Currency of United Kingdom

The currency of the United Kingdom is the Pound Sterling, subdivided into 100 pence. It is also the currency of all its Crown dependencies (the Isle of Man and the Channel Islands), the British Overseas Territories of South Georgia and the South Sandwich Islands, British Antarctic Territory and British Indian Ocean Territory.

Currently, Sterling makes up the 3 rd largest portion of global currency reserves after the US Dollar and Euro. The pound sterling is the 4 th most-traded currency in the foreign exchange market after the US dollar, Euro and Japanese Yen.

The official name ‘Pound Sterling’ is used in only formal contexts and when there is a necessity distinguish the currency within the United Kingdom from others that have the same name. The most common usage is the term ‘Pound’ while the term ‘British Pound’ is most commonly used in less formal contexts, even though it is not an official name.

The Bank of England was the first bank to issue the United Kingdom’s currency’ first sterling notes of after its foundation in 1694. Initially, the denominations were written on the notes at the time of issue. From 1745, the notes were printed in denominations between 20 and 1000 pounds, with any odd shillings added in hand. In 1759, 10 pound notes were added followed by 5 pounds in 1793 and 1 and 2 pounds in 1797. Soon after the end of the Napoleonic War, the lowest two denominations were withdrawn. In 1855, the notes were converted to being entirely printed, with denominations of 5, 10, 20, 50, 100, 200, 300, 500 and 1000 pounds issued.

Since 1965, the Bank of Scotland began issuing currency notes. Although the ‘Pound Scots’ was still the currency of Scotland, these notes were denominated in sterling in values up to 100 pounds. The Royal Bank of Scotland also issued notes from 1727 onwards. 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 pound denomination, a note not permitted in England.

With the extension of sterling to Ireland in 1825, the Bank of Ireland began issuing sterling notes followed by other Irish banks. These notes included the unusual denominations of 30 shillings and 3 pounds. The highest denomination issued by the Irish banks was 100 pounds.

In 1826, banks located at a distance of 105 km from London were permitted to issue their own paper money. However, from 1844, new banks were excluded from issuing notes in England and Wales but not in Scotland and Ireland. This resulted in shortage of the private banknotes in England and Wales but flourished in Scotland and Ireland. The last English private banknotes were issued in 1921.

In 1914, the Treasury introduced notes for 10 shillings and 1 pound 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 5 operating in Northern Ireland. The Second World War had a drastic effect on the note production of the Bank of England. All notes for 10 pounds and above ceased production de to fear of mass forgery by the Nazis leaving the bank to issue only 10 shillings, 1 and 5 pounds notes. Nevertheless, Scottish and Northern Irish issues were unaffected with issues in denominations of 1, 5, 10, 20, 50 and 100 pounds.

The Bank of England reintroduced 10 pound notes in 1964. In 1969, the 10 shilling note was replaced by the 50 new pence coin as part of the preparation for decimalization. 20 pound Bank of England notes were reintroduced in 1970, followed by 50 pounds in 1982. Following the introduction of the 1 pound coin in 1983, Bank of England 1 pound notes were withdrawn in 1988. Scottish and Northern Irish banks followed, with only the Royal Bank of Scotland continuing to issue this denomination.

The pound is freely bough and sold on the foreign exchange markets around the world in present times. Its value relative to other currencies keeps fluctuating depending on the market situation. It has traditionally been among the highest value of all base currency units.