(England Twitter)-Pound sterling, £; ISO code: GBP,commonly called the pound, is the official currency of the United Kingdom, its Crown Dependencies (the Isle of Man and the Channel Islands) and the British Overseas Territories of South Georgia and the South Sandwich Islands, British Antarctic Territory and Tristan da Cunha.It is subdivided into 100 pence (singular: penny).
The Channel Islands (the Bailiwick of Guernsey and the Bailiwick of Jersey) and the Isle of Man produce their own local issues of sterling; see Guernsey pound, Jersey pound and Manx pound. The pound sterling is also used in Gibraltar (alongside the Gibraltar pound), the Falkland Islands (alongside the Falkland Islands pound) and Saint Helena and Ascension(alongside the Saint Helena pound). Gibraltar, Falkland Islands and Saint Helena pounds are separate currencies, pegged at parity to the pound sterling.
Sterling is the fourth most traded currency in the foreign exchange market, after the US dollar, the euro and the Japanese yen. Together with those three currencies it forms the basket of currencies which calculate the value of IMF Special Drawing Rights, with a 11.3% weighting as of 2011. Sterling is also the third most held reserve currency in global reserves.
The full, official name, pound sterling, (plural: pounds sterling) is used mainly in formal contexts and also when it is necessary to distinguish the United Kingdom currency from other currencies with the same name. Otherwise the term pound is normally used. The currency name is sometimes abbreviated to just sterling, particularly in the wholesale financial markets, but not when referring to specific amounts; for example, "Payment is accepted in sterling" but never "These cost five sterling".The abbreviations "ster." or "stg." are sometimes used. The term British pound is commonly used in less formal contexts, although it is not an official name of the currency. A common slang term is quid (singular and plural) which is thought to derive from the Latin phrase "quid pro quo.
Since decimalisation in 1971 (see Decimal Day), the pound has been divided into 100 pence (until 1981 described on the coinage as "new pence"). The symbol for the penny is "p"; hence an amount such as 50p (£0.50) properly pronounced "fifty pence" is more colloquially, quite often, pronounced "fifty pee". This also helped to distinguish between new and old pence amounts during the changeover to the decimal system. A decimal halfpenny was issued until 1984.
Unofficial gold standard
In 1663, a new gold coinage was introduced based on the 22 carat fine guinea. Fixed in weight at 44½ to the troy pound from 1670, this coin's value varied considerably until 1717, when it was fixed at 21 shillings (21/-, 1.05 pounds). However, despite the efforts of Sir Isaac Newton, Master of the Mint, to reduce the guinea's value, this valuation overvalued gold relative to silver when compared to the valuations in other European countries. British merchants sent silver abroad in payments whilst goods for export were paid for with gold. As a consequence, silver flowed out of the country and gold flowed in, leading to a situation where Great Britain was effectively on a gold standard. In addition, a chronic shortage of silver coins developed.
During the Revolutionary and Napoleonic wars, Bank of England notes were legal tender and their value floated relative to gold. The Bank also issued silver tokens to alleviate the shortage of silver coins. In 1816, the gold standard was adopted officially, with the silver standard reduced to 66 shillings (66/-, 3.3 pounds), rendering silver coins a "token" issue (i.e., not containing their value in precious metal). In 1817, the sovereign was introduced, valued at 20 shillings. Struck in 22-carat gold, it contained 113 grains (7.3 g) of gold and replaced the guinea as the standard British gold coin without changing the gold standard. In 1825, the Irish pound, which had been pegged to sterling since 1801 at a rate of 13 Irish pounds = 12 pounds sterling, was replaced, at the same rate, with sterling.
As a member of the European Union, the United Kingdom could adopt the euro as its currency. However, the subject remains politically controversial. Gordon Brown, then Chancellor of the Exchequer, ruled out membership for the foreseeable future, saying that the decision not to join had been right for Britain and for Europe.
The government of former Prime Minister Tony Blair had pledged to hold a public referendum to decide on membership should "five economic tests" be met, to ensure that adoption of the euro would be in the national interest. In addition to these internal (national) criteria, the UK would have to meet the EU's economic convergence criteria (Maastricht criteria), before being allowed to adopt the euro. The Conservative/Liberal Democrat coalition ruled out joining the euro for the parliamentary term. Currently, the UK's annual government deficit, as a percentage of the GDP, is above the defined threshold. In February 2005, 55% of British citizens were against adopting the currency, with 30% in favour. The idea of replacing the pound with the euro has been controversial with the British public, partly because of the pound's identity as a symbol of British sovereignty and because it would, according to critics, lead to suboptimal interest rates, harming the British economy. In December 2008 the results of a BBC poll of 1000 people suggested that 71% would vote no, 23% would vote yes to joining the European single currency, while 6% said they were unsure.The pound did not join the Second European Exchange Rate Mechanism (ERM II) after the euro was created. Denmark and the UK have opt-outs from entry to the euro. Technically, every other EU nation must eventually sign up.