If a gold buyer is paying £12.50 for 1gram of 9 carat gold,how is he making money on it?

Volume..
Either that or reselling pieces after a rework.

Wow. That is a good price. Not paying anything like that in Canada. I tested those waters and found that they would only give me $1.50 a gram.

I love the expression "scrap gold"; when did it become SCRAP !