Pawnbrokers face tough competition as economy improves
|
Version 0 of 1. Her hands weighed down with seven rings she previously bought here, Sandie Taylor is back at the counter of H&T Pawnbrokers in Kingston upon Thames, handing over the final payment on the bracelet she left six months ago. For the £100 loan she took out, she is repaying £151. “It is just convenient really,” she said. “If it is Christmas, I am in here practically every week. “I have a lot more gold than what I need to wear so when it is sitting indoors and I need money, it is easy to come down.” Taylor is the kind of customer pawnbrokers regard as their traditional business – coming to the high street for accessible cash rather than going online, putting down engagement rings, watches and coins for up to six months. The typical loan is between £200 and £400 at an interest rate of between 5% and 10%, with gold rings still the most typical piece of security. The industry claims to cater for up to 11 million people who it says do not have access to bank loans. In recent recessionary years its core customers were joined by a new influx from the middle classes, also in need of short-term finance. “Obviously the banks had not been lending like they were so it became a credible source of alternative finance for larger numbers of people,” said Ray Perry of the National Pawnbrokers Association. The business has clearly progressed from the days of the “low, dirty-looking, dusty shop” Charles Dickens described in Sketches by Boz, “the door of which stands always doubtfully, a little way open: half inviting, half repelling the hesitating visitor”. Now ubiquitous on the high street – often fitted out in a sober but functional fashion much like a local jewellers – the pawnbroker’s progress from backstreets to relative prosperity tells a story of harsh economic conditions and, for a time, the surging price of gold. John Nichols, the chief executive of H&T Pawnbrokers, recalls a period in the late 1990s when there were between 500 and 600 shops overall in the UK – at the beginning of last year the number stood at 2,100. But rapid expansion had already come to an end, with a gold price crash in 2013 steep enough to force major chain Albemarle & Bond into administration. The company, which two years earlier had declared it was “the age of the pawnbroker” and opened 40 pop-up shops to buy punters’ gold, had to melt down and sell gold items in its shops to shore up finances. In April last year, Albemarle was bought out of administration by the investment group of the former Bank of Scotland boss Sir Peter Burt. Now the industry faces an uncertain future. The twin effects of the gold price plunge and the attractions of online payday lending – anonymity and instant access – have pushed traditional pawnbrokers into a “trough”, says analyst Jonathan De Mello, of retail property advisers Harper Dennis Hobbs. “They [pawnbrokers] still have the structural issues they face where it is cheaper to offer loans online,” he said. “The payday loan sector [for pawnbrokers] has seen structural decline. The gold sector has seen structural decline, so essentially I wouldn’t say the writing is on the wall, but there is going to be a lot of churning and consolidation and the number of pawnbrokers will continue to decline.” Online lenders have their own well-publicised difficulties, with leading lender Wonga announcing its first loss on Tuesday after a series of scandals, and a wider regulatory crackdown on the industry having capped the annual interest rate at 1,500%. The online payday loan sector itself has become a battleground between 20 different companies, said De Mello. Pawnbrokers do at least, he said, have other areas of business – gold and jewellery – whereas the online competition is limited to payday loans. But the number of pawnbroking shops now stands at 1,950 and De Mello thinks this will reduce to between 1,600 and 1,700. He expects operators that have previously let sites on high streets to come under increased competition in the bigger population centres such as London and Manchester as mainstream retailers move to take up space again. As a representative of the industry, Perry is less gloomy but still predicts “nothing dynamic” in the next four years. He believes pawnbrokers will be shored up by the middle-class customers they have gained. Meanwhile H&T has reduced its shops from 199 to 191 and Nichols said the trend is for people to take smaller loans than previously. But there remains a need for what pawnbrokers offer, he maintains. “I think there is still a great need out there for people to access cash quickly but in a safe manner. People do, whether we like it or not, always have [a need for] short-term credit.” De Mello said banks have not yet returned to the type of lending they engaged in before the crash, meaning some will always need alternative finance. “One thing in their favour, the banks are still not lending like they used to and they never will with the sub-prime crisis. They are very careful now,” he said. Back in Kingston, there is a steady stream of customers for the three staff. Bulgari watches, half sovereign coins and gold chains are packed in plastic, labelled and stored in careful order in the safes. Staff say they will look at anything as security – including in one case a herd of cows. In another extreme case Sonya Lancaster, who has worked there for three-and-a-half years, recalls a man coming in with a small bag of gold – 10 fillings from the teeth of relatives who had passed away. |