How can a pounds 1 note be worth over pounds 50,000?

Twenty years of inflation should have taught us that keeping old notes and coins is a mug's game. But really old money can be worth more than its equivalent in gold. A Bank of England pounds l note sold at auction in 1993 for pounds 57,200. Amittedly this was no ordinary example, for dated 2 March 1797 and bearing the serial number `2', it is the second note of the denomination ever issued by the Bank.

On April 24 Spink will be offering another Bank of England rarity at auction - a pounds l,000 note. It surprises many people to learn that the Bank issued pounds l,000 notes from the eighteenth century to the early 1940s.

Given that even in the 1930s, pounds l,000 would comfortably buy a couple of houses in Greater London, they were treated with care. According to the Bank's records, 63 examples apparently remain at large, although most of these would have perished in the bombing raids of the Second World War.

The example which will be offered by Spink on Wednesday (pictured above) is a specimen dated 7 September 1922. Specimen notes were issued by the Bank to other central banks to assist identification. Over the years, revolutions and a less meticulous attitude to currency in certain countries has resulted in some getting into private hands. However, large denomination specimens are of the highest rarity. Spink is anticipating its example will realise pounds 20,000-pounds 25,000.

A banknote is not "just money". It can take up to a year to engrave a single plate which is used to print just one side of a note. Just look at the intricate design of any currency note. There are watermarks, elaborate designs and an incredibly subtle use of colour. These are all techniques used to deter the forger. A banknote is where art and technology meet and the result is a miniature work of art.

Banknotes have certainly been an expanding field of collectabilia in recent years. There are two quite distinct markets. Serious collectors are prepared to pay thousands of pounds for just a single note, while there are others who get just as much pleasure simply spending a few pence. It is possible to purchase a pack of 100 uncirculated world notes for pounds 29.

Barnaby Faull, who heads Spink's banknote department, believes the market is now buoyant because banknotes escaped the investment buying of the 1970s and 1980s. Certainly both the coin and stamp markets suffered from an influx of speculators who were buying solely for investment reasons.

They learnt to their cost that when sellers outnumber buyers, prices fall dramatically. Whereas many historic coins may be purchased today for the same prices at which they were selling in the mid-1970s, the market for banknotes has risen in recent years.

The price for Hong Kong banknotes bearing low serial numbers has risen the most dramatically. For example, a Government of Hong Kong $1 which had been sold by a dealer in the late 1970s for pounds 70 found a buyer at Sotheby's in 1993 for pounds 28,600. The attraction of the piece was the serial number - A00001. However, Simon Narbeth of the specialist paper money dealers Colin Narbeth & Son, avoids all notes from the Far East on the basis that the market for the material is not collector-dominated.

There is a strong collectors' demand for English and Welsh provincial banknotes. From about 1780, over 900 different banks operating outside London have issued their own notes. Alphabetically from Ashby-de-la-Zouch to York, local paper money supplemented the nation's coinage to oil the wheels of commerce. Many of these banks failed, while the survivors merged to form the high street banks we know today.

From 1844, their note issuing was strictly controlled and banks which merged were obliged to refrain from printing their own money. The last privately printed banknote was issued in 1920 by Fox, Fowler of Wellington, the year before it merged with Lloyds.

Visually, these provincial notes can be most appealing, with vignettes of rural scenes, allegorical figures, famous local buildings, or simply a shield of arms. They are an integral part of local history with the early ones being signed by the partners who owned the bank. Today, the notes generally sell for pounds 100-pounds 200 each, but rare items can change hands for over pounds 1,000.

For those with an interest in historical events, a note issued during the French Revolution may appeal - a 1795 example can be secured for around pounds 6. A note hand-signed by General Gordon during the siege of Khartoum is a little more expensive, but can be purchased from around pounds 180, whereas a note issued during the siege of Mafeking under the authority of Baden Powell retails at around pounds 50-pounds 100.

Should banknote collecting appeal to you, whatever you buy, treat your acquisitions as an interest and not as an investment. Regard any increases in value as an added bonus rather than a goal in itself.

For a complimentary copy of Coin News, which incorporates Banknote News (cover price pounds 2) and a free banknote, send 50p in stamps to cover postage, together with your name and address to: The Independent Readers' Offer,Token Publishing, PO Box 20, Axminster, Devon EX13 7YT

The Spink sale of Banknotes takes place on 24 April at 10am. For further details telephone 0171-930 7888.

For a complimentary list of paper money for sale, contact: Colin Narbeth & Son. Tel: 0171-379 6975.