History of British Money

As a unit of currency, the term poundoriginates from the value of a troy pound of high purity silver known as sterling silver. An Act in 1266 set the weight of the silver penny, so one pound of sterling silver would yield 240 silver pennies. However, although the Pound was subsequently used in accounting, no pound coin was issued until 1489.

The penny was originally one '"pennyweight"' of silver. A pennyweight is a unit of mass which is the same as 1.555 grams, or 1⁄240 of a troy pound. So, a penny was literally, as well as monetarily, 1⁄240 of a troy pound of sterling silver.

Sterling was introduced as the English currency by King Henry II in 1158, though the name sterling wasn't acquired until later.

Pound sterling was established in 1560 – 61 by Elizabeth I and her advisors, foremost among them Sir Thomas Gresham, brought order to the financial chaos of Tudor England. By 1551, according to Fernand Braudel, the silver content of a penny had dropped to one part in three. The coinage had become mere fiduciary currency (as modern coins are), and the exchange rate in Antwerp where English cloth was marketed to Europe, had deteriorated. All the coin in circulation was called in for reminting at the higher standard, and paid for at discounted rates.

Pound sterling maintained its intrinsic value — "a fetish in public opinion" Braudel called it — uniquely among European currencies, even after the United Kingdom officially adopted the gold standard, until after World War I, weathering financial crises in 1621. Not even the violent disorders of the Civil War devalued the pound sterling in European money markets. Braudel attributes to the fixed currency, which was never devalued over the centuries, England's easy credit, security of contracts and rise to financial superiority during the 18th century. The pound sterling has been the money of account of the Bank of England from its inception in 1694.

By 1945, the money in circulation was as follows. The most commonly used nicknames are given in brackets.

Farthing = copper coin value 1/4 penny
Ha'penny = copper coin value 1/2 penny
Penny = copper coin, one of the basic units = 1d
Thrupenny bit = brass coloured twelve sided coin value three pennies = 3d (thrupence)
Sixpence (tanner) = silver coin value six pennies = 6d
Shilling (bob) = silver coin second basic unit, value 12 pennies =1/-
Florin (two bob) = silver coin value two shillings = 2/-
Half-crown (half a dollar) = silver coin value two shillings and six pence = 2/6d
Ten shillings (ten bob) = banknote value 10 shillings = 10/-
Pound (quid) = third basic unit, banknote value 20 shillings or 240 pennies = £1
Five pounds (fiver) = banknote value five pounds = £5

'Copper' and 'silver' coins were, by this time, made from alloys and were named for their colour, rather than the actual metal used. There were 20 shillings to the pound and 12 pence to the shilling.

Farthings were not produced after 1956 and were withdrawn in 1960, because of inflation. In preparation for decimalisation, the ha'penny was withdrawn in 1969, with the half-crown being withdrawn the year after. From 1968, 5p and 10p coins, identical in size, weight and value to the shilling and florin respectively, were introduced.

The symbol, £, for the pound is derived from the first letter of the Latin word for pound, the librum.