Apex insight has just published a new edition of its report on Pawnbrokers and high street loan stores.
The market consists of high-street shops which offer combinations of pawnbroking and other lending services such as payday and term loans, purchase of second-hand goods including gold jewellery, electronics and other items. Most of the main chains have their roots in one area but there has been convergence with most now offering a mix of these services.
Pawn loans are typically for up to two-thirds of the value of a pledged item. The principal plus fees and interest is repayable on or before the end of the agreement, usually six months later. If the loan is not repaid, the item is forfeit and will be sold to repay the loan. Around 30% of pledges are not redeemed.
While press reports often focus on ‘posh pawn’ involving middle class customers with assets but not cash, interviews suggest it is a small part of the pawnbroking market and research shows that most loans are for either day-to-day spending or household bills.
Store location is very important as most people do not travel far to visit a pawnbroker.
The market grew from 2009-13 to reach well over 2000 stores across the UK. Market growth was driven by:
– A significant increase in the number of customers in the sub-prime segments as a result of the economic downturn,
– Significant reduction in the appetite of the mainstream banks for serving such customers,
– A sustained rise in the gold price in the decade leading up to 2011-12,
– The more favourable regulatory environment for high-cost credit providers in the UK than elsewhere in Western Europe and North America,
– The increase in the supply of suitable sites resulting from the decline of the high street as a mainstream shopping destination.
The pawnbroking market has become relatively concentrated as a result of seven large chains having rolled out their store networks in recent years. The chains include the following:
– CNG Holdings, which operates both the Cheque Centres and Cash Generator high street chains as well as The Loan Store payday loans website, and which has recently closured some loss-making stores.
– Albemarle and Bond which was recently acquired by Promethean Investments after the weakening market impacted its ability to service its debt.
– H&T, the UK’s largest traditional pawnbroking chain, which is listed on AIM.
While traditional pawnbroking activity appears set to continue to grow at a steady rate, with limited regulatory risk, other services offered by pawnbrokers and loan shops have not performed so well recently.
– In the last two years, the reversal in the gold price has led to a significant reduction in the levels of gold buying across the pawnbroking market.
– Payday lending has also come under pressure following the introduction of the loan cap by the FCA.
The report, Pawnbrokers & High-Street Loan Stores: UK Market Profile and Forecast 2015, has a free to view summary, along with a full table of contents.