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Issue #9 January 31, 2013 Jan 31, 2013 Jan 31
Issue #1 October 11, 2012 Oct 11, 2012 Oct 11
From Issue #11 February 28, 2013

Aladdin’s New Caves

Pawnbrokers, back in fashion in the UK, have taken a decided turn away from seedy.

By Chris Stokel-Walker Twitter icon 

At the crossroads in Gateshead where West Street intersects Bensham Road and Jackson Street, a bus terminal sits on one corner. It’s a newish building of sleek glass curves. Facing it is St. Joseph’s Roman Catholic Church. Built 154 years ago, it is the oldest Catholic church in town, and the nativity scene still standing outside as January rolls into February hints that its congregation has fallen prey to time as well.

Opposite them, on either side of Jackson Street, which runs onto the semi-abandoned high street, are two stores facing out onto each other. Both are a new kind of pawnbroker. Slick, smart, and brightly lit, they are a world away from the stereotype of dark Aladdin’s caves run by skeezy proprietors who would sell your soul as well as your possessions, if they could get the right price.

Bust, boom, and bust again

Gateshead, a town of 80,000 in England’s northeast, is known best for its ill-conceived 1960s concrete car park which featured heavily in the Michael Caine film Get Carter (though the eyesore has since made way for a new retail development that might help boost the stagnant local economy).1

By and large Gateshead is poor. The average resident dies eight years earlier than a similar person in healthier parts of the country, and at 65% the employment rate in the town is viewed as worryingly low. The chronicler J.B. Priestley wrote in 1934 that Gateshead’s streets and buildings were designed “by an enemy of the human race,” and one person was denied entry into the UK by the border service because her claim of entering the country to visit Gateshead was “not credible.” Outside investment is helping matters, but the fact remains that the town’s high street and surrounding areas are run down, dilapidated, and depressing.

It’s almost possible to chart the diametrically opposed fortunes of pawnbrokers and the average Joe on the street. In 1957 the full flourish of a post-war boom caused British prime minister Harold Macmillan to say that “most of our people have never had it so good” in a speech given in the county town of Bedford.2 The pawnbroking industry was sluggish and struggling then.

It rebounded during the bleak times of the 1970s, but the following decade — epitomized by wide-eyed city boys following to the hilt Margaret Thatcher’s maxims of “there’s no such thing as society, there are individual men and women” and “pennies don’t fall from heaven, they have to be earned here on earth” — pawnbroking all but died out.3 Fewer than 50 individual pawnbrokers struggled on through the boom decade. Before the latest recession, the industry was a third of the size it is today (£296 million [$577 million] in 2007). But then the economy tanked and pawnbrokers, by now subsumed into big chains, thrived.

H&T Pawnbrokers calls itself the UK’s leading pawnbroker, with 181 premises across the country as of 2013. It opened 21 new stores from March 2012 to the year’s end. Across the street in Gateshead from H&T is Cash Converters, a worldwide behemoth with more than 700 global outlets. It began in 1984 in Perth, Australia, and entered the UK market in 1991, where it now has 223 stores. Both shops are members of the National Pawnbrokers Association, an industry body set up to ensure best practices, but Cash Converters UK chief executive David Patrick prefers not to be associated with the pawnbroking trade. “We consider ourselves a retailer,” he tells me.

Pawnbrokers were once said to be as common as pubs in the United Kingdom. The Great British high street has not quite spawned enough shops to make that statement true again, but it is getting close. Last year remained bad for British retail, with 194 bankruptcy filings from shops big and small, up 6% from the previous year. Compared to a 9% drop in bankruptcies across the whole of the country in the same time period, it shows just how badly the retail sector was affected. Pawnbrokers thrive during recessions, and today’s torpor is one of the worst the world has seen.

High-street shoppers just don’t have as much money anymore. But while many shops may be struggling, pawnbrokers are thriving. It was an industry worth £851 million ($1.38 billion) in 2012, and has grown 10%–15% each of the last five years. Currently there are more than 2,000 pawnbrokers on high streets up and down the country, with four added each week last year, including in Gateshead.4

Fruit machines and diamond rings

Many people in Gateshead live on credit, and when the banks collapsed the credit lines ran out. Unable to meet the minimum standard for bank loans, people pawn items for the money to make it through the week. So they come to the corner of Jackson and West Street and give up their most precious possessions. They hope to earn enough to buy them back at a later date. “Short-term lending is a way of life at the minute,” explains Cash Converters’ Patrick. “We get people out of a short-term fix.”

It’s that role — as a caring, compassionate lender stepping in when big banks won’t — that the pawnbroking industry is keen to present, and it’s in that role that H&T Pawnbrokers and Cash Converters prove so popular in Gateshead, where gross domestic household income is 81.6% of the national average.

The two stores are quite different. H&T deals solely in jewelry. The front of the store is lined with 9-carat diamond rings, on sale from £27 ($43) to £342 ($543), while the less attractive side of the business — the cash desks where people pawn their items — is hidden at the back of the shop. Cash Converters specializes in electronics and media (CDs, DVDs, and video games) but takes anything and everything. Alongside the rows of jewel cases, PlayStation 3 consoles, and Xboxes are more unusual items. A fruit (slot) machine, probably salvaged from a pub, sits on the shop floor, and is yours for £350 ($555). A glass case holds a collection of china, some fine, some less so. A label nearby says that all ornaments are half off.

Big-ticket goods such as flat-screen TVs are countered by a roaring trade in secondhand DVDs and video games, some of which sell for £1 ($1.60), so that the average sale transaction in the Gateshead store comes in at only about £25 ($40). There are thousands of those sales carried out each week in the shop, though, which turns into real revenue when factoring in Cash Converters’ margin of 20% to 45%.

Christmas presents and family heirlooms

Each item has a story, and it can be hard not to think how you’re benefiting from someone else’s ill fortune when you wander the aisles.

The worst time is immediately after Christmas, knowing that some of the stock was a child’s new present a week before, but “we sympathize,” asserts David Thomson, the owner of this store and several others in northeast England and in Scotland, talking to me in the second-floor stock room of the Gateshead branch of Cash Converters on a wet and windy Tuesday in January.5 Golf clubs, four PlayStations, and umpteen TV sets sit behind us; kids’ toys (including a three-foot-long Thomas the Tank Engine) line the shelves behind Thomson’s left shoulder. “When people are down they don’t need another kick.”

About 80% of people who enter into the shop’s buyback scheme — which has an average worth of £50 ($76) — end up paying for their goods back, which carries a flat fee. (The company’s pawnbroking services charge 5% or 6% a month above the loan amount, which compounds to 80% to 100% per year.) Though the company doesn’t like to advertise it, the repayment terms can be flexible dependent on circumstances. “We want to be there to help them when they need it; to be a face to talk to,” Thomson goes on. The staff is on first-name terms with many of their customers.

One of them is 35-year-old Micky Bourn. Over drinks in the pub down the road from the two pawnbrokers, he tells me just how close the staff-customer connection is.6 Bourn uses Cash Converters regularly. “They told me I’ve got more pages on their computer than anyone else,” he says in his broad Geordie burr. “There are about 30 pages of what I’ve bought and sold them.” He can’t even begin to fathom how much he’s spent, or how much he’s made, but thinks it must be a lot. You get the feeling it is. He made his 100th buyback some time ago, and the staff gave him a free DVD.

He regularly visits the shop to pick up DVDs for himself, his 15-year-old daughter, and her 6-year-old brother. “You can hire a DVD for £2.50 from somewhere, or you can buy 10 for £5 and sell them back when you’re done for £3. It’s well worth it,” he explains. Other purchases include a blue radio-controlled Subaru car, which he bought for his son for £30 ($47), and a snow sled for his niece, haggled down to £10 ($16) from £12 ($19). Both children loved the purchases.

Bourn relies on Cash Converters to cash checks and give him much-needed cash flow. He hasn’t worked since sustaining a double scaphoid fracture in his wrists after a fall. As he points out, nowadays “you can’t get loans from the bank when you can’t work.” Even when he returns to work after an operation next month that will fuse bone from his hip into his wrist, he’ll still visit the shop, he says. After all, “Even when I’m not buying things I go in just to speak to the staff.”

Fraser Elliott, a 23-year-old student, regularly visits Cash Converters and other shops like it on the lookout for video games and DVDs. “Big chains like HMV and Game don’t have much to offer outside of specific, obscure items that aren’t likely to be traded in elsewhere, and they’re gone or going,” he points out. (Both chains are among the many bankruptcy filings last year.) “There aren’t many places left to get these things immediately. Sometimes I don’t want to wait five days for Amazon to deliver me something.”

These days people are more likely to sell back items for a little money rather than scrap them or leave them collecting dust on shelves. That ugly pair of earrings given to you three exes back could, traded in at H&T, buy you a pretty bracelet or go toward an engagement ring. The parlous state of the economy and the worry that the recession has firmly bedded in for the long run have made people aware that there is money to be made from everyday items that have fallen out of use. And rather than be scared away when they enter pawnbrokers, people today are pleasantly surprised.

“I’ve heard the historical accounts of pawnbrokers, the horror tales,” says Elliott. “But that’s not what these things are. They’re just shops.” And they’re becoming more common on Gateshead’s high street.

Photos by the author.

  1. The £150 million development, led by Spenhill, an offshoot of UK-based supermarket Tesco, will include student accommodations, a cinema, and 160,000 square feet of retail space. 120,000 of those square feet will be devoted to a giant Tesco Extra big-box supermarket, which has left local traders lukewarm about the investment. 

  2. The quotation, which has now entered the popular public consciousness, is often incorrectly remembered as the more direct “you’ve never had it so good.” 

  3. Similarly, the second half of Thatcher’s “pennies” maxim is often lopped off when quoted to fit the commonplace narrative of her as destroyer of all things good. 

  4. Google Street View doesn’t show Cash Converters, as the last drive-through was in 2010. A Google+ entry for the branch is up to date. 

  5. Thomson, like many people nowadays, has a keen eye for a bargain. As we talk he points out that he bought the chunky silver watch he’s wearing from one of his own stores (kept when a customer defaulted on a buyback). 

  6. We’re drinking Cokes, but during our conversation I notice that Micky’s wearing an “I’m more think than you drunk I am” T-shirt underneath his blue-and-white tracksuit. 

Chris Stokel-Walker is a UK-based freelance writer for the Economist, the Sunday Times, the BBC, and BuzzFeed.

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