(last updated July 2019)
What has been happening in the pawnbroking sector?
The pawnbroking industry has expanded steadily in the UK since the early 1990s. Recent years have seen an increase in the use of pawnbroking services by customers from all walks of life. In the past, the industry suffered from bad publicity and a poor public image. However, the National Pawnbrokers Association (NPA) and the industry as a whole have worked hard to get the public to see pawnbroking in a more positive light, as a regulated and professional money services industry with high standards of customer service. The image of the industry has improved and it is now viewed as a legitimate money service business (MSB) and a genuine alternative to the banking services offered on the High Street.
There are a number of reasons behind the increase in demand for pawnbroking services in recent years. Getting a loan from a pawnbroker is quick and convenient - there are no lengthy forms to fill in and no waiting period for approval. People who are paid monthly can get a short term loan to tide them over until pay-day if they need extra cash. Using a pawnbroker is also an attractive option for people who can't get credit with a bank or building society or who don't have a bank account. It's estimated that around eight million people in the UK are in this position, with some of them being economic migrants who have come to work in the UK from places like Eastern Europe. The vote in 2016 to leave the EU and the government's pledge to reduce immigration are likely to have an impact on this figure.
Demand for pawnbrokers was boosted by the government's crackdown on unscrupulous payday lenders that charge very high levels of interest. Many of these stopped trading when the authorities started investigating their operating practices and introduced an interest rate cap in January 2015. In 2018 the collapse into administration of Wonga (one of the biggest payday lenders) led to tougher rules and price caps for payday lenders, further hitting their profits and undermining their business model. Of course, an increase in demand for pawnbroking services and a general initiative by the 'sub-prime' money services industry to improve its image have seen the growth of several large players, including the national Cash Generator franchise. While the pressure on payday lenders may result in a reduction in competition from that quarter, the market remains crowded and very competitive.
One of the big challenges now facing the pawnbroking industry is to continue to promote itself as a legitimate money lending service, so that using a pawnbroker becomes an attractive option for an even wider range of customers. The recent 'credit crunch' helped the sector to expand its customer base as more and more professionals turned to pawnbrokers to realise the value of jewellery and other valuables - often to pay things like school fees. Small businesses also started to use pawnbrokers as a short term source of finance instead of their bank. The economy improved in 2013 and the recovery continued during 2014 and into the first half of 2015 before slowing towards the end of the year. The Brexit vote in June 2016 led to economic uncertainty and a loss of confidence in the economy amongst both consumers and businesses. The pound fell after the vote, increasing inflation and reducing consumers' spending power. The economy continued to perform weakly with low growth in 2017 and into 2018. Little change is forecast for the foreseeable future. These conditions are likely to favour the pawnbroking industry as demand for small, short term cash loans is likely to remain strong as people struggle to make ends meet.
The industry also benefited during the early 2010s from the surge in gold prices. This encouraged customers to sell their gold jewellery for cash - the gold was then sold to bullion houses for its scrap value. However, the price of gold subsequently fell and there was a sharp fall in the number of customers looking to sell gold items. The price rose again during 2016 and 2017, helping to boost profits.
Keeping up to date with developments
Joining a trade association is an excellent way of keeping up to date with developments in your industry. The National Pawnbrokers Association (NPA) represents the interests of pawnbrokers in the UK. The NPA has a code of conduct for members and aims to raise the public profile of high quality, professional pawnbroking. They also publish a quarterly journal, The Pawnbroker. You can contact the NPA through their website.
The National Association of Jewellers (NAJ) represents the interests of jewellery retailers in the UK. NAJ members receive The Jeweller seven times a year. Visit their website to find out more.
It is also a good idea to keep up to date with gold prices and trends in the jewellery market. This will help you to make sure that your valuations of pawns are as accurate as possible, and also to take advantage of high gold prices by selling unredeemed gold items for scrap at the right time. Gold prices are published in many daily newspapers and are widely available online, for example on the World Gold Council website.
You'll be able to find out a lot of useful information by visiting a trade show - for example an event for the jewellery industry or an annual conference or convention for pawnbrokers. You'll be able to meet manufacturers, suppliers and importers and keep up to date with trends in the pawnbroking and jewellery sectors. The Exhibitions website has more information on forthcoming trade shows and exhibitions.