Annual Report on Exchange Arrangements and Exchange Restrictions 2005
Chapter

UNITED KINGDOM

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
September 2005
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(Position as of December 31, 2004)

Status Under IMF Articles of Agreement
Article VIIIDate of acceptance: February 15, 1961.
Exchange Arrangement
CurrencyThe currency of the United Kingdom is the pound sterling.
Other legal tenderGold sovereigns and britannias are legal tender, but do not circulate.
Exchange rate structureUnitary.
Classification
Independently floatingThe exchange rate of the pound sterling is determined on the basis of supply and demand in the foreign exchange market. However, the authorities may intervene at their discretion to moderate undue fluctuations in the exchange rate.
Exchange taxNo.
Exchange subsidyNo.
Forward exchange marketBanks are allowed to engage in forward exchange transactions in any currency, and they may deal among themselves and with residents and nonresidents in foreign notes and coins at free market exchange rates.
Arrangements for Payments and Receipts
Prescription of currency requirementsNo.
Payments arrangementsNo.
Administration of controlNo.
International security restrictionsPursuant to mandatory UN Security Council regulations and relevant EU regulations, financial sanctions are in place against terrorism, Al-Qaida, the Taliban, Iraq, and Liberia. In accordance with the sanctions, it is an offense to make funds or economic resources available to or for the benefit of the designated targets of these sanctions regimes and anyone acting for or on behalf of those targets. Funds and other financial assets and economic resources of the designated targets are frozen. The targets are designated by the relevant UN Sanctions Committee, except in the case of terrorism, where EU or domestic designation is required.
In addition to UN sanctions, there are also a number of EU-based financial sanctions regimes pertaining to Myanmar (renewed and extended effective April 30, 2004), the former Federal Republic of Yugoslavia, the International Criminal Tribunal for the former Yugoslavia (ICTY), and Zimbabwe (renewed and extended effective February 24, 2004). The restrictions on making funds or economic resources available and the requirement to freeze funds are the same as for the UN-based sanctions regimes. The EU financial sanctions are aimed at targets listed by the EU and include, for example, various individual members of the government of Zimbabwe, certain persons related to important governmental functions in Myanmar, certain state-owned enterprises in Myanmar (effective October 26, 2004), individuals associated with the former government of Liberia (effective April 30, 2004), and various persons indicted by the ICTY (effective October 14, 2004).
In addition to these financial sanctions regimes, the financing of and financial assistance related to military activities in Myanmar, the Democratic Republic of the Congo, Côte d’Ivoire, Liberia, Somalia, Sudan, and Zimbabwe are prohibited.
In accordance with IMF Executive Board Decision No. 144-(52/51)Yes.
In accordance with UN sanctionsYes.
Payments arrearsNo.
Controls on trade in gold (coins and/or bullion)
Controls on domestic ownership and/or tradeGold bullion and gold coins are not subject to controls. Gold coins have also been issued in Jersey and the Isle of Man and are legal tender there. Except under the authority of a license granted by the Treasury, it is not permitted to melt down or break up any metal coin that is for the time being current in the United Kingdom or that, having been current there, has at any time after May 16, 1969, ceased to be so. There is a gold market in London in which gold bars are traded freely.
Controls on external tradeThe exportation of gold in manufactured form more than 50 years old and valued at £8,000 or more for each item, or matching set of items, also requires a license from the Department of Culture, Media, and Sport.
Controls on exports and imports of banknotesNo.
Resident Accounts
Foreign exchange accounts permittedYes.
Held domesticallyYes.
Held abroadYes.
Accounts in domestic currency held abroadYes.
Accounts in domestic currency convertible into foreign currencyYes.
Nonresident Accounts
Foreign exchange accounts permittedYes.
Domestic currency accountsYes.
Convertible into foreign currencyYes.
Blocked accountsNo.
Imports and Import Payments
Foreign exchange budgetNo.
Financing requirements for importsNo.
Documentation requirements for release of foreign exchange for importsNo.
Import licenses and other nontariff measures
Negative listImport restrictions are in effect for public safety reasons and to satisfy international obligations.
Open general licensesMost imports are admitted to the United Kingdom under an OGL.
Licenses with quotasTextile and clothing imports from certain non-WTO member countries are restricted under the terms of autonomous arrangements, as are imports of certain steel products from Russia, Ukraine, and Kazakhstan that are subject to EU bilateral agreements. There are EU prior surveillance licensing arrangements for imports of certain textile products from China and for imports of certain steel products from all sources. There is double control surveillance of imports of certain steel products from Romania and the former Yugoslav Republic of Macedonia. Imports of cars from Japan are also subject to quotas under a separate agreement (The Elements of Consensus) between the EU and the Japanese government. A few articles may be imported under OGILs (i.e., without limit as to quantity or value).
Other nontariff measuresImports of cereals and cereal products, beef and veal, mutton and lamb, poultry meat, and dairy products other than butter and cheese are subject to minimum import prices enforced through autonomously imposed variable import levies. Imports of many other agricultural, horticultural, and livestock products are subject to EU regulations. Imports of rough diamonds are permitted only if accompanied by a Kimberley Process certificate that has been validated by the exporting government, and if secured within a tamper-resistant container with the original seals intact.
Import taxes and/or tariffsYes.
State import monopolyNo.
Exports and Export Proceeds
Repatriation requirementsNo.
Financing requirementsNo.
Documentation requirementsNo.
Export licensesExports of certain products are controlled for reasons of national security, animal welfare, national heritage, and in accordance with international agreements.
Without quotasExports of rough diamonds are permitted only if accompanied by a validated Kimberley Process certificate, and if secured within a tamper-resistant container with the original seals intact (EC Directive No. 2368/2002).
Export taxesNo.
Payments for Invisible Transactions and Current Transfers
Controls on these transfersNo.
Proceeds from Invisible Transactions and Current Transfers
Repatriation requirementsNo.
Restrictions on use of fundsNo.
Capital Transactions
Controls on capital transactionsYes.
Controls on capital and money market instrumentsNo.
Controls on derivatives and other instrumentsNo.
Controls on credit operationsNo.
Controls on direct investment
Inward direct investmentThe Secretary of State for Trade and Industry may prohibit a proposed transfer of control of an important U.K. manufacturing undertaking to a nonresident when the transfer of a substantial part is considered contrary to the interests of the United Kingdom in terms of public policy, public security, or public health. If it is considered that the national interest cannot appropriately be protected in any other way, property in such a proposal or completed transfer may be compulsorily acquired against compensation. Both prohibition and vesting orders are subject to parliamentary approval. These powers have not been used to date.
Controls on liquidation of direct investmentNo.
Controls on real estate transactionsNo.
Controls on personal capital transactionsNo.
Provisions specific to commercial banks and other credit institutions
Open foreign exchange position limitsNet spot liabilities in foreign currencies (i.e., the net amount of foreign currency resources funding sterling assets) form part of a bank’s eligible liabilities that are subject to a 0.15% non–interest bearing deposit requirement with the Bank of England. Effective June 1, 2004, the level of the required deposit is based on the average of reported eligible liabilities over a six-month period in excess of the equivalent of £500 million (previously, £400 million). This rule applies to building societies as well as to banks.
Provisions specific to institutional investorsNo.
Other controls imposed by securities lawsNo.
Changes During 2004
Arrangements for payments and receiptsFebruary 24. The Council of the European Union renewed and extended the freeze on funds, financial assets, and economic resources of various individual members of the government of Zimbabwe and various persons associated with them.
April 30. The Council of the European Union renewed and extended the freeze on funds, financial assets, and economic resources of certain individuals related to important governmental functions in Myanmar and persons associated with them.
April 30. Restrictions were imposed on transactions with respect to certain individuals associated with the former government of Liberia.
October 14. The Council of the European Union froze the funds and economic resources of persons who have been indicted by the ICTY.
October 26. The Council of the European Union banned the provision of financing to certain state-owned enterprises in Myanmar.
Capital transactions
Provisions specific to commercial banks and other credit institutionsJune 1. The minimum open foreign exchange position of banks and building societies was raised to the equivalent of £500 million from £400 million.

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