What Is the Currency of the United Kingdom?

By Ritu Kohli on August 1 2017 in Economics

British pound coins and banknotes.

What Kind of Currency Does the United Kingdom Use?

The pound sterling is the world's oldest currency which is still in use. It is one of the most traded currencies in the world. Its symbol is £, and its currency code is GBP, which is an abbreviation of "Great Britain Pound."

The pound sterling is a decimal currency, meaning its sub-units are based on a factor of 10. One pound Sterling has 100 pence (symbol: p). Prior to decimalization in February 1971, the pound sterling had sub-units of shillings and pence (12 pence = 1 shilling and 20 shilling = 1 pound). The penny also had subdivisions named “halfpennies” and “farthings,” which were worth half and a quarter of the penny, respectively.

Coins and Banknotes

Common denominations of UK’s notes are £5, £10, £20, and £50. The common coin denominations are 1p, 2p, 5p, 10p, 20p, 50p, £1, and £2. Britons tend to speak “pee” instead of pence, like "20 pee" for a 20p coin. A pound is also referred to as a “quid”. A five pound note is colloquially called a “fiver,” while the ten pound note is known as a “tenner”.

The current £5 banknote features an image of Sir Winston Churchill, a Nobel laureate and the UK’s prime minister during World War II. Charles Darwin is featured on the £10 note. The £20 note has Adam Smith, and £50 note features Matthew Boulton and James Watt.

The Bank of England is the central bank of the UK. It is also known as the “Old Lady” of Threadneedle Street. The bank is responsible for designing and printing the banknotes. It has started switching from traditional paper notes to polymer banknotes. On September 13, 2016, the Bank of England issued its first £5 note made of a polymer substance. The polymer £5 note features Sir Winston Churchill. The polymer £10 note is planned to be released on September 14, 2017, and will feature novelist Jane Austen. The new polymer £20 notes are planned to be issued in 2020.

Relationship with the Banks of Scotland and Northern Ireland

There are provisions in the legislation to ensure that holders of Scottish and Northern Irish banknotes receive protection similar to the one provided to Bank of England note holders. For example, to issue banknotes, an authorized bank in Scotland or Northern Ireland has to hold equivalent value in a combination of pound sterling, UK coins or an interest bearing bank account with the Bank of England. The Bank of England has two very large denomination notes called as “Giant” and “Titan”. They are worth £1 million and £100 million, respectively. These notes are not in circulation, instead their purpose is to enable authorized banks in Scotland and Northern Ireland to hold equivalent values in Bank of England notes.

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