Home » ‘Why are UK stock prices quoted in pence not pounds?’
UK stock prices are quoted in pence rather than pounds and have been for years. But why? Katie Royals takes a look at possible reasons.
- About
- Latest Posts
Latest posts by Katie Royals (see all)
- Avoid the car insurance mistake costing UK drivers £830 million - 22 February, 2022
- Is the housing crisis jeopardising my retirement prospects? - 21 February, 2022
- What might lead to an increase in the 2023-24 ISA allowance? - 16 February, 2022
Published
The content of this article was relevant at the time of publishing. Circ*mstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.
When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.
Read More
The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.
You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today toget instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.
At The Motley Fool, we always love to hear from our readers. One reader got in touch last week to ask why the London Stock Exchange still quotes UK stock prices in hundreds or thousands of pence and not pounds.
I found this question very interesting, so I decided to look into why UK stock prices are quoted in this way. Read on to find out what I discovered.
[top_pitch]
How are UK stock prices quoted?
On the London Stock Exchange, UK stock prices are quoted in pence. You’ll see this price when you’re trading shares.
So, the price of a stock could be quoted as ‘GBX 520’. This means the stock costs £5.20. Similarly, if a stock is quoted as costing ‘GBX 1,190’, it will cost you £11.90 to buy one share.
The sums can split into smaller values than pence too. For example, it’s possible for the price of a stock to be ‘GBX 400.5’. This would cost you £4 and half a penny to buy one share.
What is GBX?
GBX represents a form of currency. While GBP refers to Great British pounds, GBX refers to 1/100th of a pound or one penny.
[middle_pitch]
Why are UK stock prices quoted like this?
There is no official explanation from the London Stock Exchange on its reasoning behind quoting UK stock prices in this way. However, there are a number of plausible explanations.
The UK is one of the only major economies that quotes its share prices in this way. Other countries, like the US, use dollars and cents for quoting their stock prices.
It is thought that the LSE’s system has roots in the old days of the pound – pre-1971. This was before the GBP was decimalised and one pound was worth 20 shillings. Each shilling was worth 12 (old) pence. This meant one pound was worth 240 pence.
Stock exchange quotations need to be reduced to the lowest sub-unit of currency – in this case, pence. It was much clearer to say ‘470 pence’ than ‘one pound, 19 shillings and two pence’.
It could also be expressed as 1.958 pounds, but this would be even more confusing as it doesn’t really have any relation to the actual currency.
Given it’s been over 50 years since decimalisation, it would make sense to change the process now. However, no system is simple to change. It seems to have worked for the past 50 years, so there is little desire to change it to reflect the decimalised currency we have at the moment.
Are there any other theories?
One theory is that most stocks are only worth a few pounds, so it makes sense to use a smaller currency unit. Some think it is easier to read a stock price as ‘102’, for example, rather than ‘£1.02’.
Many also believe that quoting UK stock prices in pence improves accuracy and reduces errors. Decimal points are easily missed out and people could find themselves buying £102 worth of shares rather than £1.02. This could clearly be an unfortunate – and costly – error!
Will the way stock prices are quoted ever change?
While some find this way of quoting UK stock prices frustrating, there doesn’t appear to be any clear movement to change it. However, it’s impossible to say that the practice will never change. It is more than possible we will see a change in the future, but it is not imminent.
For now, love it or loathe it, you will have to put up with UK stock prices being listed in pence rather than pounds.
When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.Tax treatment depends on your individual circ*mstances and may be subject to future change. The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice.
Read More
Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.
Tax Year Ends 5 April 2025
Don’t leave your ISA allowance until the last minute!
Shelter up to £20,000 from the Taxman this tax year in a Stocks and Shares ISA, and you’ll pay no UK income tax or capital gains on potential profits!
We’ve made it easier to compare Stocks and Shares ISAs, so you can find an account that’s a great fit for your needs. Whether you’re shopping for a trading account with all the whistles and bells, or seeking a simpler, ready-made portfolio solution, we’ve got it covered.
Compare our top-rated Stocks and Shares ISAs
Investments involve various risks, and you may get back less than you put in. Tax benefits depend on individual circ*mstances and tax rules, which could change.
Stock Strategies
- Growth Stocks
- Dividend Stocks
- Value Stocks
- Get Started with Investing