From EU standards to the volatility of the pound how will Brexit impact the bike industry?

Bikexit: how will leaving the EU impact on the bicycle business?

Alexander Boris de Pfeffel Johnson may have given his second name to London’s hire bikes (even though it wasn’t he who created the concept), and led the impetus for the installation of the Cycle Superhighways, but it’s his leadership of the Brexit campaign that might have the greatest eventual impact on the bicycle industry. Should the disentanglement from the EU go ahead – and given that there has been no formal actioning of Lisbon Treaty’s Article 50 this is far from certain – there will be many months, perhaps even years, of political and economic turmoil.

If, as many experts predict, the economy tanks there will be stiff challenges ahead for a bicycle industry already in the doldrums internationally.

Looking on the bright side, there’s also the possibility that cycling could do well out of a faltering British economy – with petrol prices expected to rise people will shun cars and hopefully get on bikes instead (BSOs mainly; sales of high-end bikes will stagnate); and manufacturer-exporters, such as Brompton, will prosper from a weaker Sterling.

However, most of the UK cycle industry relies on imports, which will become more expensive in the near future. Any further softening of the domestic currency will hit hard, almost certainly leading to price hikes for consumers. (Prices for 2017 bikes are being worked on right now, and suppliers will factor in the likelihood that volatile markets will settle down, but if they don’t suppliers who gamble incorrectly will be stiffed.)

UK cycle exporters – such as Pashley, Brompton and a few others – may benefit from a sluggish pound, but this could be offset by a slackening in domestic demand. UK auto makers have already predicted that they expect Brexit will reduce their profits by billions of pounds, and cut new-vehicle sales by nearly a million units over the next three years.

Fewer new cars on the road will be a positive for green campaigners, and the recession that could be just ahead will also reduce car travel, another positive for reducing the impact of climate change. However, the likelihood of a government led by Brexit supporters could mean a watering down of action on the environment: Brexit parliamentarians tend to be climate-change sceptics.

Some bicycle campaigners once dreamed that a Boris-led Government would build London-style cycle infrastructure across the country, but even if Johnson had of reached the job he has been striving for all his adult life the creation of a bike-lane utopia would have been unlikely. Johnson would have been in charge of a right-wing libertarian government that believes fervantly in "localism", and cutting public spending on transport (on anything other than roads and vanity projects such as HS2) was always very much on the cards. Anyway, Local Enterprise Partnerships – LEPs – which are now largely in charge of transport spending, have shown little interest in providing for cycling.

Not that the installation of cycling infrastriucture is going to be a priority for any post-Brexit government. In fact, the only priority will be Brexit – parliament will be tied up with Brexit-related legislation for some years, and little else will get decided upon. Brexitalia will dominate the political agenda for a minimum of two years, and could even take most of the political oxygen for the next five or even ten years (trade negotiations take many years of work). 

In a Brexit-dominated future it’s likely that it’ll be harder to move British goods and people through Europe – this will make it more difficult for UK exhibitors to attend, say, Eurobike. There would be borders to cross, and duties to pay. Bit of a nightmare, really.

The markets believe that the travel and leisure sectors will suffer mightily from Brexit. Cycle holiday companies which currently take FUK clients to overseas destinations will be adversely impacted. Expect at least some to go to the wall, and quite quickly (there’s nothing like a run on the pound to quell interest in a holiday abroad). Airline stocks have been trading poorly since Brexit (Easyjet’s shares fell more than 18 percent after the airline said leaving the EU would contribute to a fall in revenues), the RAC and the AA have warned that the 31-year low on sterling will mean petrol prices are likely to rise, and the Halfords share price fell through the floor, dropping from over 400 pence per share to 311 soon after Brexit. It may be short-term volatility but if it continues it may force the company to rethink its expansion plans.

Northern Ireland based Chain Reaction Cycles may be able to increase its overseas sales due to the weaker pound, but geo-politics could hamper the business going forwards. Brexit could lead to major problems for Irish businesses of all stripes, with the possibility of the closure of the border between the Republic of Ireland and Northern Ireland, and, shudder, perhaps even a return to the “Troubles” of the 1970s and 1980s

While Brompton, Pashley and other well-known marques may be safe in Little England, other British suppliers might not be. Thanks to Brexit the US business intelligence firm IBISWorld is recommending that US companies should stop buying from UK companies. In a press statement the market information firm suggested that "buyers looking to maintain continuity in their supply chains should consider alternative sources for any British products." This was because Brit suppliers will likely suffer "supply disruptions" and "price volatility".

One of the likely winners from the vote to leave the EU is the Bicycle Association. Now more than ever suppliers will need to cleave to an industry organisation, pushing for legislative help from a newly energised parliament (yeah, right) and eager to have a representative body explain the new *British* red tape on business that will be waiting in the wings. 

According to a pre-referendum poll conducted by the Association of Cycle Traders, bike shops were in favour of Brexit, with 62 percent wishing to leave the EU. Whether this support lasts is a moot point – the many economic and social downsides to Brexit are now becoming plain to see, with Project Fear morphing into Project Reality, and it can’t have escaped the attention of even the most ardent Leavers that the silky promises of the Brexit cheer-leaders – such as funding for the NHS and a cap on immigration – have been ditched.

We may have to wait many years before everything settles down, and we’ve managed to negotiate hundreds of new trading agreements (maybe we will be able to remove anti-dumping tariffs on Chinese-made bikes?), but that’s many years in which many businesses will have suffered dreadfully.

With overt racism on the rise and the social fabric of the Former United Kingdom (FUK) unravelling the plight of a relatively small industry selling fewer products is small beer but, as this is a bicycle trade paper, we have to point out the likely impact of Brexit on our industry, and like for many other industries, it’s a grim one. With the industry already down by at least 10 percent year on year (and some bike shops and suppliers are down by much more than this) any further reduction in demand caused by a Brexit-induced slow-down will be tough to ride out. 

In other news...

Construction work to begin soon on new cycle route between Finsbury Park and Holloway Road

Transport for London (TfL) has confirmed that construction work will begin on a new cycle route between …