Why is the British £ still so valuable?

Explaining why it has retained its position as the oldest and most valuable currency for centuries

The official currency of the UK is the pound sterling, and its name comes from it initially having its value tied to that of one pound of sterling silver. It is the most valuable currency globally, exchanging at around $1.37 per £1[1], and is also the oldest that is still in use. The reason for its significant value comes down to two main reasons. However, the UK’s economic power is not actually one of them – although the UK has a robust economy, this is not significant enough to account for this value as the UK is not a global superpower like the United States or China, and yet its currency is more valuable than theirs. In reality, there is no real reason – it is just the legacy of the British Empire, which was one of the largest, wealthiest empires in history, so the pound was very valuable back then. Furthermore, back when the system in which values of currencies were tied to that of precious metals was still in use (before the gold standard), 1 US dollar was valued at 1.5 grams of gold, whereas 1 British pound was, as the name suggests, associated with 1 pound of sterling silver, which was simply more valuable and still is.

Sterling Silver

The substantial value of the pound is a great advantage for the United Kingdom, as it makes items cheaper to buy abroad, as more units of a foreign currency can be obtained per 1 pound sterling. This makes imports more affordable, making it easier to buy foreign products that may be better than those made locally, benefitting consumers. However, this also means that by comparison, exports are expensive, so if another country wanted to import any goods or services from the UK, it would cost them more than if they bought it in their own country. Despite this, the UK imports more than it exports, so it works in the UK’s favour. In addition, the types of goods and services that the UK exports are very high quality and unique, meaning that cheaper alternatives cannot usually be found of the same quality, so the demand for them is not very price elastic.

[1] Data at 29/10/2021


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