Pound Sterling

Pound Sterling, monetary unit of the United Kingdom, represented by the symbol “£”. On the basis of gold content the pound as represented by a gold coin, the sovereign, contains 113.001 grains (7.32238 g) of fine gold. Because of the position that Britain has historically held in international trade and as a major world banking centre, the pound has been a major currency of foreign exchange. A sterling area or sterling zone designation indicates those countries, either former members of the British Empire or current members of the Commonwealth of Nations or countries that maintain a high percentage of their foreign trade with Britain, that hold substantial amounts of pounds as exchange reserves.

Historically, the terms “pound” and “pound sterling” originated in Anglo-Saxon Britain during the 8th century when the basic monetary unit, called a sterling, was made equivalent to 1/240 of a pound of silver and 240 sterlings became known as a pound of sterling. The pound was convertible into silver until 1717, when the British government substituted gold in the amount cited above. In 1797 the government abandoned the gold standard for the duration of the Napoleonic Wars; it was restored at the old rate in 1816. The gold standard was abandoned again during World War I, restored at the old rate in 1925, and finally abandoned in 1931. Attempts to maintain the pound at a stable parity with other currencies failed first in 1972, with the collapse of the monetary accords agreed at the Bretton Woods Conference, then again in 1992 with sterling’s withdrawal from the Exchange Rate Mechanism (ERM) of the European Union. Its value is presently set by supply and demand, pending the possible rejoining of the ERM or possible participation in the Euro, the European currency.

On February 15, 1971, the pound’s coinage equivalent was changed to the decimal system, from 20 shillings to 100 pennies, replacing the traditional shillings and pence that had been used since 11th-century Anglo-Norman times.

As at early 2007, 0.51 pounds sterling equalled US$1. The bank of issue is the Bank of England.