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Scottish currency before and after the Act of Union The Kingdom of Scotland began coining pennies and farthings in the twelfth century, under King David I (1124-1153), mainly in silver. The value of Scottish coins was initially roughly equal to its English equivalents but in the fourteenth century, under David II and Robert II, a long and intense depreciation started and lasted until monetary unification with England. The Scottish penny was reduced to a twelfth of its English counterpart by the time of James VI (1566-1625), who was the first Stuart and Scottish King to become King of England as well, in 1603. Gold, silver, billion (an alloy with less than 50% of silver) and copper coins changed continuously in weight and finenesse through almost 600 years, often coexisting for many years despite the changes. This instability was also reflected in a great variety of names, inspired either by the changing images represented on them (like Unicorn, Lion, Rider, Noble, Sword & sceptre, Crown, Sword Dollar) or by the names of imported types of coins from England, France, Germany or Italy (Penny, Farthing, Demy, Testoon, Groat, Merk, Plack). The name groat derived from Northern Italian grossi (heavier silver coins introduced in the thirteenth century as opposed to the smaller denarii), which then spread in Germany as groschen. The Testoon is also of Italian origin, being an even larger silver coin with a realistic portrait produced in the late fifteenth century starting from Milan (in Italian testone means big head). The increase in the size of silver coins had on both occasions signalled larger supplies of metal and an increase of the value of transactions in Italy and elsewhere in Europe. The Groat of Robert II (1371-90), here illustrated, was minted in Perth and was worth four pence. Robert II's groat is clipped and its size is significantly reduced in comparison to what it was when it left the mint, cutting out part of the text. It carries on the obverse a standardized regal portrait with crown and scepter and the words ROBERT REX SCOTORVM and on the reverse the indication that it was minted in Perth and a Long cross quartered with four stars.

The second groat illustrated is a hammered silver eight pence of James VI, minted in the period 1567–1602. Despite its higher nominal value, it is considerably lighter than its predecessor of two hundred years earlier and it is of billon, with less than 50% silver, the rest being replaced by copper. James VI's groat carries the symbols of Scotland (Thistle sprig and Lion rampant in a shield within a double tressure flory counter-flory) which persisted in British coinage on some occasions until today (the 1994 pound and the 2009 two pence are here illustrated) and remain the symbols of Scotland and an element of the Royal Coat of Arms of the United Kingdom. During the period of the Union of crowns, between the ascent of James to the English throne in 1603 and the Act of Union under Queen Anne in 1707, Scottish coinage remained separate. It started converging in appearance but kept different types of coinage and depreciated further, even if at a slower rate, reaching a 13th of its English counterpart, as established by a decree in 1697.

Monetary Union between Scotland and England was reached only after the act of Union, and the English coinage was extended to the whole of Scotland, with a minimal change in symbols and text. James VI of Scotland and I of England, however, had already started promoting the term United Kingdom and using it in his coinage for England long before the Act of Union. Already in 1604 James' coins for England included the combined crests of England, Ireland and Scotland, the name MAG. BRIT. and the motto QUAE DEUS CONIUNXIT NEMO SEPARET, stating already then that he considered that by the will of God Scotland should not be separated from England. In 1707-09, Scottish silver and gold coinage was re-coined in the mints of London and Edinburgh. It was the last official coinage minted in Scotland and formally started a period of more than three centuries of monetary stability, even if the pound encountered difficulties during the Napoleonic wars and after the end of the gold standard in 1931.

1707 was not entirely the end of Scottish currency however. First of all copper coins had not been re-minted because the operation was expensive and would have imposed a substantial net cost for the Crown, through the Royal Mint. Therefore, for more than a century small change in Scotland was a mixture of various old Scottish, English and foreign copper coins, worn down, often fake but nevertheless tolerated because of the absence of adequate alternative. The chaos of copper coinage persisted well into the nineteenth century in England and France as well. As a consequence, from 1787 to Parliamentary prohibition in 1817, private entrepreneurs in the UK had their own tokens minted to pay for their workers or provide change to their customers, circulating as surrogate private money at the local level, and sometimes even at a national level. This phenomenon took place in Scotland as well, with copper Scottish coins appearing, even if they were generally produced in English mints. Here illustrated is an 1813 Glasgow penny token, issued by the Phoenix iron works, showing the factory's activity. Another example illustrated here is a 1795 Glasgow halfpenny token, carrying an allegory of the Clyde river, represented as antique river god. This coin was a speculative fraud because it was anonymous and the rim only mentioned "payable in London", without the name of the issuer, who should have been liable to redeem the coins in banknotes or in good silver coins.

The scarcity of small change also explains the peculiar early development of small denomination Scottish banknotes, whose historical legacy are the £1 notes, still existing today in Scotland but not in England. Scotland indeed was a pioneer in the emergence of paper money in the eighteenth and nineteenth century. Scottish banks proved very active in the private issue of banknotes, which was legal and free without limits provided that banknotes were backed by reserves of silver and gold coins in the bank's vaults. Only in 1844 the British Prime Minister Robert Peel passed a Banking Act which started the concentration process of the right to issue banknotes in favour of the Bank of England. At the time of Union only one Scottish bank existed, the Bank of Scotland, founded in 1695. By 1819 Scottish banks had grown to 30 in number (with 97 branches). After the Peel Act the number of Scottish banks declined to 13 by 1864, but with 591 branches. Today there are 3 Scottish banks issuing bank notes (Bank of Scotland, Royal Bank of Scotland and Clydesdale Bank) while no English bank other than the Bank of England can claim such right.

Luca Einaudi, Centre for History and Economics