Where the slump has a silver lining

Pawnbrokers are profiting as a growing number of people turn to old-fashioned ways of raising cash by pledging their valuables.

By Candice Krieger, March 5, 2009
Pawn star: TSG’s Andrew Lazarus boasts record-breaking business

Pawn star: TSG’s Andrew Lazarus boasts record-breaking business

Business has never been so good for Andrew Lazarus. Co-director of TGS Pawnbrokers, his company is boasting a record-breaking start to the year as cash-strapped people trade in their goods in search of a quick buck.

“We really are benefiting from the recession,” says Mr Lazarus, 41. “As much as it can be an embarrassment to say so sometimes, we are busier than we ever have been.

“Recently, it’s gone absolutely crazy. We smashed all records for January and were 75 per cent busier than the same period the previous year.

He adds: “Our funds are stretched to the limits. The banks aren’t lending, so people are coming to us.”

Mr Lazarus founded TSG with jeweller Spencer Dryer, 42, as a jewellery store in 1989. The duo, who met at school, decided to add a pawnbroking arm — one of the best decisions they ever made. It now constitutes around 80 per cent of the business and there are plans to open two more outlets in north London on the back of the recent upturn.

Customers take their valuables, usually diamonds, gold or watches, into one of TSG’s eight London shops. The company offers up to two thirds of an item’s second-hand value for up to seven months. It charges interest of between two to seven per cent a month, equivalent to annual rates of around 130 per cent.

Mr Lazarus, who lives in Elstree, Hertfordshire, says the recession is breeding a new type of customer. “The whole market face has changed.

“Historically, it’s been a business aimed at under-privileged people and single mothers, but over the past couple of years, the client base has changed considerably.”

Nowadays, those coming to him include a growing number of City boys and “well-to-do middle classes that are under financial strain”.

He believes that the negative association with pawnbroking has now disappeared. “It used to have this sort of Dickensian image of someone walking into a dark dingy shop, handing over their mink coat and walking out with money. It’s changed now.

It’s commonplace on every high street.”

The company has a sizable Jewish clientele, particularly in the group’s Burnt Oak branch. Other units include Borehamwood, Kilburn, Willesden, Holloway; and in West London, Hayes, Hounslow and Acton.

“The quality of goods that we are seeing now is a lot better than we have ever seen.

“In our Burnt Oak shop, we are seeing higher value goods from a wealthier clientele, in addition to keeping the core business from unmarried mothers. It’s a good time for us.” As it is for the industry in general. Leading pawnbroker Albemarle & Bond recently unveiled a 19 per cent rise in half-year profit to £6.2 million and has seen its loan book grow 18 per cent to £27 million.

Robert Cohen of north London jewellers D & M Cohen, which charges an average six per cent interest, says: “We have definitely seen an increase in our pawnbroking business. People are borrowing money for bills or to pay their staff and, with gold prices rising, they can expect to get more for their valuables. We are also seeing a rise in local clients, who perhaps hadn’t come to us before. People need cash for short term means such as school fees.”

Mr Lazarus predicts business will get even busier over the next few months. “The banks aren’t really lending money at the moment, and they are certainly not lending it out to the kind of people we are dealing with.

“We are dealing with people who need short-term cash, whether it be to fund their business or their lifestyle, but the banks are looking for sure-fire bets.”

TSG’s average lend is around £300, although he acknowledges the company has been doing higher volumes of late. “The average lend in our Burnt Oak and Borehamwood shops is probably around £700 now, mainly on Rolex watches from City boys.” He recalls lending £5,000 to a local Jewish boy for his Rolex in Borehamwood.

According to Mr Lazarus, up to 80 per cent of business is now from professionals, compared with 20 per cent a year ago. He attributes this partly to the launch of the online service, which allows customers who prefer not to enter branches to post their valuables. TGS only accepts items it can fit in its safe and has had to turn down “hundreds of cars and paintings” — a far cry from the company’s early years.

“When we first started TSG, the banks were really reluctant to lend us money,” he recalls. “They didn’t like the idea of pawnbrokers at all.” For the first three years, Mr Lazarus and Mr Dryer would withdraw money on their credit cards at 1.5 per cent and lend it to customers at seven per cent. “That’s how we initially funded our business, but as the properties grew, we found it easier to get money.”

Does he worry how his business will fare after the recession? “There’s always a market for pawnbroking as even in good times, there are people who don’t have access to funds. 25 per cent of people in this country don’t have a bank account.”

Last updated: 2:04pm, March 11 2009