Demand for Pawnbroking Reaches ‘Record Levels’ in Britain

Signage for pawnbroker shops on Lewisham high street in London, in this file photo. The price of gold had a steep drop lately, leading analysts and other financial experts to speculate on the cause. Oli Scarff/Getty Images

The chief executive of the UK’s largest pawnbroking operator said that demand for pawnbroking services in Britain has surged due to high costs and a lack of viable alternatives.

Last week, the pawnbroker H&T said demand for its services had “gathered momentum” in the first six months of the year, as its profit increased, with people increasingly turning to pawnbrokers to access cash.

Pre-tax profit rose 31 percent to £8.8 million, the business said.

It said borrowers were also taking out bigger loans, on average around £423 each, compared with £405 in December last year.

People lend items to pawnbrokers for loans, usually around 50 to 70 percent of an item’s secondhand value, who charge 155 percent APR.

H&T Chief Executive Chris Gillespie said “the demand for the product is, is at record levels.”

“Demand for pledge lending continued to gather momentum during the first half of 2023, as customers’ increasing need to access small sums of short-term credit comes at a time of reduced market supply following the departure of several firms from the unsecured lending market,” H&T said.

‘We Fill That Void’

Pawnbrokers are licensed by the Financial Conduct Authority and offer interest rates that are lower than short-term unsecured loans from payday lenders, but higher than bank loans.

Companies such as Wonga used to defend annual interest rates of more than 5,000 percent by saying loans were for days or weeks rather than a year.

Changes to the rules in 2014 from the Financial Conduct Authority (FCA) meant that people using payday lenders and other providers of high-cost short-term credit saw the cost of borrowing fall and would never have to pay back more than double what they originally borrowed.

Talking to GB News on Monday, founder of Prestige Pawnbrokers James Constantinou said he has “seen a massive spike in the last eight months of small business owners coming to us looking to raise capital.”

Mr. Constantinou listed “the fuel crisis, lack of labour and all sorts of issues.”

“They’re facing a moment, that sort of pushing the cost of running a business up and the short-term funding, they’re turning to us in that respect, and we fill that void,” he added.

Low incomes

Last year, a report by the public policy think-tank The Social Market Foundation, which was supported by the National Pawnbrokers Association (NPA) wrote that people with low incomes were pawning household goods to pay for increasing rises in food prices and rent.

This was despite the number of pawnbroking shops falling, having halved in seven years. NPA members had 2,091 shops in 2014 and that number had fallen to 865 in 2021.

A common reason given by interviews for using pawnbrokers was to get cash that is used for household essentials including food and rent, often at the end of the month when they are running out of money. Loans secured by pawning possessions are typically less than £100, the SMF said.

“Having spoken with customers directly, I’ve learned that pawnbrokers can play an important role in people’s financial lives,” said Jake Shepherd, SMF researcher and report author.

He said that at times when we’re in need of a financial safety net, “many of us take credit cards, bank loans, and even savings for granted. But they are luxuries that not all people have access to.”

“For people on low incomes, the alternatives to pawnbroking can be even more risky and costly. In a credit environment where options are already limited, the closure of pawnbrokers could be devastating for some customers,” he added.

Ray Perry, CEO National Pawnbrokers Association, said that “the need for small sum borrowing is growing due to the inflationary pressures on food and energy costs.”

PA Media contributed to this report.