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Paper money was invented by the Chinese as far back as the 7th century A.D. In the western world, people were used to their money having intrinsic value with the widespread use of gold and silver coins and the government-backed banknote wasn't commonly used until the end of the 17th century. In the United Kingdom, the Bank of England was established in 1694 to manage the government's accounts and was initially a private company, only being nationalized in 1946. It also operated commercially, issuing handwritten banknotes to start with, converting to partially printed notes after a couple of years. The first notes were of high value, 20 pounds or more, as coin was still used for smaller amounts, but gradually the bank came to issue 5 pound notes and even, more rarely, 1 and 2 pound notes. From the mid-eighteenth century there was a proliferation of small local banks which began to issue notes of their own for local circulation. These started to die out during the later nineteenth century though and gradually merged into the "big five" banks which dominated banking in the early twentieth century. These "provincial" notes are highly prized by collectors today. In Scotland and Northern Ireland however, several commercial banks still retain their license to issue their own notes to this day. Jersey, Guernsey and the Isle of Man also have their own government banknotes, though English currency circulates concurrently on these islands. During the First World War, the government was concerned about the possible hoarding of gold coins (the sovereign and half-sovereign) which were still used for small amounts and so H.M. Treasury issued a series of notes in one pound and ten shilling denominations to replace these coins. There were three series of these notes, including the intial, emergency, issue in 1914 (now highly collectable), but in 1928 the Bank of England took over the issuance of notes in these denominations and the coins were discontinued for circulation.
Notaphily (collecting banknotes) is an increasingly popular hobby, though still not as popular as coin collecting, and there are a number of catalogues to assist the collector. Krause Publications' three volume Standard Catalog of World Paper Money is the major reference used by most dealers to identify their wares and lists virtually every note ever issued, assigning an unique reference number to each. It is commonly referred to as "Pick" after Albert Pick, its originator. For UK notes, there is Token Publishing's Banknote Yearbook and Vincent Duggleby's English Paper Money. All are available on Amazon.
As with all collectibles, when it comes to value, condition is everything. The above catalogues will give current prices for various grades, but most collectors seek the best grade they can get and, for most modern notes, that will be uncirculated (mint) condition. Those who specialize in older notes will seek the best available grade of note or whatever their budget will allow. Some collectors prize special serial number prefixes such as the first and last for a particular issue and those of replacement notes for which they are willing to pay a significant premium. Signature varieties are also frequently collected. As notaphily has become more popular, some banks have been known to hold charity auctions where they sell notes of particular collectible interest, such as the first few of a new issue.
There are two societies which exist to promote the hobby and allow collectors to contact each other: the International Bank Note Society and LANSA (Latin American Paper Money Society).
Some websites of dealers with whom I have transacted successfully:
I have also dealt with R.P. & P.J. Beckett, K. Goulborn and Clive Dennett who do not have websites. More information can be found in Coin News magazine.
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