he 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 The lowest two denominations were withdrawn following the end of theNapoleonic wars.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.
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.
in 2007, a commemorative George Best £5 note was issued by Ulster Bank. These notes were limited edition and many were presented in frames from the Ulster Bank Head Office in Belfast. These notes are rarely seen in circulation.
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 U.K., £1 and £2 coins are legal tender for any amount, with the other coins being legal tender only for limited amounts. InEngland 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 are sometimes rejected by shops when used in England and Wales. (Conversely, English bank notes are very rarely rejected in other British countries.) British shopkeepers can choose to reject any payment, 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, 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 |
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.
Value against other currencies
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 base currency units in the world. As of 20 October 2009, £1 was worth US$1.637 or €1.095.
- Historical exchange rates (since 1990) are given in Exchange rates section of the Economy of the United Kingdom entry.
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