Pound sterling (£)

The pound sterling has a long history dating back over 300 years when the Bank of England began issuing bank notes. The Bank's notes originally represented deposits of gold coin and bullion with the Bank. Until 1931, when Britain finally came off the gold standard, notes could be exchanged for gold at a fixed rate. Since 1844 the Bank has been authorized to issue notes against securities — the fiduciary issue of notes — instead of just gold or silver. After 1939 only a nominal amount of gold was held and today the note issue is wholly backed by securities.

 

The first recorded use of paper money was in the 7th century in China. However, the practice did not become widespread in Europe for nearly a thousand years. In 1694 the Bank of England was established and almost immediately started to issue notes in return for deposits. The crucial feature that made Bank of England notes a means of exchange was the promise to pay the bearer the sum of the note on demand. This meant that the note could be redeemed at the Bank for gold or coinage by anyone presenting it for payment. These notes were handwritten on Bank paper and signed by one of the Bank's cashiers. They were made out for the precise sum deposited in pounds, shillings and pence. During the 18th century there was a gradual move toward fixed denomination notes, which by 1745 were being printed in denominations ranging from £20 to £1,000. The first fully printed notes appeared in 1855 relieving the cashiers of the task of filling in the name of the payee and signing each note individually. In 1833 the Bank's notes were made legal tender for all sums above £5 in England and Wales.

 

 

One of UK's problems had been the relative strength of the pound against the dollar and the euro, its two principal trading partners. This forced the manufacturing sector into recession while the rest of the economy was flourishing. The strength of sterling was one of several reasons why Britain did not join the Eurozone. The pound sterling was above the $2.00 mark — but the credit crunch sent sterling spiraling downward in relation to virtually all major currencies, but especially the dollar and euro. Sterling was stronger against the euro as the pound became a safe haven for investors during the continuing Eurozone woes. It continues to remain strong against both the euro and U.S. dollar. The pound sterling reached a recent peak in June 2014 but has retreated since then with the decline increasing pace in November and into December 2014. The Bank of England continues to voice its concerns regarding the strength of the pound sterling. It fell below the $1.50 level in March 2015 but was above $1.52 in April, May and June. In July, sterling climbed above the $1.56 level but subsided to $1.536 level in August.