Updated: Nov 19, 2021
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Compared to the Greek drachma - dating as far back as the 6th century before Christ -, the pound sterling is unarguably not the most ancient European currency to have ever existed. However, the UK currency deserves credit for holding the title of one of the oldest currencies to have kept legal tender.
Over the centuries leading up to our times, the world-famous GBP has traversed eras of heavy turmoil and successive transformations. Although its prestige has not gone unspoiled ever since its creation, the pound sterling is as dear to the hearts of the inhabitants of the United Kingdom as it is still valued globally today. Emblem of the reigning Monarchy, pillar of the City, and key currency of the world economy, the pound is the focus of the following article. Let us then take a closer look at its history, shall we?
The GBP: a currency that has prevailed
As we are in for a pound, let us first not overlook the fact that up until the very beginning of the 20th century - before being superseded by the American dollar -, the pound sterling was the international means of payment of choice and the reserve currency of the capitalistic world.
This historical display of financial dominion and the unperishable desire of the Crown for monetary independence has been reaffirmed time and time again. As a recent example, at the eve of the 21st century, when most European countries were giving up their national currencies, the United Kingdom played its cards with its benefit clearly in mind, as would the Brexit later further underline. This long-lasting attachment of the Kingdom to its sovereignty has its roots in history.
A short history of the origins of the British pound
Symbolized by the iconic £ ever since the 18th century, the GBP, or pound sterling, is said to have been born somewhere close to the end of the 11th century AD - about roughly 1'000 years ago! -, following the 1066 Norman invasion of England, known to the Brits as the battle of Hastings.
Some historians go as far as to suspect that the invention of the word "sterling" might very well be a direct invention derived from the Norman root word "steorra", which back then meant "star". This claim could be corroborated by the actual presence of a starred motif minted on the heads of the very first pennies of the time. Other experts, however, link the sterling back to the ancient French word "esterlin", later reappropriated to give the word "stière", meaning "strong", "firm", "unflinching".
But the first signs of the currency may be even older: its first-ever recorded appearance could bring historians' investigations as far back as 765 AD. Borrowed from the central European Carolingian ruler of the time, the pound could be directly linked to the influence of Charlemagne and his heir.
Whatever the specialists theorize, the term was meant to stick and later designate the monetary unity governing the United Kingdom, its overseas territories, and the multiple dependencies of the British Crown.
Noteworthy characteristics of the pound sterling
Although being ten a penny, the pound sterling having legal tender differs across British territories. This detail alone is interesting enough to be worth briefly touching upon.
In the UK:
Although having no legal tender in England and Wales, Scottish and Northern Irish banknotes are not illegal under English law.
In the dependencies of the British Crown:
On Jersey, Guernesey (Channel Islands), or the Island of Man, for example, the traditional pound sterling comes in local derivatives, respectively: the Jersey, the Guernesey, and the Manx pound.
The evolution of the pound sterling (GBP) throughout history
Let us not forget that for most of a millennium, the currency the United Kingdom is familiar with today followed the inherited monetary system of the Roman Empire. Based on silver, a pound was at first indexed to that of a corresponding pound of silver: roughly 450 grams - 20 shillings and 240 pence -, that is.
From the 13th century onward, and to ensure smoother everyday transactions and work out a fixed and sustainable currency for improved financial stability, the State strived to establish quality coinage. Strictly speaking, it was not before the year 1489 that, under Henri VIII, the first coin of the pound sterling came about, called a "sovereign".
In the 1660s, the mechanical manufacturing of coins allowed for more controlled production. New design characteristics, ie the engraving onto the edge, were introduced to help prevent coin debasement, otherwise known as clipping: the illegal practice of cutting off a small portion of a precious metal coin for personal gain.
By the end of the 17th century, following its creation in 1694, the Bank of England officially started issuing banknotes. The banking institution is the first to be considered a central bank per se, as it adjusted interest rates, controlled credit, exchange, and managed inflation.
The February 15th, 1971 decimalization
If today's pound sterling is comprised of eight coins - 1p, 2p, 5p, 10p, 20p, 50p, £1 and £2 -, it is because of the 1971 agreement to revise the monetary system. While before the revision a pound equated to 240 pence, the newly adopted arrangement opted for 100 pence.
Brexit: a new chapter in the long history of the pound sterling
First announced in 2016 and concluded in December 2020, Brexit negotiations concerning the exiting of the European Union seem to prove the point this article was trying to make all along: the history of the GBP is inseparable from the Kingdom's identity.
Despite real added threats to the UK's stability - namely the now two-year-long Covid-19 pandemic and the resurgent Scotexit risk -, the Brexit, shrouded in profound uncertainty from the start, not only managed to reach satisfactory agreements with the EU regarding unimpeded free trade exchange but further safeguarded national sovereignty.
Despite many europhiles' skepticism and doomsday prognostics, the United Kingdom bet seems to be paying off just fine. With a close to 80% double vaccination rate, with the pound on the rise, and with the economic revival of the country on the horizon, the indicator needle is in the green! This, of course, is merely our two pennies worth, as time itself will tell. A penny for your thoughts, perhaps?