The Pound Sterling

The pound sterling, also known as the British pound, (GBP, £) is the official currency of the United Kingdom, Guernsey, Jersey, and the Isle of Man. It is also the main means of payment of a range of the Crown Dependencies and British Overseas Territories.

The sterling is the fourth reserve currency in the world.

History

In ancient times, the people of Albion used coins made of pure silver called sterlings to pay for goods and services. Counting money was a very long and onerous procedure. And so many coins were needed to make a big purchase that venturesome Anglo-Saxons came up with the new money - the pound sterling.

The troy pound, which is still used to measure the weight of coins and items made of precious metals, equals 373,24 grams. The tower pound is 350 grams. That was the exact weight of 240 sterlings, and the number became a new unit of calculation.

Not always there were exactly 240 sterlings when weighing a pound. The reason was the wear of soft metal, its defects, and fraudulent attempts of some people to use counterfeit coins. Thus, the process of weighing became a so-called currency detector.

Sterlings used to be weighed for trading transactions till 1489. Between the end of the 15th century and the middle of the 16th century, the mint of gold pounds began. They constituted the coins of high quality and got the name of ‘sovereigns’ after Henry VII, King of England.

The gold sovereign remained the country’s official currency till 1663 when the guinea (coins made of gold from the Guinea region) was introduced. In 150 years, the sovereign became the main currency of the British Isles and their colonies.

Due to the conformity of the British to their traditions, the sovereign remained the main means of payment till 1982. That was the year of issuance of the last series.

The first GDP banknotes emerged in 1694. That was also when the final version of the official name was approved.

Till 1971, the British pound was considered one of the most complicated and inconvenient currencies to be used in financial transactions. At various times, it had various divisions like crowns, shillings, groats, florins, and pence. There were also half crowns, halfpennies, and farthings.

In this way, one pound sterling was divided into four crowns, and one crown comprised five shillings. One groat was worth four pence, and one penny - four farthings. One golden guinea equaled 21 shillings. The decimal system appeared at the beginning of the 1970s. Since then, there have been two types of money in the United Kingdom: the pound sterling and its fractional coins - pence. One pound sterling is divided into 100 pence, which simplifies the payment system greatly.

The British pound underwent several devaluations during its history. The strongest one happened in 1949 when there was an attempt to peg the British currency to the money of other countries that also used the decimal system. At that moment, GDP plummeted by a third. In 1988, there was another effort to peg the pound to the other European currency - the Deutsche Mark. As a result, devaluation reached the level of 25%.

The 20%-drop of the British currency took place in 1933 when the gold standard was abolished. In 1966, the pound sterling devalued by 14%. At present, it is one of the most stable currencies in the world owing to the refusal of the national government to switch to the euro-based economy.

Design

As compared to many other European countries, the United Kingdom uses only four types of banknotes in denominations of £50, £20, £10, and £5, though there is no uniform design yet. The emitting banks operate in every part of the country, and each of them issues money denominated as the British pound sterling.

In practice, it means that the banknotes issued in Scotland may not be accepted as a payment somewhere in Wales or England. Even though the Bank of England banknotes are considered the sole legal tender, sometimes they cannot be used in Scotland or Northern Ireland. At the same time, all the issued banknotes have the mandatory reserve back-up.

A similar situation can be observed within Crown Dependencies and Overseas Territories where their own pounds are issued: the Gibraltar pound, the Manx pound, and the Jersey pound. All of them are equaled to and at par value with the pound sterling.

Bank of England Banknotes

There are five series of banknotes issued by this financial institution: D, E, E (variant; revised version), F, and G. The reverse sides feature prominent British - politicians, public figures, military people, writers, and scientists who have made a significant contribution to the life of Britain and the world.

Series D consists of the banknotes in denominations of £1, £5, £10, £20, and £50. The one-pound note depicting the portrait of Isaac Newton was withdrawn from circulation in March 1998. 

• £5 note features the portrait of Duke of Wellington in the background of the battlefield. The banknote was withdrawn in 1991.
• £10 note features the portrait of a nursing pioneer Florence Nightingale, the founder of the first nursing school, in the background of the scene in a military hospital where she was taking care of the wounded soldiers. The banknote was withdrawn in 1994. 
• £20 note features the image of William Shakespeare on the reverse. The banknote was withdrawn in March 1993. 
• £50 note features the portrait of Sir Christopher Wren, the author of St. Paul’s Cathedral rebuilding project. The background contains the cathedral’s planning scheme. The banknote was withdrawn in 1996. 

Series Е includes three banknotes in denominations of £5, £10, and £20. 

• £5 note depicts the portrait of a British inventor George Stephenson. It was withdrawn in November 2003. 
• £10 note depicts the portrait of a great writer Charles Dickens. It was withdrawn in July 2003.  
• £20 note depicts the portrait of Michael Faraday, a prominent English physicist and chemist. It was withdrawn in February 2001.

Series Е (Variant; Revised Version) comprises three banknotes in denominations of £10, £20, and £50. The £10 and £20 notes feature the portraits of Charles Dickens and Michael Faraday. The £50 note shows the portrait of Sir John Houblon, the first Governor of the Bank of England. The banknotes were withdrawn in 2003, 2001, and 2014 respectively. 

Series F includes the £5, £10, £20, and £50 notes:

• £5 note features Elizabeth Fry, an English prison and social reformer (withdrawn in May 2017).
• £10 note features the portrait of Charles Robert Darwin, the theory of evolution author (withdrawn in March 2018).
• £20 note was issued in two design versions. One features the portrait of Sir Edward Elgar and the other - the portrait of Sir Adam Smith. The first one has not been printed since June 2010, but the second one has been in circulation up to this day. 
• £50 note features the portraits of an English manufacturer Matthew Boulton and inventor James Watt - the partners who have produced several hundreds of steam engines. The banknote is still in circulation. 

Series G consists of three currently circulating banknotes:

• £5 note features the portrait of a British statesman Sir William Churchill 
• £10 note features the portrait of Jane Austin, an English novelist and author of the bestseller Pride and Prejudice
• £20 note features the portrait of William Turner, a great painter and predecessor of the Impressionists. 

Since 2016, the United Kingdom has commenced issuing polymer banknotes. There are only three types of Series G notes in circulation - £5, £10, and £20. The £50 note is going to be issued very soon in 2021.

The coins are minted by the Royal Mint in denominations from 1 penny to 50 pence, and £1, £2, and £5. There are restrictions imposed on fractional coins (1 penny - 50 pence) to be used for paying for goods and services. For instance, pennies will be accepted only for payments up to 20 pence, and 50-pence coins - for payments up to £10. The use of coins in denominations of £1, £2, and £5 is not limited.

The Pound Sterling in the World

Not only is the pound sterling the most stable but also the most expensive currency in the world. For example, the exchange rate in relation to the US dollar has remained 1:1.41, to the euro - 1:16, and to the Japanese yen - 1:154.3.

The UK money is widely used in Forex trade. The pound sterling is popular among traders who process short-term transactions because it enables them to generate big profits.