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Did you know that the Great British Pound (GBP) is the world’s oldest currency still in use, dating back 1,264 years ago?
Also known as ‘sterling’, the British pound is the official currency of the United Kingdom (UK), comprising England, Scotland, Wales, and Northern Ireland. Some British overseas territories, such as the Falkland Islands and Gibraltar, use the Falkland Island pound and the Gibraltar pound, respectively, as their official currency but will accept the GBP for most transactions. However, it must be noted that both currencies are fixed at a rate of one pound sterling.
The pound is the central unit of sterling, and the term ‘pound sterling’ emerged in the 12th century during King Henry II’s reign. The shilling was introduced in 1487, and the first pound coin, called the ‘sovereign,’ appeared later in 1489; both took place under King Henry VII's reign and notably influenced the economy. The Bank of England (BoE) was established in 1694, and soon after its establishment, banknotes—which were initially handwritten—began to circulate. It was only in 1855 that fully printed notes came into being and were circulated with denominations of £5, £10, £20, £50, £100, £200, £300, £500 and £1,000. However, today only four denominations are in circulation—£5, £10, £20, and £50.
A major change occurred with the decimalisation of the Kingdom’s currency in 1971. Before this major event, the currency was divided into pounds, shillings, and pence. Under the decimalisation system, only the pound was retained and was divided into 100 pence—before which 1 pound equalled 240 pence.
The British pound sterling is one of the most common reserve currencies, the fourth most traded currency in the world, the sixth largest in terms of GDP, and the eighth largest in Purchasing Power Parity.
Source: International Monetary Fund (IMF)
Currency has always been in a constant state of transformation throughout history. Long before currencies were invented, the barter system served as a medium of exchange. It is the oldest mode of monetary system where people exchange goods and services for other goods in return. This system evolved into a non-coin form of gold and silver pieces, which were used as a form of currency by the end of Egypt's new kingdom (1570-1070 BC). The ancient Egyptians also used pieces of gold and silver as standardised weights in the fifth century.
The first true coins date back 2,600 years to the ancient Lydian Kingdom, the modern-day Türkiye. Croesus (561–546 BC), King of Lydia, introduced the most famous lion and bull coinage. They were made of electrum, a mixture of gold and silver. Lydian coins are also said to be minted and traded as tokens by merchants. Around the same time, ancient Chinese people also created coins. The Tang dynasty was the first to introduce paper currency during the 7th century, which was called ‘promissory notes’. Taking China’s lead, European countries began using promissory notes that later paved the way for receipts to be used as a way of payment. Today, the mode of currency has taken a different dimension altogether and is heavily influenced by modern technology.
As of 2024, the UK is the sixth largest economy in the world, and the pound sterling is one of the most influential currencies, reflecting the country's economic stability and strength. Movements in the GBP significantly impact the value of currencies of the countries that have economic ties with the UK.
The British pound and US dollar (which forms the GBP/USD currency pair - see below)—also known as Cable—is one of the world's top five most traded currency pairs and represents about 11% of all forex trades by volume. GBP is also traded with major currencies like the euro (EUR) and Japanese yen (JPY), which represent 3% and 4% of all forex trading by volume, respectively.
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Source - database | Page ID - 38803
