Pawn again: The rebirth of the high-street credit merchants

Room in Mayfair, two men shake hands across a sleek wooden desk. Casually but expensively dressed, one gets up and turns toward the glass security door that's de rigueur in this enclave of central London. He smiles as he leaves: "Pleasure doing business. I'll recommend you."

Later that day, on a scruffy suburban street in east London, an elderly couple station themselves on plastic chairs under the yellow glare of strip lights in what looks like a jewellery shop. They chat to staff, enjoying the opportunity to put down their supermarket carrier bags, as the woman carefully counts out a few £10 notes from her purse.

The mise-en-scène may be different, but the occasion for both events is a transaction stretching back millennia. Now, after a half-century hiatus, pawnbroking in Britain, from high-end to high street, is experiencing a resurgence.

Whether it takes place across a chic desk or a reinforced glass screen, for £5 or for £50,000, the deal is essentially the same. Briefly, it's a loan secured fully against a person's property. No credit checks, no black marks if you default. The pawnbroker will lend a percentage (up to 40 per cent) of an item's market value and after a short period, between one and six months, the client can purchase it back for the amount of the loan plus interest. If the loan is neither paid nor extended, the item is sold to recoup the loan.

From fine art and vintage Swiss watches to broken bits of modest, 9ct gold jewellery, there are few valuables that can't be pawned and, it now seems, a growing number of us are ready to do so. The evidence is there on our much-maligned local shopping parades. They might no longer play host to fishmongers or, indeed, a branch of your bank, but you will likely spot the traditional trio of golden balls that became the pawnbroker's symbol in 15th-century Italy, or the signage of one of the UK's major pawnbroking chains. In swankier postcodes, you'll have to look a little harder; here they outwardly resemble private banks or art showrooms.

In the business pages, the names of the latter appear under some impressive headlines. Last month, Harvey and Thompson, which has 160 shops, announced double-digit year-on-year growth. The Albemarle and Bond group plans to open 25 more stores this year. Quite a turnaround for an industry that, 20 years ago, was dead on its feet.

While at the beginning of the 20th century the pawnbroker was a staple of Britain's working-class areas, by the 1970s fewer than 50 remained. Now the figure exceeds 1,000, taking in anonymous chains, lively family businesses and plush high-rollers. As Dickens observed in 1835, "There are grades in pawning as in everything else, and distinctions must be observed even in poverty."

It's tempting to theorise a direct, dramatic recessionary link – and from there imagine a proliferation of hard-luck stories as a new underclass or squeezed middle lose treasured possessions in a desperate bid to make ends meet. But while the downturn has contributed to the industry, it was on the up long before the collapse of the economy, according to Des Milligan, chief executive of the k National Pawnbrokers Association (NPA): "It's been steady growth since the 1980s, when main chains invested a huge amount of money opening lots of shops in good sites and making them look nice – well-lit, modern. Even when things were booming, there was an underclass who found it incredibly difficult to get credit."

It's only very recently that the customer demographics have begun to shift: "A typical pawnbroking customer is under 40, female and working part-time or on a low income. But in the past nine months, our members tell us that they are getting a lot more affluent, middle-class people.

"These new customers could once have relied on the banks to refinance them for a new car, say. Now the banks are saying no. Small businesses, too, are using pawnbrokers to pay for stock or wages until a payment comes in."

Beyond the standardised new façades, pawnbrokers have worked hard to overhaul a shady image. In 2010, the NPA commissioned an industry study by Bristol University Personal Finance Research, which found that 80 per cent of items were redeemed. And, Milligan explains, pawnbrokers are happier about that than anyone, since it's the interest, not sales, they rely on.

And what of the interest rates on these loans, whose average APR exceeds 90 per cent? "The loans are for less than a year, so looking at the APR is like being told a hotel's rates are 30 grand a year," Milligan counters. "We prefer the system our customers ask for, which is: 'How much will this cost a month?'" The average interest rate on a six-month loan of £1,000 is 8 per cent per month – meaning to borrow that amount for the full six-month term, the interest would be £480. However, the average time a loan is outstanding is three months, and would be redeemed at £1,240.

Perhaps the biggest rehabilitation of pawnbrokers' image has occurred by favourable comparison. Payday loans with APRs rocketing into the thousands make pawn rates look fantastic. Loan sharks all the more so. Significant, too, may be hostility toward the mainstream finance industry. The banks are the villains in the credit saga now, while the pawnshop, thanks to the physical nature of the transaction, retains a beguiling degree of localism and personality: in the branch of one big chain that I visit, cups of tea are made for customers and conversations have an easy intimacy.

Margaret, 62, is a regular at Albemarle Bond. "I've been coming here for more than 10 years and I'd keep coming in even if I won the Lottery," she says. "They're like family to me. They always help me work out my money. I don't have credit cards any more – it's too difficult if you miss a payment. Here I can come in and pay the interest when I want. Obviously, I wish I didn't have so much of my jewellery in here, but what else do you do when you need money quickly?"

Not surprisingly, the mood is buoyant across the pawnbroking industry, reports Milligan, and the feeling is that it could expand to at least twice its size. But if you're thinking about a change of career on this basis, be warned: it takes an awful lot of capital to start a pawnshop and, just like the rest of us, they're having trouble getting credit from banks.

Nathan Finch

Finch, 40, owns Pickwick Pawnbrokers, which has six branches in south London and Kent. With more than 20 years in the business, he has also served as secretary general of the National Pawnbrokers Association

"People have a misconception that if something is worth £500, a pawnbroker will offer only £100. That is not the case, because as a pawnbroker you are in the business of lending money. Banks look for reasons not to lend; pawnbrokers look for reasons to lend – so we'll lend up to 50 per cent of value, more if we know the customer. Most pawnbrokers charge similar interest and lend similar sums, so we compete mainly by building relationships.

"The service is constructed with an intention to get the item back to the customer. First off, that allows repeat business. And second, by law we aren't allowed to make more money out of reselling the item than we would if the customer redeemed it.

"A pawn loan is the right product for the right circumstance. If you want to borrow a large sum for a long time, you're not best off in a pawnbrokers. But if it's a unique short-term, small loan, you can't go to a bank, because to them it's not worth the paperwork."

pickwickpawnbrokers.co.uk

Samantha Lilley

Lilley, 39, is head of valuations at Borro, a personal asset lender established in 2008 that serves the whole of the UK. A fellow of the Gemmological Association and a chartered surveyor, she previously worked at auction houses including Bonhams and Christie's

"Our form of lending is based on the pawnbroker model but where they look at small-revenue items, we look at fine art, antiques, cars, boats, planes – anything that has a commercial value.

"Our clientele ranges from housewives to small businesses to high-earning professionals.

"Predominantly, we see watches and jewellery. But we also see an awful lot of art, especially contemporary British – things that people have been collecting over the past 15 years: Banksy, Jack Vettriano, Damien Hirst. We've had Picassos, sculptures by Henry Moore. We made our first £1m loan last year against a fine-art collection.

"We lend more than a pawnbroker because we have the expertise to value more accurately against market trends and minimise risk. I don't know anywhere else you can go and get as much money as we can lend in a matter of hours.

"Clients are able to accept the contract online and monitor their loan and the interest online, too. You can't avoid the fact that a movement of physical assets needs to happen, but we've perfected the logistics.

"We have a network of specialists around the UK or we'll travel to the client. The barrier when you start something like this is trust. But once people realise that we are fully qualified and that we'll handle their valuables correctly, they are happy."

borro.com

David Sonnenthal

Sonnenthal, 34, worked in antique jewellery retail before setting up New Bond Street Pawnbrokers in 2000

"January is always busy. We're high-end but everyone needs cash after Christmas. Our clientele is very mixed, though it's businessmen, mainly, who need cash for deals. Maybe they've maxed their credit card or have to pay for something for their kids. We don't ask – that's why they come here.

"Our minimum loan is £1,000, which means an item worth £2,000 to £2,500. A Swiss watch is the most common – Rolex, Patek Philippe – and we see a lot of diamonds, lots of Vertu mobile phones, too, the gold-plated ones. Women always bring those in but we don't lend much on them as we don't want them. But if we can value it, you can pawn it.

"We get loads of interesting stuff. One guy who collects Titanic memorabilia has pawned a lot with us; another who collects antique money-boxes uses us to pay for his next investment.

"We've done a few super-high-end handbags – crocodile-skin Hermès bags are worth 40 grand. The problem is that the fakes are so clever. Watches can be difficult, too. We've been done over a few times, but we've learnt a lot and we're insured for that anyway.

"Our first three years, establishing ourselves were quiet. It would have been easy to do £100 deals, but we stuck with it.

"There's definitely still a stigma to pawnbroking. The BBC begged us to do a documentary but it would finish us. We're all about privacy. They'd be bored here anyway; it's big loans so we only get about four customers a day."

newbondstreetpawnbrokers.com

Heather stick

Stick, 52, is the manager of Albemarle Bond's Bedminster branch in Bristol. She joined the company in 1996

"We think of ourselves as a bank combined with a jeweller. People might come to us because they can't get credit from a bank, but I don't think most of them feel it's worth bothering to try.

"Banks aren't what they used to be – you're just a number. Here, we don't just know people's names, we know who likes to be called by their first name and who doesn't. You'll hear people on their mobile saying, 'I'm just in my bank,' not even 'the' bank, but 'my' bank. And it's not because they're embarrassed – that's how they think of us.

"Women tend to bring in things they've inherited or been given as presents, and the guys come in with engagement rings after a split. We have a few regulars who are gamblers who'll come in wanting a few hundred quickly because they've had a tip on the horses.

"A few young families come in because it's one of the kids' birthdays and they need some cash. Then it's a bit tight for them next month, but they make it work.

" I think our clients are good money managers; it's just they haven't got much money to manage.

"There are regional differences – in London you get the higher-carat gold, because you've got wealthier people from all over the world. Birmingham and Manchester get a lot of Asian gold, which is purer – 21ct or 22ct – and the prices for that are crazy – more than £1,000 an ounce."

albemarlebond.co.uk