Other people’s debts

‘A financier is a pawnbroker with imagination,’ claimed Arthur Wing Pinero in his 1893 play The Second Mrs Tanqueray.

‘A financier is a pawnbroker with imagination,’ claimed Arthur Wing Pinero in his 1893 play The Second Mrs Tanqueray. His work may be rarely seen in the West End these days, but his words are enjoying a revival in the City. Earlier this week financiers found the imagination to invest £49 million in the flotation of a modern-day pawnbroker. Where once the Square Mile mantra was to profit from ‘other people’s money’, it is now about profiting from their lack of it.

Debt is a growth sector of the UK stock market, in line with the growth in consumer borrowing. Since 1997 personal debt has more than doubled to almost £1.2 trillion. This has been fuelled not only by the housing market — non-mortgage borrowing has risen 120 per cent to £192 billion, though this is not always the problem that tabloid editors suggest. Although the ratio of debt to disposable income reached an unsustainable-sounding 143 per cent last year, low interest rates and fuller employment keep the debt affordable for most. But the lack of refinancing options is a problem. Mortgage equity withdrawal peaked in 2003 so, for a majority of homeowners, there’s no more money down the back of the sofa. Conventional unsecured loans are also harder to come by, as high street banks protect their bad debt provisions. As a result, 9 million Britons have been left without access to ‘normal banking arrangements’, according to John Nichols, managing director of the National Pawnbrokers Association. For them, as for Bob Hope, it seems ‘a bank is a place that will lend you money if you can prove that you don’t need it’.