The History Of The British Pound
This chapter is full of information and facts about the pound sterling including:
- Why the British currency is called the pound
- Why ‘£’ is the symbol for our currency
- Why the pound is called a quid
- The possible origins of the word sterling
- Where the word penny comes from
- Who calls sterling a ‘cable’
- Where the pound is the official currency
- Who’s responsible for the production of sterling coins & banknotes
- The Royal Mint – its role, the Trial of the Pyx, how many coins are in circulation in the UK
- The Bank of England – its role, why it’s called the ‘Old Lady of Threadneedle Street’, how many banknotes in circulation, the UK’s biggest cash robbery
- The future of cash – coins in the UK, the use of polymer notes, the future of the £50 banknote
- The changing way Britons pay for goods & services
An outline of the UK currency – Behind the name
We use it to carry out over 15 billion transactions in our daily routine from buying a cup of tea to paying the bills. But how much do you know about our currency and its history?
Let’s start by looking at its name and why it’s called a pound, quid or sterling. And what about the symbol for the pound, £ – where does it come from?
Why is the British currency called the Pound?
It’s no coincidence that the name for the currency we use and the name of a measurement under the old Imperial system is exactly the same. When the Anglo-Saxons started using pure or fine silver coins, 240 pennies were the equivalent of one pound in weight so the name ‘pound’ referred to both its weight and its monetary value.
Why is the ‘£’ the symbol for our currency?
The £ symbol is found in Medieval Latin documents and is an abbreviation of the capital ‘L’ of the word ‘libra’ – the Latin word for ‘pound’. Although it’s usually written with one cross-bar, it was commonly found with two in the past and is still sometimes seen that way.
Why do we often refer to a Pound as a Quid?
There are two possible theories as to why we refer to a pound as a quid although no one exactly knows how this came about. One theory is that the word ‘quid’ is derived from the Italian word ‘scudo’, which referred to the name of coins used in Italy until the 19th century and was brought to Britain by Italian immigrants. The second explanation which has been suggested is that it comes from the Latin phrase ‘quid pro quo’. Literally translated this means ‘what for what’. In other words, the financial transaction between buyer and seller was an equal exchange.
Why is the British currency called Sterling?
Neither historians nor numismatists can seem to agree on the origins of the word ‘sterling’. A number of theories have been put forward and this topic is hotly debated. Let’s look at some of the explanations (both past and present).
From the Easterlings (German traders)
The merchants of the Baltic Sea region (or Ost See) were called Osterlings or Easterlings. Because of their close trading links with England, in 1260 Henry III granted them a charter of protection and land for their Kontor in the Steelyard of London. By the 1340s this area was called Easterlings Hall (or Esterlingeshalle). As silver English coins at this time were often debased with other metals, traders would often say they wished to be paid in the purer currency of the Easterlings and this word was abbreviated to sterling.
From the Norman word ‘Esterlin’
The esterlin was a small Norman silver coin, which was introduced into England at the time of the Norman conquests. In evidence experts cite the English chronicler Orderic Vitalis (1075-c1142), who uses the Latin phrases ‘librae sterilensium’ and ‘librae sterilensis monetae’ to refer to the coinage. Over time, this word became corrupted and Anglicised becoming the word ‘sterling’ we use today.
Neither historians nor numismatists can seem to agree on the origins of the word ‘sterling’.
From the Old English word ‘Steorra’
Some people believe that the Old English word ‘steorra’ meaning ‘star’ was used, with the diminutive suffix ‘ling’ (meaning little) because a star appeared on a number of silver coins minted in the 11th century. However, some experts disagree with this theory since they say the Normans changed the designs of their coins every 3 years and a star only appeared in 1077-80, which isn’t long enough for people to develop a nickname for it.
From the Old English word ‘Ster’
Some numismatists put forward the theory that sterling comes from the Old English word ‘ster’, which means ‘strong/stout’. They believe they described the coinage in this way to distinguish it from previous debasements. The coinage was sterling because the Normans had restored it to its original weight and purity.
From the word ‘Starling’
It used to be thought that sterling could have been a corruption of the word ‘starling’ since a penny of the reign of Edward I depicted 4 birds (martlets). However, it’s argued that one coin wouldn’t have been enough to name the entire currency. It has also been suggested that the hallmark sign for sterling silver used to have a picture of a starling.
From the Arab word ‘Lesterling’
Another theory is that sterling was derived from the Arab word ‘lesterling’, which meant ‘money’.
The word ‘pound’ is used for both our currency and an imperial measurement since 240 silver pennies (or a £) used to weigh a pound.
The £ sign is a Latin abbreviation for the L of ‘libra’ (or pound).
The word ‘quid’ might have been brought to England by Italian immigrants or is from the Latin phrase ‘quid pro quo’.
There are various theories about the origin of the word ‘sterling’.
Where does the word ‘Penny’ come from?
Like the origins of the word ‘sterling’, no one seems to agree on the origins in the word ‘penny’. It’s first recorded in a Scottish text of 1394 but has its origins from much older words. Either from the Old English word ‘pennig’ (or ‘peni’) or further back from Germanic-based languages (where it was also retained as the German word ‘pfennig’), the penny could have taken its name from the pans where molten metal was poured before coins were minted. Interestingly enough, the word ‘pawn’ has its roots from the same word – in the sense of pledge or debt.
Another theory is that the penny took its name from a minor Saxon king, Penda.
Who calls Sterling a ‘Cable’?
Foreign Exchange (or Forex) traders use the word ‘cable’ to refer to the pound when they’re discussing financial transactions in which the pound is priced in dollars (or the GBP/USD currency pair rate).
Although latest updates are transmitted via optic fibre, the word ‘cable’ comes from the 19th century when information was sent through transatlantic submarine communications cables.
Where is the Pound Sterling the official currency?
The pound sterling is used by the four nations of the United Kingdom (England, Scotland, Wales and Northern Ireland); its Crown Dependencies (the Isle of Man, Guernsey and Jersey); the British Overseas Territories of Georgia and the South Sandwich Islands; the British Antarctic Territory and the British Indian Ocean Territory. These areas include Gibraltar, the Falkland Islands, St. Helena, Ascension Island and Tristan de Cunha.
Who’s responsible for the production of Sterling coins & banknotes?
Gone are the days when the monarch used to arrange for the minting of coins or, from the late 18th century, the issue of banknotes at a whim or to finance his personal expenses and/or foreign wars. Nowadays it’s a complex procedure involving two main institutions: the Royal Mint and the Bank of England. Let’s take a look at their role before looking at the statistics to answer the question: how many sterling coins and notes are currently in circulation?
What does the Royal Mint do?
Since 1968, the Royal Mint has been located at a 35-acre site in Llantrisant although its history goes back over 1,000 years to when the Mint in London used to be one of many such mints operating in most market towns in England.
The main responsibility of the Royal Mint is to make and distribute the coinage of the United Kingdom. It also designs, produces and sells commemorative coins such as sovereigns and Maundy money; supplies blanks and mints official medals. It’s a Government-owned company and makes a financial return to the UK government in line with agreed targets.
Did you know that the Royal Mint is also the world’s leading export mint making coins and medals for over 60 different countries a year?
In order to cope with this workload, it employs 900 people and works around the clock all year. In this way, it’s able to produce 90 million coins or blanks a week (or 5 billion a year).
No one knows the origins of the word ‘penny’ but it could be from the name of the pans used to smelt coins or the name of a Saxon king.
Foreign exchange traders call the pound a ‘cable’ from the transatlantic cables which used to bring the news of trading in sterling/dollars.
The pound sterling is the official currency of the United Kingdom and other Crown Dependencies/Territories across the world.
The Royal Mint’s main responsibility is to produce and distribute sterling coinage although it has other functions.
Checking the integrity of UK’s coinage – The Trial of the Pyx
Every year, the coins minted for the UK must be tested in the Trial of the Pyx. The word ‘pyx’ refers to the boxwood chests, in which the coins to be tested are presented. It’s a real judicial trial in that there’s a presiding judge and a jury made of metallurgical assayers who have 2 months to test the coins using the criteria of their diameter, chemical composition and weight. The coins themselves are selected randomly by the Deputy Master of the Mint out of the million of coins which are minted in the year.
When the trial takes place is at the discretion of HM Treasury although it must be held once a year. The trial has remained unchanged since its origins in the 13th century. It was absolutely vital at the time to encourage people’s confidence in the coinage when it could easily have been debased by adding base metals.
How many coins are in circulation in the UK?
According to the Royal Mint, the number of coins in circulation are as follows (statistics from March 2016):
|Coin||Numbers (in millions)||Value (£ millions)|
In total, there are over 30 trillion coins in circulation in the UK worth nearly £5 billion.
What’s the role of the Bank of England?
Established in 1694 and nationalised in 1946, the Bank of England is a corporation owed by the government but which sets monetary policy independently. Overseen by a board of directors (known as the Court), the Bank is accountable to both Parliament and the public and employs 3,600 people.
As the central bank of the UK, the Bank of England carries out a number of functions. Firstly, it prints the banknotes in circulation in England and Wales ensuring they’re strong, durable and difficult to forge. Although it regulates the banknotes issued by the 7 retail banks of Scotland and Northern Ireland, the responsibility for banknotes from the Crown Dependencies and Territories lies in the hands of their local governments.
The Bank of England also supervises banks and insurers and looks at the entire financial system to reduce risks and keep it safe so that it functions well. This includes working behind the scenes to make sure that electronic payments work well without any problems.
Finally, the Bank of England sets the interest rate called the Bank Rate, which will directly and indirectly affect how much interest you’ll receive on your savings or how much interest will be added to any loans you take out.
All of these functions taken together ensure that there’s a strong and stable economy in the United Kingdom.
Why is the Bank of England called the ‘Old Lady of Threadneedle Street’?
Threadneedle Street is where the Bank of England is situated – in the former home of the Bank’s first Governor Sir John Houblon (who appeared on the £50 note from 1994-2004).
The ‘Old Lady’ refers to a cartoon published in 1797 by James Gillray, which showed the Bank of England as an old woman being wooed by the then Prime Minister, William Pitt the Younger. He’s trying to get his hands on the Bank’s gold reserves and the woman’s shouting “…Villain! Ruin! Ravishment!”
The story of the Bank’s garden being haunted by the ghost of the old lady or ‘Black Nun’, Sarah Whitehead, whose brother was a Bank employee who had been executed for forgery in 1821 is perhaps more urban legend than based in fact.
The Trial of the Pyx dates back to the 12th century and has traditionally been used to check the integrity of British coinage.
There are 30 trillion coins of all denominations in circulation in the UK and they have a value of £5 billion.
The Bank of England has a number of functions, all of which ensure monetary and financial stability for Britons.
The nickname of the Bank of England is the ‘Old Lady of Threadneedle Street’ from an 18th century satirical cartoon.
Who prints the Bank of England banknotes?
The banknotes we use every day are printed under contract to the Bank of England by De La Rue Currency in Loughton, Essex. Set up in 1821, the company also prints security documents such as passports, drivers’ licences and travellers’ cheques as well as stamps and vouchers.
How many Sterling banknotes are in circulation?
According to the Bank of England’s statistics for February 2017, the numbers of banknotes in circulation were as follows:
|Banknote||Numbers (in millions)||Value (£ millions)|
It’s obvious that pound notes aren’t as long-lasting as coins. In 2016-17 the Bank of England produced 349 million £5 notes; 555 million £10 notes; 8 million £20 notes and no £50 banknotes (making a total of 912 million banknotes). In the same period, 9,422 million banknotes were destroyed.
The UK’s biggest cash robbery
Did you know that the Bank of England were the victims of the Securitas depot robbery on 21st February 2006 when £53 million was stolen from a depot in Tonbridge, Kent?
This is the largest cash robbery in the UK – even larger than the haul from the 1963 Great Train Robbery, which would now be worth £40 million if it’s adjusted for inflation.
The future of cash
Coins in the UK
If the changes that have occurred over the past 40 years continue, then it’s quite likely that the ‘coppers’ (1p-and 2p-coins) will go the way of ½ pence coins and be demonetised. For the same reason, inflation could also mean that the £5 banknote could be replaced by a coin. Some people argue that this won’t happen since the use of polymer notes effectively more than doubles the lifespan of a banknote.
The Use of polymer banknotes
Although the Bank of England wasn’t the first central issuing bank to use polymer banknotes (that was Australia in 1988), it is planning to extend its use of these notes for £10 banknotes (the Jane Austen issue from September 2017) and a £20 note by 2020 featuring the painter JMW Turner.
In a statement issued by the Bank, they said that there were no plans to change the fifty-pound banknote to polymer, which has left some unanswered questions about its future.
No future for the £50 banknote?
There are a number of theories about what will happen to the £50-note. Some people have put forward the idea that with the increasing use of non-cash payments, there’s no longer a place for a high-denomination banknote since it’s very rarely used. Others argue that it should be scrapped as it will help combat the problem of tax evasion and jobs paid cash in hand.
Is this possible – could the Bank of England demonetise the note and how has the way Britons pay changed?
The changing way Britons pay for goods & services
The Payments Council is an organisation which represents the evolving payments industry, promotes change and innovation and advises consumers. They recently released their research about the way payments were made in the UK last year and revealed some interesting facts.
Of the 38.7 billion payments in the UK in 2016, they found there were:
- Payments by cash: 15.4 billion
- Payments by debit cards: 11.6 billion
- Payments by direct debit: 4.1 billion
- Contactless payments: 2.9 billion
- Payments by credit card: 2.8 billion
- Bacs Direct Credit: 2.1 billion
- Payments by online/mobile banking: 1.3 billion
- Payments by cheque: 471 million
- Payments by CHAPS: 39 million
The most striking change they found was that the number of contactless payments tripled in 2016. Although cash was the most popular means of payment in 2016 (40% of all transactions), the Payments Council estimate that contactless payments are due to overtake cash by 2018. Despite this, they believe that cash still has a role to play and predict that about 21% of all transactions will still be made in cash. Only time will tell.
The Bank of England banknotes are printed by De La Rue Currency and there are banknotes worth an estimated £73,000 million in circulation.
In the future inflation might mean copper coins will disappear and there will be coins worth more than £2.
People speculate that the £50 note might be scraped as high payments are often paid by card rather than in cash and as a way to combat tax evasion.
At the moment 40% of financial transactions are paid in cash but if present trends continue, they will be overtaken by contactless payments by 2018.