Pawnbroking demand hits ‘record levels’ in UK

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Demand for pawnbroking has hit “record levels” in Britain because of high inflation and a shortage of alternatives, according to the boss of the UK’s biggest operator.

H&T Group said pre-tax profit rose 31 per cent to £8.8mn in the first half of the year compared with 2022, while its “pledge book” — loans against customer assets such as jewellery and watches — was worth £114.6mn in June, up from £85.1mn in the same month last year.

Chief executive Chris Gillespie said demand had reached “record levels” partly because of a lack of alternatives. 

“Supply of small-sum credit is constrained now in a way it hasn’t been for many years,” he said. “If you only want and need to borrow £200, your options are very limited.”

He added that “to a degree” the rise in demand for pawnbroking was also because of the high cost of living.

The high-cost credit market, which grew out of the financial crisis to serve customers who were not eligible for bank loans, has shrunk dramatically in recent years because of regulatory action.

According to data from the Financial Conduct Authority, the number of high-cost credit providers fell from 106 in the third quarter of 2016 to 39 in the same period last year. 

Payday lender Wonga collapsed in 2018, while guarantor loan provider Amigo announced it was winding down in March. Provident Financial shuttered its 141-year-old doorstep lending business in 2021, and was renamed Vanquis Banking Group in January.

Pawnbroker Ramsdens has also benefited from the loss of competition. The UK-listed company said pre-tax profit in the six months to March rose 68 per cent to £3.7mn on a 33 per cent rise in revenue.

Its loan book rose 29 per cent to £9.7mn over the same period, while net assets increased by £5.4mn to £43mn.

“There is a lack of small-sum, short-term credit,” said chief executive Peter Kenyon. “Home collected credit has been decimated, payday lending has been decimated — so the customer has fewer options.”

However, he also said the business saw the effects of rising prices.

“It’s clear that bills are higher, because we see that with our median loan increasing from £150 to £170.” 

Pawnbrokers, which are licensed by the Financial Conduct Authority, offer interest rates that are generally lower than payday lenders but higher than bank loans.

Ramsdens’ representative annual percentage rate is 154.08 per cent for a primary six-month loan, while H&T’s maximum APR is 155.8 per cent for a six-month contract. Prior to its collapse, payday lender Wonga generated controversy for offering loans at more than 5,000 per cent APR.

The Money and Pensions Service, the government-sponsored money and pensions adviser, warns that borrowing money from a pawnbroker is relatively expensive and might involve losing a valued possession.

Kenyon said interest rates across the sector had not increased, “despite our own backdrop of increased costs [and] increased wages”.

Gillespie said that despite rising demand, pawnbroking was often seen as a slightly antiquated practice. 

“People in the UK aren’t used to using pawnbrokers, because they haven’t needed to for two generations.

“If you go to eastern Europe and the Pacific Rim [pawnbroking is] what people do,” he added. “In the UK it has a slightly old-fashioned image, which is a shame.”