks from printing their own money

1727 Chartering of the Royal Bank of Scotland Scotland Broke the monopoly of the Bank of Scotland, initiated the banking war when the Royal Bank attempted to drive the Bank of Scotland out of business by stockpiling and then presenting its notes for payment.

1800 Act of Union 1800 Great Britain & Ireland British and Irish parliaments merged into the Parliament of Great Britain and Ireland

1826 Country Bankers Act 1826 England & Wales Allowed joint stock banks with more than six partners which were at least 65 miles away from London to print their own money. Bank of England allowed to open branches in major English provincial cities, enabling wider distribution of its notes.

1826

Bank Notes Act 1826

Bankers (Scotland) Act 1826

England & Wales

Scotland Prohibition of circulation of notes under £5 in England. Attempts to apply this law in Scotland fail after a protest by Sir Walter Scott, and the Scottish £1 note is saved.

1833 Bank Notes Act 1833 England & Wales Gave Bank of England notes official status as "legal tender" for all sums above £5 in England and Wales to guarantee public confidence in the notes even in the event of a gold shortage.

1844 Bank Charter Act 1844 UK Took away the note-issuing rights of any new banks; existing note-issuing banks barred from expanding their issue. Began process of giving Bank of England monopoly over banknote issue in England and Wales.

1845 Bank Notes (Scotland) Act 1845 Scotland Regulated issue of notes in Scotland; most Scottish banknotes had to be backed up by Bank of England money

1908 Bank closure Wales The last private note issuer in Wales, the North and South Wales Bank, loses its note-issuing rights under the 1844 act after it is acquired by Midland Bank.

1914 Currency and Bank Notes Act 1914 UK HM Treasury given temporary wartime powers for issuing banknotes to the value of £1 and 10/- (ten shillings) in the UK (ended 1928)

1921 Bank closure England The last private note issuer in England, Fox, Fowler and Company of Somerset, loses its note-issuing rights under the 1844 act after it is acquired by Lloyds Bank.

1928 Irish pound established Ireland Following Partition of Ireland, Irish pound is established as a separate currency (but at parity with sterling until 1979); Northern Ireland remains within sterling

1954 Currency and Bank Notes Act 1954 UK Extended the Bank Notes Act 1833 to make Bank of England notes under £5 in value legal tender; act also applied to Scotland, making English 10/- and £1 legal tender for the first time. Bank of England withdrew low-denomination notes in 1969 and 1988, removing legal tender from Scotland.

2008 Banking Act 2009 UK As a consequence of the Financial Crisis of 2007-08, this proposed Bill will alter the right of banks in Scotland and Northern Ireland to issue their own notes, and consequential provisions related to the powers of the Bank of England.

Everyday use and acceptance

Because of the wide variety of sterling notes in circulation, acceptance of different pound sterling banknotes varies. Their acceptance may depend on the experience and understanding of individual retailers, and it is important to understand the idea of "legal tender", which is often misunderstood (see section below). In summary, the various banknotes are used as follows:

English banknotes (Bank of England)

The majority of sterling notes are printed by the Bank of England. These are legal tender in England and Wales only but generally accepted throughout the UK, Isle of Man, and Channel Islands. However since 2005, cash machines in Jersey no longer dispense English notes. Bank of England notes are generally accepted in the Overseas Territories which are at parity with sterling. In Gibraltar, there are examples of pairs of automatic cash dispensers placed together, one stocked with English notes, the other with local ones.

Scottish banknotes

These are the recognised currency in Scotland, and although they are not legal tender they are always accepted by traders in Scotland, and often in other parts of the United Kingdom. However, some people outside Scotland are unfamiliar with the notes and they are sometimes refused. Institutions such as clearing banks, building societies and the Post Office will readily accept Scottish bank notes. Branches of the Scottish note-issuing banks situated in England dispense Bank of England notes and may not dispense their own notes from those branches. Modern Scottish banknotes are denominated in pounds sterling, and are exactly the same value as Bank of England notes; they should not be confused with the former Pound Scots, a separate currency which was abolished in 1707.

Northern Ireland banknotes

Banknotes issued by Northern Ireland banks have the same legal status as Scottish banknotes in that they are promissory notes issued in pounds sterling and may be used for cash transactions anywhere in the United Kingdom. However, they are rarely seen outside Northern Ireland and are often not accepted in England and Wales without some explanation. As with Scottish notes, clearing banks and building societies will accept them. Northern Ireland sterling banknotes should not be confused with the Irish pound (or Punt), the former currency of the Republic of Ireland, which was replaced by the euro in 1999.

Banknotes from the Crown dependencies

The Bailiwicks of Jersey and Guernsey, and the Isle of Man are possessions of the Crown but are outside the UK; they are in currency union with the United Kingdom and issue sterling banknotes in local designs (Jersey and Guernsey pounds are freely interchangeable within the Channel Islands). In the United Kingdom, although they could be accepted by any store, as banks can exchange these notes for English ones, it is still difficult to spend them in England and Wales. However, they are accepted by banks, post offices, large retailers and are often dispensed by large retailers.

British Overseas Territories

There are fourteen British Overseas Territories many of which issue their own currencies which are distinct under ISO 4217; Gibraltar, Saint Helena and the Falkland Islands have their own pounds which are at par with Sterling. These notes cannot be used in the UK or outside the territories of origin. Falkland Island Pounds are also commonly used in the South Georgia and the South Sandwich Islands and the British Antarctic Territory. St Helena pounds can also be used on Ascension Island. However, the Gibraltar Pound is treated like the Pounds of Jersey and Guernsey in the UK and can be accepted as a mean of payment since these pounds are pegged with the English pound.

The question of legal tender

The concept of "legal tender" is a narrow technical definition that refers to the settlement of debt, and it has little practical meaning in everyday transactions such as buying goods in shops (but does apply, for example, to the settling of a restaurant bill, where the food has been eaten prior to demand for payment and so a debt exists). Essentially, any two parties can agree to any item of value as a medium for exchange when making a purchase (in that sense, all money is ultimately an extended form of barter). If a debt exists that is legally enforceable and the debtor party offers to pay with some item that is not "legal tender," the creditor may refuse such payment and declare that the debtor is in default of payment; if the debtor offers payment in legal tender, the creditor is required to accept it or else the creditor is in breach of contract. Thus, if in England party A owes party B 1,000 pounds sterling and offers to pay in Northern Ireland banknotes, party B may refuse and sue party A for nonpayments; if party A provides Bank of England notes, party B must acknowledge the debt as legally paid even if party B would prefer some other form of payment.

Banknotes do not have to be classed as legal tender to be acceptable for trade; millions of retail transactions are carried out in the UK using cheques, or debit or credit cards, none of which is a payment using legal tender. Equally, traders may choose to accept payment in foreign currency, such as euro or US dollar. Acceptability as a means of payment is essentially a matter for agreement between the parties involved.

Millions of pounds' worth of sterling banknotes in circulation are not legal tender, but that does not mean that they are illegal or of lesser value; their status is of "legal currency" (that is to say that their issue is approved by the parliament of the UK) and they are backed up by Bank of England securities.

Bank of England notes are the only banknotes that are legal tender in England and Wales. Scottish and Northern Ireland banknotes are not legal tender anywhere, and Jersey, Guernsey and Manx banknotes are only legal tender in their respective jurisdictions. The fact that these banknotes are not legal tender in the UK does not however mean that they are illegal under English law, and creditors and traders may accept them if they so choose. Traders may, on the other hand, choose not to accept banknotes as payment as contract law across the United Kingdom allows parties not to engage in a transaction at the point of payment if they choose not to.

In Scotland and Northern Ireland no banknotes, not even ones issued in those countries, are legal tender. They have a similar legal standing to cheques or debit cards, in that their acceptability as a means of payment is essentially a matter for agreement between the parties involved, although Scots law requires any reasonable offer for settlement of a debt to be accepted.

Until 1988, the Bank of England issued one pound notes, and these notes did have legal tender status in Scotland and Northern Ireland while they existed. The Currency and Bank Notes Act 1954 defined Bank of England notes of less than £5 in value as legal tender in Scotland. Since the English £1 note was removed from circulation in 1988, this leaves a legal curiosity in Scots law whereby there is no paper legal tender in Scotland. The UK Treasury has proposed extending legal tender status to Scottish banknotes. The proposal has been opposed by Scottish nationalists who claim it would reduce the independence of the Scottish banking sector.

Most of the notes issued by the note-issuing banks in Scotland and Northern Ireland have to be backed by Bank of England notes held by the issuing bank. The combined size of these banknote issues is well over a billion pounds. To make it possible for the note-issuing banks to hold equivalent values in Bank of England notes, the Bank of England issues special notes with denominations of one million pounds ("Giants") and one hundred million pounds ("Titans") for internal use by the other banks.

Bank notes are no longer redeemable in gold and the Bank of England will only redeem sterling banknotes for more sterling banknotes or coins. The contemporary sterling is a fiat currency which is backed only by securities; in essence IOUs from the Treasury that represent future income from the taxation of the population. Some economists term this 'currency by trust' as sterling relies on the faith of the user rather than any physical specie.

Issuing banks and authorities

The following table lays out the various banks or authorities which are authorised to print pound sterling banknotes, organised by territory:

United Kingdom

England & Wales Scotland Northern Ireland

Bank of England

Bank of Scotland

Royal Bank of Scotland

Clydesdale Bank

Bank of Ireland

First Trust Bank

Northern Bank

Ulster Bank

Crown dependencies

The Isle of Man Bailiwick of Jersey Bailiwick of Guernsey

Isle of Man Government

(Manx pound)

States of Jersey

(Jersey pound)

States of Guernsey

(Guernsey pound)

British Overseas Territories

Gibraltar Saint Helena Falkland Islands

Government of Gibraltar

(Gibraltar pound)

Government of Saint Helena

(Saint Helena pound)

Government of the Falkland Islands

(Falkland Islands pound)

= notes issued by a government or treasury

= notes issued by a central bank

= notes issued by a retail bank

England and Wales

Bank of England notes

A Series E (revised) £10 Bank of England note.

Banknote printing facility in Loughton.

Bank of England note issues

In 1921 the Bank of England gained a legal monopoly on the issue of banknotes in England and Wales, a process that started with the Bank Charter Act of 1844 when the ability of other banks to issue notes was restricted.

The bank issued its first banknotes in 1694, although before 1745 they were written for irregular amounts, rather than predefined multiples of a pound. It tended to be times of war, which put inflationary pressure on the British economy, that led to greater note issue. In 1759, during the Seven Years' War, when the lowest-value note issued by the Bank was £20, a £10 note was issued for the first time. In 1793, during the war with revolutionary France, the Bank issued the first £5 note. Four years later, £1 and £2 notes appeared, although not on a permanent basis. Notes did not become entirely machine-printed and payable to the bearer until 1855.

At the start of the First World War, the government issued £1 and 10-shilling Treasury notes to supplant the sovereign and half-sovereign gold coins. The first coloured banknotes were issued in 1928, and were also the first notes to be printed on both sides. The Second World War saw a reversal in the trend of warfare creating more notes when, in order to combat forgery, higher denomination notes (at the time as high as £1,000) were removed from circulation.

All Bank of England notes issued since Series C in 1960 depict Queen Elizabeth II on the obverse side, in full view facing left; her image also appears as a hidden watermark, facing right; recent issues have the EURion constellation around.

The custom of depicting historical figures on the reverse began with William Shakespeare in Series D in 1970. Since then, many other figures have featured on successive issues.

Current issue

Bank of England notes since series D

Series D

Value Reverse portrait Issued Withdrawn

£1 Isaac Newton 9 February 1978 11 March 1988

£5 Duke of Wellington 11 November 1971 29 November 1991

£10 Florence Nightingale 20 February 1975 20 May 1994

£20 William Shakespeare 9 July 1970 19 March 1993

£50 Christopher Wren 20 March 1981 20 September 1996

Series E

£5 George Stephenson 7 June 1990 21 November 2003

£10 Charles Dickens 29 April 1992 31 July 2003

£20 Michael Faraday 5 June 1991 28 February 2001

£50 John Houblon 20 April 1994 in use

Series E (Revision)

£5 Elizabeth Fry 21 May 2002 in use

£10 Charles Darwin 7 November 2000 in use

£20 Edward Elgar 22 June 1999 30 June 2010

Series F

£20 Adam Smith 13 March 2007 in use

£50 Matthew Boulton and James Watt late autumn 2010 n/a

As of July 2010 the Bank of England banknotes in circulation are mixed series. Most notes are of the revised Series E, although the Houblon £50 note, which is part of the original Series E, remains in circulation. On 13 March 2007, Bank of England issued a new 20 pound note depicting Adam Smith. This is the first note from the new Series F.

The notes presently in circulation are as follows:

5 pound note depicting Elizabeth Fry, showing a scene with her reading to prisoners in Newgate Prison

10 pound note depicting Charles Darwin, a hummingbird and the HMS Beagle

20 pound note depicting Adam Smith, with an illustration of 'The division of labour in pin manufacturing' ( Image )

50 pound note depicting Sir John Houblon, with a view of his house in Threadneedle Street.

Series F

The launch of the new Series F banknotes was announced on 29 October 2006 by the Governor of the Bank of England. The first of these new notes, a £20 note, drew some commentary because it features the Scottish economist, Adam Smith, the first Scot to appear on an English note. Smith also features on £50 notes issued by the Clydesdale Bank. Previous issues of Bank of England £20 notes were known to have suffered from higher cases of counterfeiting (276,000 out of 290,000 cases detected in 2007) than any other denominations. The note, which also includes enhanced security features entered circulation on 13 March 2007.

The current £50 note will be replaced in late 2010 by the first Bank of England banknote to feature two Britons on the reverse – James Watt and Matthew Boulton.

As of 2005, the notes are signed by the Chief Cashier, Andrew Bailey.

Previous issues

The Bank of England Series D one pound note was discontinued in 1984, having been replaced by a pound coin the year before, and was officially withdrawn from circulation in 1988. Nonetheless, all banknotes, regardless of when they were withdrawn from circulation may be presented at the Bank of England where they will be exchanged for current banknotes. Other banks may also decide to exchange old banknotes, but they are not under an obligation to do so.

High-value notes

Higher-value notes are used within the banks – particularly the £1 million and £100 million notes used to maintain parity with Scottish and Northern Irish notes. Banknotes issued by Scottish and Northern Irish banks have to be backed by Bank of England notes (other than a small amount representing the currency in circulation in 1845), and special million pound notes are used for this purpose. These resemble simple IOUs and bear no aesthetic design features.

Wales

There are no Welsh banknotes in circulation; Bank of England notes are used throughout Wales. The last Welsh banknotes were withdrawn in 1908 upon the closure of the last Welsh bank, the North and South Wales Bank. An attempt was made in 1969 by a Welsh banker to revive Welsh banknotes, but the venture was short-lived and the notes did not enter general circulation, surviving today only as a collectors' curiosity.

Scotland and Northern Ireland

Scottish and Northern Irish banknotes are unusual, firstly because they are issued by retail banks, not central banks, and secondly, as they are not legal tender anywhere in the UK – not even in Scotland or Northern Ireland – they are in fact promissory notes. Indeed, no banknotes (even Bank of England notes) are now legal tender in Scotland or Northern Ireland.

Seven retail banks have the authority of Parliament to issue sterling banknotes as currency. Despite this, the notes are sometimes refused in England and Wales, and are not always accepted by banks and exchange bureaus outside of the United Kingdom. This is particularly true in the case of the Royal Bank of Scotland £1 note, which is the only £1 note to remain in circulation within the UK.

In 2000, the European Central Bank indicated that, should the United Kingdom join the euro, Scottish banks (and, by extension, Northern Ireland banks) would have to cease banknote issue. During the Financial crisis of 2007–2008, the future of private banknotes in the United Kingdom was uncertain. It has been suggested that the Banking Act 2009] would restrict the issue of banknotes by commercial banks in Scotland and Northern Ireland by removing many of the provisions of the Acts quoted above.Banks would be forced to lodge sterling funds with the Bank of England to cover private note issue for a full week, rather than over a weekend, thereby losing four days' interest and making banknote production financially unviable. Following negotiations among the UK Treasury, the Bank of England and the Scottish banks, it was agreed that the funds would earn interest, allowing them to continue to issue their own notes.

Scotland

The issuing of retail-bank banknotes in Scotland is subject to the Bank Charter Act 1844, Bank Notes (Scotland) Act 1845, the Currency and Bank Notes Act 1928, and the Coinage Act 1971. Pursuant to some of these statutes, the Commissioners for Revenue and Customs publishes an account of "the Amount of Notes authorised by Law to be issued by the several Banks of Issue in Scotland, and the Average Amount of Notes in Circulation, and of Bank of England Notes and Coin held" in the London Gazette. See for example Gazette Issue 58254 published 21 February 2007 at page 2544.

Bank of Scotland notes

Bank of Scotland

A £50 Bank of Scotland Tercentenary series note.

As of late 2007, the Tercentenary Series, introduced at the time of the Bank of Scotland's 300th anniversary in 1995, remains in circulation, but will be withdrawn as their physical condition deteriorates and will be replaced by the new Bridges of Scotland series:

£5 note featuring a vignette of oil and energy

£10 note featuring a vignette of distilling and brewing

£20 note featuring a vignette of education and research

£50 note featuring a vignette of arts and culture

£100 note featuring a vignette of leisure and tourism

All the notes also depict Sir Walter Scott who was instrumental in retaining the right of Scottish banks to issue their own notes in 1826.

A Bank of Scotland £20 note of the new 2007 issue

As of 17 September 2007, the Bank of Scotland introduced its new Bridges of Scotland notes, on which appear famous Scottish bridges:

£5 features the Brig o' Doon

£10 features the Glenfinnan Viaduct

£20 features the Forth Bridge

£50 features the Falkirk Wheel

£100 features the Kessock Bridge

Again all the notes also depict Sir Walter Scott on the front.

Following the announcement that HBOS (Bank of Scotland's parent company) would be taken over by Lloyds TSB in September 2008, it was confirmed that the new banking company would continue to print bank notes under the Bank of Scotland name. According to the 1845 Bank Notes (Scotland) Act, the bank could have lost its note-issuing rights, but by retaining headquarters within Scotland, banknote issue will continue. Currently Lloyds TSB branches dispense Clydesdale bank notes and there will need to be negotiations to release Lloyds Banking Group from its contract with 

Clydesdale bank.

Royal Bank of Scotland notes

Royal Bank of Scotland

A £100 Royal Bank of Scotland note.

The current series of Royal Bank of Scotland notes was originally issued in 1987. On the front of each note is a picture of Lord Ilay (1682–1761), the first governor of the bank. On the back of the notes are images of Scottish castles, with a different castle for each denomination:

£1 note featuring Edinburgh Castle

£5 note featuring Culzean Castle

£10 note featuring Glamis Castle

£20 note featuring Brodick Castle

£50 note featuring Inverness Castle (introduced 2005)

£100 note featuring Balmoral Castle

Occasionally the Royal Bank of Scotland issues commemorative banknotes. Examples include the £1 note issued to mark the 150th Anniversary of the birth of Alexander Graham Bell in 1997, the £20 note for the 100th birthday of Queen Elizabeth, the Queen Mother in 2000, and the £5 note honouring veteran golfer Jack Nicklaus in his last competitive Open Championship at St Andrews in 2005. These notes are much sought-after by collectors and they rarely remain long in circulation.

In addition to this, many people will collect a "lucky" £1 note, as they become increasingly rare (shops preferring to give change in £1 coins when they are available).

Clydesdale Bank notes

 Clydesdale Bank

A £20 Clydesdale Bank note.

£5 note featuring Robert Burns on the obverse and a vignette of a field mouse from Burns' poem To a Mouse on the reverse

£10 note featuring Mary Slessor on the front and a vignette of a map of Calabar and African missionary scenes on the back

£20 note featuring Robert the Bruce on the front and a vignette of the Bruce on horseback with the Monymusk Reliquary against a background of Stirling Castle on the back

£50 note featuring Adam Smith on the front and a vignette of industry tools against a background of sailing ships on the back

£100 note featuring Lord Kelvin on the front and a vignette of the University of Glasgow on the back

In early 2009 Clydesdale Bank announced a new series of banknotes would be introduced later in the year. The obverse designs will feature famous Scots while the reverse designs will feature Scotland's UNESCO World Heritage Sites.

A £5 Clydesdale Bank note featuring Sir Alexander Fleming.

£5 note featuring Sir Alexander Fleming and St Kilda

£10 note featuring Robert Burns and Edinburgh Old and New Towns

£20 note featuring King Robert the Bruce and New Lanark

£50 note featuring Elsie Inglis and the Antonine Wall

£100 note featuring Charles Rennie Mackintosh and Neolithic Orkney

The Clydesdale Bank also occasionally issues special edition banknotes, such as a 10 pound note celebrating the bank's sponsorship of the Scotland team at the 2006 Commonwealth Games.

Northern Ireland

A £20 Northern Bank note

 Banknotes of Northern Ireland

Currently, four Northern Irish banks practise their right to issue pound sterling notes in Northern Ireland, with different series of denominations. Bank of Ireland issues notes from £5 to £100. First Trust Bank issues notes from £10 to £100, Northern Bank issues notes from £5 to £100, and Ulster Bank issues notes from £5 to £50.

Northern Bank and Ulster Bank are the only two banks that have issued commemorative notes so far. The only polymer banknote in the UK was issued by Northern Bank commemorating the new millennium. It is the only one of the bank's pre-2004 notes still in circulation after the recall of all others following the £26.5 million pound robbery at its Belfast headquarters in 2004.

Channel Islands

The Channel Islands are grouped for administrative purposes into the Bailiwicks of Jersey and Guernsey. The islands are not part of the United Kingdom but are dependencies of the British Crown and in currency union with the UK. Both Jersey and Guernsey issue their own banknotes. These notes circulate freely between the two territories, so Jersey notes are commonly used in Guernsey, and vice versa. Private banknotes are no longer in circulation in the Channel Islands.

The Government of Alderney (a part of the Bailiwick of Guernsey) is also licensed to issue its own currency, the Alderney pound, but only mints special commemorative sterling coins and does not issue banknotes.

States of Jersey notes

The obverse of a 2010 issue Jersey £5 note.

The reverse of a 2010 issue Jersey £5 note.

 Jersey pound

The current series of notes entered circulation on 29 April 2010.The obverse of the notes includes a portrait of Queen Elizabeth II based on a photograph by Mark Lawrence, alongside a view of an important Jersey landmark, with text in English. The reverse of each note includes an image of one of Jersey's numerous historic coastal defence towers, built in the late 18th century, as well as a further image of cultural or landscape importance, images of the twelve parish crests, and with denomination worded in French and Jèrriais. The watermark is a Jersey cow, and further security features include a see-through map of Jersey, and on the £10, £20 and £50 a patch hologram showing a varying image of the coat of arms of Jersey and the Island of Jersey on a background pattern of La Corbière lighthouse.

Denomination Colour Obverse design Reverse design

1 pound Green Queen Elizabeth II; Liberation Sculpture in Saint Helier Le Hocq Tower; La Hougue Bie

5 pounds Sky blue Queen Elizabeth II; Le Rât Cottage Archirondel Tower; Les Augrès Manor

10 pounds Burnt Sienna Queen Elizabeth II; Hermitage of Saint Helier Seymour Tower; Lalique sculpture in the Glass Church

20 pounds Violet Queen Elizabeth II; States Building La Rocco Tower; States Chamber

50 pounds Red Queen Elizabeth II; Mont Orgueil Tower, Ouaisné; La Marmotière, Les Écréhous

The previous series, gradually being withdrawn from circulation in 2010, depict Queen Elizabeth II on the front and various landmarks of Jersey or incidents in Jersey history on the reverse.

States of Guernsey notes

Guernsey pound

The Guernsey Pound is legal tender only in Guernsey, but also circulates freely in Jersey. Elsewhere it can be exchanged in banks and bureaux de change. In addition to coins, the following banknotes are used:

1 pound note, green, Daniel De Lisle Brock, Bailiff of Guernsey (1762–1842) and Royal Court, St Peter Port (1840) on front and the Market, St Peter Port on back

5 pound note, pink, Queen Elizabeth II and the Town Church, St Peter Port on front, and Fort Grey and Hanois Lighthouse (1862) on the back

10 pound note, blue/orange, Queen Elizabeth II and Elizabeth College, St Peter Port on the front and Saumarez Park, Les Niaux Watermill, Le Trepid Dolmen on the back

20 pound note, pink, Queen Elizabeth II and St James Concert Hall, St Peter Port on the front and Vale Castle and St Sampson's Church on the back

50 pound note, light brown, Queen Elizabeth II and the Royal Court House on the front and St Andrew’s Church and La Gran’mère on the back

Isle of Man

 Manx pound

The Isle of Man Government issues its own banknotes and coinage, which are legal tender only on the Isle of Man. Manx pounds are a local issue of the pound sterling.

The front of all Manx banknotes feature images of Queen Elizabeth II (not wearing a crown) and the Triskeles (three legs emblem). Each denomination features a different scene of the Island on its reverse side:

£1 - Tynwald Hill

£5 - Castle Rushen

£10 - Peel Castle

£20 - the Laxey Wheel

£50 - Douglas Bay

British overseas territories

Three British overseas territories use their own separate currencies called pounds which are at par with the pound sterling. The governments of these territories print their own banknotes which in general may only be used within their territory of origin. Bank of England notes usually circulate alongside the local note issues and are accepted as legal currency.

Gibraltar

A Gibraltar £5 note

Gibraltar pound

In Gibraltar, banknotes are issued by the Government of Gibraltar. The pound was made sole legal tender in 1898 and Gibraltar has issued its own banknotes since 1934. The notes bear an image of the British monarch on the obverse and the wording "pounds sterling", meaning that more retailers in the UK will accept them.

Falkland Islands

 Falkland Islands pound

The Falkland Islands pound is the currency of the Falkland Islands. Banknotes are issued by the Falkland Islands Government. The illustrations on all notes are the same, featuring the British monarch, wildlife and local scenes; denominations are distinguished by the size and colour of the notes.

Saint Helena

Saint Helena pound

The territory of Saint Helena, which includes the dependencies of Ascension Island and Tristan da Cunha, uses the Saint Helena pound. Banknotes in these areas are issued by the Saint Helena Government and bear the image of the British monarch.

The monarch on banknotes

Queen Elizabeth II was not the first British monarch to have her face on UK banknotes. George II, George III and George IV appeared on early Royal Bank of Scotland notes and George V appeared on 10 shilling and 1 pound notes issued by the British Treasury between 1914 and 1928. However, prior to the issue of its Series C banknotes in 1960, Bank of England banknotes generally did not depict the monarch. Today, notes issued by Scottish and Irish banks do not depict the monarch.

The monarch is depicted on banknotes issued by the Crown dependencies.

Some British overseas territories have their own Sterling-based currencies, and some of these issue banknotes bearing the monarch; for example the Falkland pound, the Gibraltar pound, and the Saint Helena pound.

(source:wikipedia)

Pound sterling

The pound sterling (symbol: £; ISO code: GBP), commonly called the pound, is the official currency of the United Kingdom, its Crown dependencies (the Isle of Man and the Channel Islands) and the British Overseas Territories of South Georgia and the South Sandwich Islands, British Antarctic Territory and Tristan da Cunha. It is subdivided into 100 pence (singular: penny).

The Channel Islands and the Isle of Man produce their own local issues of sterling; see Manx pound, Jersey pound, and Guernsey pound. The pound sterling is also used in Gibraltar (alongside the Gibraltar pound), the Falkland Islands (alongside the Falkland Islands pound) and Saint Helena and Ascension (alongside the Saint Helena pound). The Gibraltar, Falkland Islands and Saint Helena pounds are separate currencies, pegged at parity to the pound sterling.

Sterling is the fourth most traded currency in the foreign exchange market, after the US dollar, the euro, and the Japanese yen and ahead of the Australian dollar.

Name

The full, official name, pound sterling, (plural: pounds sterling) is used mainly in formal contexts and also when it is necessary to distinguish the United Kingdom currency from other currencies with the same name. Otherwise the term pound is normally used. The currency name is sometimes abbreviated to just sterling, particularly in the wholesale financial markets, but not when referring to specific amounts; for example, "Payment is accepted in sterling" but never "These cost five sterling". The abbreviations "ster." or "stg." are sometimes used. The term British pound is commonly used in less formal contexts, although it is not an official name of the currency. A common slang term is quid (singular and plural) which is thought to derive from the Latin phrase "quid pro quo".

There is some uncertainty as to the origin of the term "pound sterling". Some sources say it dates back to Anglo-Saxon times, when coins called sterlings were minted from silver; 240 of these sterlings weighed one pound, and large payments came to be made in "pounds of sterlings". Other references, including the Oxford English Dictionary, say a sterling was a silver penny used in England by the Normans, and date the term to around 1300. For more discussion of the etymology of "sterling" see Sterling silver.

The currency sign is the pound sign. The £ is written with a single cross-bar—this is the style used on sterling bank notes. The pound sign derives from the black-letter "L", an abbreviation of Librae in Roman £sd units (librae, solidi, denarii) used for pounds, shillings and pence in the British pre-decimal duodecimal currency system. Libra was the basic Roman unit of weight, derived from the Latin word for scales or balance.

The ISO 4217 currency code is GBP. Occasionally, the abbreviation UKP is used but this is incorrect because the ISO 3166 country code for (the United Kingdom of) Great Britain and Northern Ireland is GB (see Terminology of the British Isles#Terminology in detail). The Crown dependencies use their own (non-ISO) codes: GGP (Guernsey pound), JEP (Jersey pound) and IMP (Isle of Man pound). Stocks are often traded in pence, so traders may refer to pence sterling, GBX (sometimes GBp), when listing stock prices.

Subdivisions and other units

Decimal

Since decimalisation in 1971 (see Decimal Day), the pound has been divided into 100 pence (until 1981 described on the coinage as "new pence"). The symbol for the penny is "p"; hence an amount such as 50p (£0.50) properly pronounced "fifty pence" is more colloquially, quite often, pronounced "fifty pee". This also helped to distinguish between new and old pence amounts during the changeover to the decimal system. Until the new halfpenny was withdrawn in 1984, each penny could be exchanged for two halfpence.

Pre-decimal

The Mad Hatter's hat shows an example of the old pre-decimal system: the hat costs 10 shillings and 6 pence.

Prior to decimalisation, 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 the word, but from the Latin solidus. The symbol for the penny was "d.", from the French denier[citation needed], from the Latin denarius (the solidus and denarius were Roman coins). A mixed sum of shillings and pence such as 3 shillings and 6 pence was written as "3/6" or "3s. 6d." and spoken as "three and six". 5 shillings was written as "5s." or, more commonly, "5/-". The stroke (/) indicating shillings is also known as a solidus, and was originally an adaptation of the long s which represented that word.

Various coin denominations had, and in some cases continue to have, special names—such as crown, farthing, sovereign and guinea. See Coins of the pound sterling and List of British coins and banknotes for details.

By the 1950s, coins of George III, George IV and William IV had disappeared from circulation, but coins (at least the penny) bearing the head of any British king or queen from Queen Victoria onwards could be found in circulation. Silver coins were replaced by those in cupro-nickel in 1947, and by the 1960s the silver coins were rarely seen. Silver/cupro-nickel shillings (from any period after 1816) and florins (2 shillings) remained as legal tender after decimalisation (as 5p and 10p respectively), and the sixpences of 1816 and after remained legal tender until 1980 (as two and a half new pence).

History

The pound sterling is the world's oldest currency still in use.

Anglo-Saxon

Main article: Anglo-Saxon pound

The origins of sterling lie in the reign of King Offa of Mercia, (757 - 796) who introduced the silver penny. It copied the denarius of the new currency system of Charlemagne's Frankish Empire. As in the Carolingian system, 240 pennies weighed 1 pound (corresponding to Charlemagne's libra), with the shilling corresponding to Charlemagne's solidus and equal to 12d. At the time of the penny's introduction, it weighed 22.5 troy grains of fine silver (30 tower grains; about 1.5 g), indicating that the Mercian pound weighed 5,400 troy grains (the Mercian pound became the basis of the tower pound, which weighed 5,400 troy grains, equivalent to 7,200 tower grains). At this time, the name sterling had yet to be acquired. The penny swiftly spread throughout the other Anglo-Saxon kingdoms and became the standard coin of what was to become England.

Medieval

The early pennies were struck from fine silver (as pure as was available). However, in 1158, a new coinage was introduced by King Henry II (known as the Tealby penny) which was struck from .925 (92.5%) silver. This became the standard until the 20th century and is today known as sterling silver, named after its association with the currency. Sterling silver is harder than the fine silver (i.e. 0.999/99.9% pure, etc.) that was traditionally used and so sterling silver coins did not wear down as rapidly as fine silver coins. The English currency was almost exclusively silver until 1344, when the gold noble was successfully introduced into circulation. However, silver remained the legal basis for sterling until 1816. In the reign of Henry IV (1399–1413), the penny was reduced in weight to 15 grains (0.97 g) of silver, with a further reduction to 12 grains (0.78 g) in 1464.

Tudor

During the reigns of Henry VIII and Edward VI, the silver coinage was drastically debased, although the pound was redefined to the troy pound of 5,760 grains (373 g) in 1526. In 1544, a silver coinage was issued containing just one third silver and two thirds copper—equating to .333 silver, or 33.3% pure. The result was a coin copper in appearance, but relatively pale in colour. In 1552, a new silver coinage was introduced, struck in sterling silver. However, the penny's weight was reduced to 8 grains (0.52 g), meaning that 1 troy pound of sterling silver produced 60 shillings of coins. This silver standard was known as the "60-shilling standard" and lasted until 1601 when a "62-shilling standard" was introduced, reducing the penny's weight to 7 23⁄31 grains (0.50 g). Throughout this period, the size and value of the gold coinage fluctuated considerably.

Unofficial gold standard

In 1663, a new gold coinage was introduced based on the 22 carat fine guinea. Fixed in weight at 44½ to the troy pound from 1670, this coin's value varied considerably until 1717, when it was fixed at 21 shillings (21/-, 1.05 pounds). However, despite the efforts of Sir Isaac Newton, Master of the Mint, to reduce the guinea's value, this valuation overvalued gold relative to silver when compared to the valuations in other European countries. British merchants sent silver abroad in payments whilst goods for export were paid for with gold. As a consequence, silver flowed out of the country and gold flowed in, leading to a situation where Great Britain was effectively on a gold standard. In addition, a chronic shortage of silver coins developed.[citation needed]

[edit]Establishment of modern currency

The Bank of England was formed in 1694, followed by the Bank of Scotland a year later. Both began to issue paper money.

[edit]Currency of the United Kingdom

The pound scots had begun equal to sterling but had suffered far higher devaluation until being pegged to sterling at a value of 12 pounds scots = 1 pound sterling. In 1707, the Kingdom of England and the Kingdom of Scotland merged to form the Kingdom of Great Britain. In accordance with the Treaty of Union, the currency of the 'united kingdom' was sterling with the pound scots being replaced by sterling at the pegged value.

Gold standard

During the Revolutionary and Napoleonic wars, Bank of England notes were legal tender and their value floated relative to gold. The Bank also issued silver tokens to alleviate the shortage of silver coins. In 1816, the gold standard was adopted officially, with the silver standard reduced to 66 shillings (66/-, 3.3 pounds), rendering silver coins a "token" issue (i.e., not containing their value in precious metal). In 1817, the sovereign was introduced. Struck in 22-carat gold, it contained 113 grains (7.3 g) of gold and replaced the guinea as the standard British gold coin without changing the gold standard. In 1825, the Irish pound, which had been pegged to sterling since 1801 at a rate of 13 Irish pounds = 12 pounds sterling, was replaced, at the same rate, with sterling.

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. The pound sterling was equal to 4.85 U.S. dollars, 4.89 Canadian dollars, 12.10 Dutch guilders, 25.22 French francs (or equivalent currencies in the Latin Monetary Union), 20.43 German Marks or 24.02 Austro-Hungarian Krones. Discussions took place following the International Monetary Conference of 1867 in Paris concerning the possibility of the UK joining the Latin Monetary Union, and a Royal Commission on International Coinage examined the issues, resulting in a decision against joining monetary union.

The gold standard was suspended at the outbreak of the war in 1914, with Bank of England and Treasury notes becoming legal tender. Prior to World War I, the United Kingdom had one of the world's strongest economies, holding 40% of the world's overseas investments. However, by the end of the war the country owed £850 million (£30.7 billion as of 2010)., mostly to the United States, with interest costing the country some 40% of all government spending. In an attempt to resume stability, a variation on the gold standard was reintroduced in 1925, under which the currency was fixed to gold at its pre-war peg, although people were only able to exchange their currency for gold bullion, rather than for coins. This was abandoned on 21 September 1931, during the Great Depression, and sterling suffered an initial devaluation of some 25%.

Use in the Empire

Main article: Sterling Area

Sterling circulated in much of the British Empire. In some parts, it was used alongside local currencies. For example, the gold sovereign was legal tender in Canada despite the use of the Canadian dollar. Several colonies and dominions adopted the pound as their own currency. These included Australia, Barbados, British West Africa, Cyprus, Fiji, Irish Free State, Jamaica, New Zealand, South Africa and Southern Rhodesia. Some of these retained parity with sterling throughout their existence (e.g. the South African pound), whilst 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 Sterling Area.

Bretton Woods

See also:Economic history of Britain 1945–1959

In 1940, an agreement with the U.S.A. pegged the pound to the U.S. dollar at a rate of £1 = $4.03. This rate was maintained through the Second World War and became part of the Bretton Woods system which governed post-war exchange rates. 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 $2.80. The move prompted several other currencies to be devalued against the dollar.

In the mid-1960s, the pound came under renewed pressure since the exchange rate against the dollar was considered too high. In the summer of 1966, with the value of the pound falling in the currency markets, exchange controls were tightened by the Wilson government. Among the measures, tourists were banned from taking more than £50 out of the country, until the restriction was lifted in 1979. The pound was eventually devalued by 14.3% to $2.40 on 18 November 1967.

Decimalisation

Main article: Decimal Day

On 15 February 1971, the UK decimalised, replacing the shilling and penny with a single subdivision, the new penny. The word "new" was omitted from coins after 1981.

Free-floating pound

With the breakdown of the Bretton Woods system, the pound floated from August 1971 onwards. It at first appreciated a little, rising to almost $2.65 in March 1972, from 2.42 when it had been fixed. The Sterling Area effectively ended at this time when the majority of its members also chose to float freely against the pound and the dollar.

The 1976 sterling crisis

James Callaghan came to power in 1976. He was immediately told the economy was facing huge problems, according to documents released in 2006 by the National Archives. Financial markets were losing confidence in sterling. The UK treasury could not balance its books, while Labour'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.

1979-1989

The Conservatives arrived in power in 1979, on a programme of fiscal austerity. The pound rocketed, moving above the $2.40 level, as interest rates rose in response to the monetarist policy of targeting money supply. The high exchange rate was widely blamed for the deep recession of 1981. Sterling fell sharply after 1980. At its lowest, the pound stood at just $1.03 in March 1985, before returning to the US$1.70 level in December 1989.

Following the Deutsche Mark

In 1988, Margaret Thatcher's Chancellor of the Exchequer Nigel Lawson decided that the pound should "shadow" the West German Deutsche Mark, with the unintended result of a rapid rise in inflation as the economy boomed due to inappropriately low interest rates. (For ideological reasons, the Conservative Government declined to use alternative mechanisms to control the explosion of credit. For this reason, former Prime Minister Edward Heath referred to Lawson as a "one club golfer").

Following German re-unification in 1989, the reverse held true, as high borrowing costs to fund Eastern reconstruction, a need exacerbated by the political choice to make the ostmark equivalent to the deutschemark, meant rates in other countries shadowing the DM, 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 decided to join the European Exchange Rate Mechanism (ERM), with the pound set at DM2.95. 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. Speculator George Soros famously made approximately US$1 billion from shorting the pound.

'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 DM2.20. Proponents[who?] of a lower GBP/DM exchange rate were vindicated as the cheaper pound encouraged exports and contributed to the economic prosperity of the 1990s.

Following inflation targets

In 1997, the newly elected Labour government handed over day-to-day control of interest rates to the Bank of England (a policy that had originally been advocated by the Liberal Democrats[citation needed]). The Bank is now responsible for setting its base rate of interest so as to keep inflation in the Consumer Price Index (CPI) very close to 2%. 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, 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 government explaining why inflation was more than one percentage point higher than its target.

Euro

United Kingdom and the euro

As a member of the European Union, the United Kingdom could adopt the euro as its currency. However, the subject remains politically controversial. Gordon Brown, then Chancellor of the Exchequer, ruled out membership for the foreseeable future, saying that the decision not to join had been right for Britain and for Europe.

The government of former Prime Minister Tony Blair had pledged to hold a public referendum to decide on membership should "five economic tests" be met, to ensure that adoption of the euro would be in the national interest. In addition to these internal (national) criteria, the UK would have to meet the EU's economic convergence criteria (Maastricht criteria), before being allowed to adopt the euro. The Conservative/Liberal Democrat coalition ruled out joining the euro for the parliamentary term. Currently, the UK's annual government deficit, as a percentage of the GDP, is above the defined threshold. In February 2005, 55% of British citizens were against adopting the currency, with 30% in favour. The idea of replacing the pound with the euro has been controversial with the British public, partly because of the pound's identity as a symbol of British sovereignty and because it would, according to critics, lead to suboptimal interest rates, harming the British economy. In December 2008 the results of a BBC poll of 1000 people suggested that 71% would vote no, 23% would vote yes to joining the European single currency, while 6% said they were unsure. The pound did not join the Second European Exchange Rate Mechanism (ERM II) after the euro was created. Denmark and the UK have opt-outs from entry to the euro. Technically, every other EU nation must eventually sign up.

The Scottish Conservative Party claims that there is an issue for Scotland in that the adoption of the euro would mean the end of regionally distinctive banknotes, as the euro banknotes do not have national designs. The Scottish National Party claims an independent Scotland would have nationally distinctive coins, and its party policy includes entry into the single currency.

On 1 January 2008 the British sovereign bases on Cyprus (Akrotiri and Dhekelia) began using the euro (along with the rest of the Republic of Cyprus).

Current exchange value

Main article: Economy of the United Kingdom#Exchange rates

The pound and 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 the pound to appreciate against other major currencies, and with the US dollar depreciating at the same time, the pound hit a 15-year high against the US dollar on 18 April 2007, having reached US$2 for the first time since 1992 the day before. The pound and many other currencies continued to appreciate against the dollar, and sterling hit a 26-year high of US$2.1161 on 7 November 2007 as the dollar fell worldwide. From mid-2003 to mid 2007, the pound/euro rate remained rangebound (within ± 5%) of €1.45. However, following the global financial crisis in late 2008, the pound has since depreciated at one of the fastest rates in history, reaching a 24-year low of $1.35 per £1 on 23 January 2009 and falling below €1.25 against the euro in April 2008.] A further decline was seen during the remainder of 2008; most dramatically in December when its euro rate hit an all-time low at €1.0219 (29th). The pound appreciated in early 2009 reaching a peak in mid-July of €1.17. The following months saw a steady decline, with the pound's current (February 2010) value at €1.14 and US$1.56.

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

The process sees the Bank of England creating new money for itself, which it then uses to purchase assets such as government bonds, bank loans, or mortgages. 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 is thought the process is likely to occur over a period of three months with results only likely in the long term. By 5 November 2009, some £175 billion had been injected using quantitative easing and the effectiveness of the process remains questionable.

The Bank of England has stated that the decision has been taken to prevent the rate of inflation falling below the two percent target rate. Mervyn King, the Governor of the Bank of England, also suggested there were no other monetary options left as interest rates have already been cut to their lowest level ever of 0.5% and it was unlikely they would be cut further.

Coins

Main article: Coins of the pound sterling

Pre-decimal

The silver penny (plural:pence; abbr.: 'd') was the principal and often sole coin in circulation from the 8th century until 13th century. Although some fractions of the penny were struck (see farthing and halfpenny), it was more common to find pennies cut into halves and quarters to provide smaller change. Very few gold coins were struck, with the gold penny (worth 20 silver pence) a rare example. However, in 1279, the groat, worth 4d was introduced, with the half groat following in 1344. 1344 also saw the establishment of a gold coinage with the introduction (after the failed gold florin) of the noble worth six shillings and eight pence ('6/8') (i.e. 3 to the pound), together with the half and quarter noble. Reforms in 1464 saw a reduction in value of the coinage in both silver and gold, with the noble renamed the ryal and worth 10/- (i.e. 2 to the pound) and the angel introduced at the noble's old value of 6/8.

The reign of Henry VII saw the introduction of two important coins, the shilling (abbr,: 's') (known as the testoon) in 1487 and the pound (known as the sovereign, abbr.: '£' or 'L') in 1489. In 1526, several new denominations of gold coins were added, including the crown and half crown worth five shillings ('5/-'), and two shillings and six pence ('2/6', 'two and six') respectively. Henry VIII's reign (1509–1547) saw a high level of debasement which continued into the reign of Edward VI (1547–1553). However, this debasement was halted in 1552 and a new silver coinage was introduced, including coins for 1d, 2d, 3d, 4d and 6d, 1/-, 2/6 and 5/-. The reign of Elizabeth I (1558–1603) saw the addition of silver ¾d and 1½d coins, although these denominations did not last. Gold coins included the half crown, crown, angel, half sovereign and sovereign. Elizabeth's reign also saw the introduction of the horse-drawn screw press to produce the first "milled" coins.

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

Following the restoration of the monarchy in 1660, the coinage was reformed, with the ending of production of hammered coins in 1662. The guinea was introduced in 1663, soon followed by the ½, 2 and 5 guinea coins. The silver coinage consisted of denominations of 1d, 2d, 3d, 4d and 6d, 1/-, 2/6 and 5/-. Due to the widespread export of silver in the 18th century, the production of silver coins gradually came to a halt, with the half crown and crown not issued after the 1750s, the 6d pence and 1/- stopping production in the 1780s. One response was the introduction of the copper 1d and 2d coins and the gold ⅓ guinea (7/-) in 1797. The copper penny was the only one of these coins to survive long.

To alleviate the shortage of silver coins, between 1797 and 1804, the Bank of England counterstamped Spanish dollars (8 reales) and other Spanish and Spanish colonial coins for circulation. A small counterstamp of the King's head was used. Until 1800, these circulated at a rate of 4/9 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 and 3/- between 1811 and 1816.

In 1816, a new silver coinage was introduced in denominations of 6d, 1/-, 2/6 and 5/-. 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 ("thruppence") 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, ¼d), halfpenny and penny.

During the First World War, production of the half sovereign and sovereign was suspended and, although the gold standard was restored, the coins saw little circulation again. In 1920, the silver standard, maintained at .925 since 1552, was reduced to .500. In 1937, a nickel-brass 3d coin was introduced, with the last silver 3d coins issued seven years later. In 1947, the remaining silver coins were replaced with cupro-nickel. 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

£1 coin (Welsh design, 2000)

Queen Elizabeth II Welsh dragon

British coinage timeline:

1968: The first decimal coins were introduced. These were cupro-nickel 5p and 10p coins which were equivalent to and circulated alongside the 1/- and 2/- coins.

1969: The curved equilateral heptagonal cupro-nickel 50p coin replaced the 10/- note.

1971: The decimal coinage was completed when decimalisation came into effect in 1971 with the introduction of the bronze ½p, 1p and 2p coins and the withdrawal of the 1d and 3d coins.

1980: Withdrawal of 6d coins, which had circulated at a value of 2½p.

1982: The word "new" was dropped from the coinage and a 20p coin was introduced.

1983: A £1 coin was introduced.

1983: The ½p coin was last produced.

1984: The ½p coin was demonetised

1990s: The 5p, 10p and 50p coins became smaller.

1991: The old 1/- coins, which had continued to circulate with a value of 5p, were demonetised in 1991 after the 5p coin became smaller.

1992: Bronze was replaced with copper-plated steel

1993: The 2/- coins were similarly demonetised.

1998: The bi-metallic £2 coin was introduced.

2007: By now the value of copper in the pre-1992 1p/2p coins (which are 97% copper) exceeded the 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.

At present, the oldest circulating coins in the U.K. are the 1p and 2p copper coins introduced in 1971. Before decimalisation, change could contain coins aged one hundred years or more, with any of five monarchs' heads on the obverse.

In April 2008 an extensive redesign of the coinage was unveiled. The new designs were issued gradually into circulation, starting in summer 2008. The new reverses of the 1p, 2p, 5p, 10p, 20p and 50p coins feature parts of the Royal Shield, and the new pound coin depicts the whole shield. The coins are of the same specifications as those with the old designs (which will continue to circulate).

Banknotes

Main article: Banknotes of the pound sterling

£10 Series E Bank of England note.

The first sterling notes were issued by the Bank of England shortly after its foundation in 1694. Denominations were initially written on the notes at the time of issue. From 1745, the notes were printed in denominations between £20 and £1000, with any odd shillings added in hand. £10 notes were added in 1759, followed by £5 in 1793 and £1 and £2 in 1797. The lowest two denominations were withdrawn following the end of the Napoleonic wars. In 1855, the notes were converted to being entirely printed, with denominations of £5, £10, £20, £50, £100, £200, £300, £500 and £1000 issued.

A £20 note of the 2007 issue from the Bank Of Scotland

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 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.

The Bank of England reintroduced £10 notes in 1964. In 1969, the 10/- note was replaced by the 50p coin as part of the preparation for decimalisation. £20 Bank of England notes were reintroduced in 1970, followed by £50 in 1982. Following the introduction of the £1 coin in 1983, 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.

The £5 polymer banknote, issued by Northern Bank in 2000, is the only polymer note currently in circulation, although Northern Bank also produces paper-based £10, £20 and £50 notes.

Legal tender and regional issues

Legal tender in the UK means (according to the Royal Mint) "that a debtor cannot successfully be sued for non-payment if he pays into court in legal tender." It does not mean that any ordinary transaction has to take place in legal tender or only within the amount denominated by the legislation. Both parties are free to agree to accept any form of payment whether legal tender or otherwise according to their wishes. In order to comply with the very strict rules governing an actual legal tender it is necessary, for example, actually to offer the exact amount due because no change can be demanded.

Throughout the UK, £1 and £2 coins are legal tender for any amount, with the other coins being legal tender only for limited amounts. In England and Wales, Bank of England notes are also legal tender for any amount. In Scotland and Northern Ireland, no banknotes are currently legal tender, although Bank of England 10/- and £1 notes were legal tender, as were Scottish banknotes, during World War II (Currency (Defence) Act 1939; this status was withdrawn on 1 January 1946). However, the banks made deposits with the Bank of England to cover the bulk of their note issues. In the Channel Islands and Isle of Man, the local variations on the banknotes are legal tender in their respective jurisdictions.

Scottish, Northern Irish, Channel Islands and Manx notes can be used in the UK as a mean of payment but are sometimes rejected by shops when used in England and Wales (conversely, English bank notes are sometimes rejected in other UK countries). It is legal for shopkeepers to choose to reject any payment (but not in their interest), even if it would be legal tender in that jurisdiction, because no debt exists when the offer of payment is made at the same time as the offer of goods or services. When settling a restaurant bill after consuming the meal, or settling another debt, the laws of legal tender do apply and the payment can not be rejected. But usually any reasonable method of settling the debt (such as by credit card) will be accepted.

Commemorative £5 and 25p (crown) coins, rarely seen in circulation, are legal tender, as are the bullion coins issued by the Mint.

Coin Maximum usable as legal tender

£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

Further, any coin or bank note ceases to be legal tender if it is 100x the amount of the debt (for example, offering a £20 note to settle a 20p debt).

Value

In 2006 the House of Commons Library published a document which included an index of the value of the pound for each year between 1750 and 2005, where the value in 1974 was indexed at 100. (This was an update of earlier documents published in 1998 and 2003.)

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

The following table shows the equivalent amount of goods that, in a particular year, could be purchased with £1. The table shows that from 1971 through 2009 the British Pound has lost about 91% of its buying power.

Buying power of one British Pound compared to 1971 GBP

Year Equivalent buying power Year Equivalent buying power Year Equivalent buying power

1971 £1.00 1980 £0.30 1989 £0.18

1972 £0.94 1981 £0.27 1992 £0.15

1973 £0.86 1982 £0.25 1994 £0.14

1974 £0.74 1983 £0.24 1996 £0.14

1975 £0.59 1984 £0.23 1999 £0.12

1976 £0.51 1985 £0.21 2000 £0.12

1977 £0.44 1986 £0.21 2007 £0.10

1978 £0.41 1987 £0.20 2008 £0.09

1979 £0.36 1988 £0.19 2009 £0.09

Exchange rate

The pound is freely bought and sold on the foreign exchange markets around the world, and its value relative to other currencies therefore fluctuates. It has been among the highest-valued currency units in the world. As of 16 July 2010, £1 was worth US$1.530 €1.14 ¥130 CHF 1.53 A$ 1.61 or C$ 1.62.

Sterling is used as a reserve currency around the world and is currently ranked third in value held as reserves.

Currency composition of official foreign exchange reserves

	'95	'96	'97	'98	'99	'00	'01	'02	'03	'04	'05	'06	'07	'08	'09
US dollar	59.0%	62.1%	65.2%	69.3%	70.9%	70.5%	70.7%	66.5%	65.8%	65.9%	66.4%	65.7%	64.1%	64.1%	62.2%
Euro					17.9%	18.8%	19.8%	24.2%	25.3%	24.9%	24.3%	25.2%	26.3%	26.4%	27.3%
Pound sterling	2.1%	2.7%	2.6%	2.7%	2.9%	2.8%	2.7%	2.9%	2.6%	3.3%	3.6%	4.2%	4.7%	4.0%	4.3%
Japanese yen	6.8%	6.7%	5.8%	6.2%	6.4%	6.3%	5.2%	4.5%	4.1%	3.9%	3.7%	3.2%	2.9%	3.1%	3.0%
German mark	15.8%	14.7%	14.5%	13.8%
French franc	2.4%	1.8%	1.4%	1.6%
Swiss franc	0.3%	0.2%	0.4%	0.3%	0.2%	0.3%	0.3%	0.4%	0.2%	0.2%	0.1%	0.2%	0.2%	0.1%	0.1%
Other	13.6%	11.7%	10.2%	6.1%	1.6%	1.4%	1.2%	1.4%	1.9%	1.8%	1.9%	1.5%	1.8%	2.2%	3.1%
	Sources: 1995-1999, 2006-2009 IMF: Currency Composition of Official Foreign Exchange Reserves Sources: 1999-2005 ECB: The Accumulation of Foreign Reserves

(source:wikipedia)