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By the 640s, a trading settlement began to establish itself west of the city walls in what is now the Strand and Charing Cross. This naturally advantageous position had the added political benefits of being on the boundary of a number of kingdoms. Lundenwic, as the area had become known by the 670s, grew into a thriving emporium: 'a market for many peoples coming by land and sea' as Bede described it. Saxon timberwork has been discovered reinforcing the Strand Embankment, while wooden homes stood to the north. Archaeological finds of pottery and millstones from France and Germany show London's expanding international trade, and it is probable that foreign ships passed easily through the, by now, ruinous London Bridge. The first coins minted in Britain since the Romans were produced there and stamped with the word Lonuniu.

In 675, St. Eorcenwald became Bishop of London and solidly re-established Christianity in the city after the rule of several inefficient prelates. Around the same time, the Mercian Kings from Midland Britain became dominant over the city and may have established the first monastery at Westminster. They held councils in Chelsea and appear to have built a Royal Palace in the ruins of the old Roman fort and amphitheatre. St. Alban's Church, Wood Street is said to have been the 8th century Chapel Royal of King Offa (of Offa's Dyke fame) and may have earlier roots. Elsewhere in the still deserted city, new paths began to emerge through the dilapidated Roman buildings. Attacks from Viking Raiders started in earnest around Britain in the 830s and it wasn't long before they moved on London. There were attacks in 842 & 851. Then in 865, the 'Great Heathen Army' invaded East Anglia and began to march across the country, raping and pillaging as it went.

The Vikings spent the winter of 871-2 in London, presumably within the walls. It is unclear what happened to the traders to the west at this time. By 878 though, King Alfred the Great had become King of all the English and forced the Viking leaders to sue for peace. Eight years later, he re-established Lundenburg, within the city walls, as one of a system of defensive burghs around the country. A South-Werk was also constructed across the river to protect the ferry crossing. With the Roman walls repaired and the ditch recut, Alfred handed the city over to Ealdorman Aethelred of Mercia. The latter established Aethelred's Hythe (Queenhythe) and Billingsgate Market and a new street system began to emerge. Trade prospered and Lvndonia coins were minted in the city, but development was slow at first. Lundenwic was abandoned, though the name survives today as the Auld-Wych.

Upon Aethelred's death in 911, London came under the direct control of the English Kings. Through the 920s, the city became the most important commercial centre in England with eight moneyers within its streets. Contemporary writers speak of exotic international trade. There were markets at West (Cheapside) & East Cheap and much industry has been excavated in the form of decorative metalwork and weavers' loomweights. London became a political focus too. King Aethelstan held many Royal Councils in London and issued laws from the city, but the place also had its own government.

The city was divided into twenty wards with an ealdormen in charge of each. He was a commander in war and a judge in peace-time. London also had its own Portreeve, a precursor of the county sheriff, who was responsible for collecting taxes. The Peace-Guild was established to pursue criminals. Another body, the ancient popular assembly, known as the Folkmoot, traditionally met at St. Paul's Cross in the Cathedral churchyard, but may have originally taken over the Mercian Royal Palace at the old Roman amphitheatre. Guildhall was later built on this site. The busy city was full of small wooden houses. Stone was reserved for churches. All Hallows by the Tower still retains a Saxon arch. Other fragments survive at St. Brides, Fleet Street & St. Nicholas Shambles.

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