‘I borrow to live’: Pawnshops profit from golden age as UK faces tough times | UK cost of living crisis

A a sturdy chain and a slender cross, both in gold, are placed on the desk in a small plastic bag. Her owner is debating whether he should pawn or sell her grandmother’s necklace and mother’s pendant to raise £400 in cash to pay off debts and fund her daughter’s birthday celebrations. She has never used a pawnbroker before, but her finances are under increasing pressure.

“Every month I have nothing to live on,” says the client, who declined to be identified, as she fights back tears. “I’ve been sitting around the house planning things that I can sell. I’m out of the house for nine or 10 hours a day five days a week and I’m still squatting five days after getting paid.

The customer is one of many to cross the threshold on a typical day at Pickwick in Ashford, Kent, which is part of a chain of eight pawnbrokers – an industry which is booming as customers struggle to find money to pay growing bills.

The company’s profits plummeted during the pandemic when it lost at least a third of its loan portfolio as customers with little ability to spend paid off their debts. Business today is rebounding – up 20% since January to almost 60% above pre-Covid levels. “I had never really seen this rate of growth before. I think we’re in new territory,” says Nathan Finch, Managing Director of Pickwick.

Nathan Finch with a customer at Pickwick in Ashford. “If we have to sell the items, it’s a failed loan.” Photograph: Martin Godwin/The Guardian

“I think people arm themselves with their finances. Pawnbroker customers are particularly savvy and often smooth their cash flow and make sure they have [what they need for] an upcoming bill.

Finch expects a further rise this year as the high inflation and looming recession predicted by the Bank of England this week, along with energy bills expected to reach £3,600 a year, add to the soaring cost of living.

Access to other forms of short-term credit, such as payday loans, has shrunk with the disappearance of some key players, leaving pawnbroking to fill the void. The industry has also benefited from the skyrocketing value of gold and diamonds, increased demand for designer watches and increased awareness through television shows such as Channel’s Posh Pawn. 4.

It is a revival for an industry that was as ubiquitous as pubs in the Victorian era but shrank during the 20th century with the rise of other forms of credit. Two of its biggest players – The Money Shop and Albemarle & Bond – fell apart shortly before the pandemic hit.

Finch says, “Historically it was a working class thing, but I don’t think you can put customers in a class now. Everyone sometimes has more bills than they earned that month.

While he says customers have pawned expensive watches to fund investments in race cars, the typical customer borrows for a vacation or an unexpected cost like a car or heating system breakdown. central office, or higher-than-expected business or household expenses.

Although heavily regulated, pawnbroking allows customers to borrow quite large sums without a credit check or proof of income. Borrowers must provide photo ID and proof of address, but the transaction depends on the element of security provided. Lenders don’t focus on the finances of the borrower, only the market value of the collateral, making sure it can cover the cost of the loan and interest charges in the event of default. Typically, a broker will lend up to 70% of the item’s market value.

Finch examines a client's jewelry
Finch examines a customer’s jewelry. Photograph: Martin Godwin/The Guardian

Pawnbroking is about personal relationships, Finch says, with experienced staff able to spot someone trying to borrow against an item they may not actually own, and willing to haggle over the loan amount. Regulars get better deals.

He says he has lent against vehicles and even false gold teeth, but the vast majority of the loans are against jewelry. The pawnbroker pulls out a box from one of the shop’s huge safes, full of pawns – the industry term for the security feature – each in a clear plastic zip-lock bag next to a pink contract setting out the terms of the loan.

There’s a £90 loan against nine-karat gold earrings, £300 on an 18-karat gold necklace and a slew of chunky jewelry – large fashioned rings with a buckle, saddle or the woven design and studded rings known as keeper rings, which are favored by many clients as a means of storing wealth with the ability to borrow against the asset.

Between 85% and 88% of pledges are exchanged because customers want to recover often sentimentally important items. Men’s watches – especially Rolexes – and women’s designer bags and shoes, such as Gucci or Chanel, are one of the fastest growing sectors. Finch says the refund rate is high. “These are things that people have worked hard for. It means something in the sense that you worked hard to buy it and own it.

Just before noon, a regular arrives, Gary Thompson. The 55-year-old says he borrows about twice a month at the moment, slightly more than usual, as bills for his dog breeding business and household expenses have increased. He thinks he may have to pay for his dog to have surgery for the latest puppy litter and dog food prices are on the rise. ” Times are hard. I borrow to live,” he says.

Sporting a chunky gold chain and several chunky rings, he adds, “I only buy certain types of jewelry. They have their purpose, I can take them home or drop them off. I buy big things that I know I can come to the pawnshop and ask for a lot of money.

About an hour later, Wayne Cheeseman, 36, walks in wearing a huge jeweled ring with a saddle design slung around his neck on a heavy gold chain and sporting several large sovereign rings on his fingers.

Marisa and Wayne in the shop
Marisa Smedley and Wayne Cheeseman regularly borrow from Pickwick in Ashford. Photograph: Martin Godwin/The Guardian

Cheeseman says he bought lots of gold jewellery, as well as a house, after winning £1m on scratch cards in 2018. He uses some of his loot – including necklaces and rings from his partner Marisa – to borrow against once or twice a month to help cover costs. “He’s there if I need him,” he said. “It’s an investment. I don’t trust banks and my credit score isn’t all that.

Cheeseman, who works as a care assistant, says: “I put in a lot of hours but by the time I pay council tax, home insurance, gas and electricity and I can’t see anything. Like everyone else we struggle… Petrol is ridiculous and just feeding the dog costs £52 for a big bag of food whereas last year it was £45.

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He is now selling his house to move somewhere cheaper to cut costs and pay off his debts, including around £2,000 borrowed against gold jewelery in Pickwick. Cheeseman says he likes the system because he always knows what he owes and can pay it back at any time during the seven-month contract without any penalty.

By law, pawnbrokers are not allowed to dispose of a pledge in less than six months and Pickwick gives at least seven months to redeem a loan and another month of warnings before the item is sold. At the end of the contract, the interest can be repaid and the loan renewed, giving more time to repay.

Interest is charged between just under 2% for a large loan, say £10,000 or more, and 10% for a small item. Pawnshops are not allowed to sell for less than market value and if an item sells above estimate, the customer gets the difference between the sale price and what is owed to them.

Finch says, “We don’t want our customers to default, we want them to get a happy result and come back to us. If we have to sell the items, it’s a failed loan.

The customer with the gold chain and cross returns to the pawnshop after taking time to consider her options. She decides to sell because she doesn’t want any more debts of any kind. “I’ve been thinking about it for months,” she says. “That’s what I want to do.”

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