Little Britain: Brexit, What will it mean for the Cycle Industry?
Companies react to Britain leaving the EU
We'd rather to be talking about riding bikes, but No matter what your political leanings the decision last week by the majority of the British population (who voted) to leave the European Union will affect us all.
We know that the pound dropped to its lowest rate for 31 years on Monday (June 27th) and that the country is in a mess politically, but what does all of this mean for the cycle industry, both here and in Europe?
We contacted a varied group of people from the cycling industry (manufacturers, distributors, etc.) to hear their views on the subject by asking three questions. Many wanted to stay silent due to the uncertainty and speed in which this whole thing is moving, and some preferred to put out a statement rather than focus on the individual questions (at the bottom of this feature), but others were happy to give their opinions. Of course for everyone this is all new and changing constantly, and the vote means different things to different people. We also get the feeling that everyone questioned here played their cards very close to their chests. These are all considered answers and not ‘down the pub’ rants.
The one thing that does seem to be coming from all of this is that there will be increased prices and uncertainty, and that means that consumer spending will be hit. And that usually means that people will spend less on bikes and ‘stuff’ as they worry about the price of food, petrol, electricity, etc.
Dirt: How do you think the vote to leave the EU will affect your business in both the short and long term? Have you already seen changes?
“The morning after the vote we had several European dealers immediately asking what would be changing as a result of the vote. They thought that the UK would be out of the EU on the Friday morning. Their fears were allayed once we told them it would be at least two years before anything significant changes took place and would probably be longer. We don’t envisage any changes to our business in the short term, but the long term will depend on the trade deals that are negotiated with each country." Alan Weatherill, Hope Technology
“As a business we were firmly in favour of remain, but we are where we are. Short term the most likely possible impact is price increases as the GBP has weakened to a 31 year low against the USD and other currencies. The timing couldn’t be worse from a 2017 model year bike pricing perspective for most brands. 2016 is going to prove to be a superb value for money year. Grab a bargain now as it is hard not to believe that prices will only be going up for next year. Other than that it is all about consumer confidence. The current political climate is not conducive to consumer spending but we will have to wait and see how things settle. It is too early to tell right now." Dom Langan CEO at Madison
“With the Pound becoming so weak we will ultimately see prices rise. We purchase our products in dollars and have been hit pretty hard. Long term if the pound recovers then that would be nice? Until the exit plan has been made it’s hard to predict. We are kind of expecting further issues down the road." Olly Wilkins, DMR Brand Manager
“As a venue that received considerable EU grant funding during our initial build phase we clearly owe a lot to the EU. Without that initial seed funding BikePark Wales would not have happened. Although we no longer receive any grant funding and BPW is a private limited company we have clearly benefitted from the EU in the past. As for future impact on our business, well further EU funding for expansion is clearly no longer an option and how about foreign visitors, we are lucky enough to receive visitors from all over Europe (and the world) lets hope that freedom of movement isn’t affected." Martin Astley, Director BikePark Wales (BPW)
“Short term the effects are immediate with regards to pricing. We manufacture, finish and assemble in the UK so we're better placed to deal with the short term effects of the current market conditions. However, mid to long term instability wouldn't be good for any business and we are no exception. We also import a lot of other components from all over the world that we predominantly pay for in US$ which is having an immediate effect. The last lot of dollars we bought was at a rate of $1.49. As of today (Weds June 29th) the rate is $1.34, so already there's a 10% differential. This means that inevitably prices are going to rise. How long for? We'll have to keep a close eye on that and if things stabilise we can re-adjust.
Long term, we need to see what trade deals can be negotiated with Europe. Last time I looked, to import a bike into Switzerland for example costs just CHF12 (about £9). To import a bike into any other EU member country is £0 with the current free trade agreement. Bicycles and any other 'green' vehicles I think will have a pretty low duty rate so I think we'll be fairly safe on that front. It will probably involve a bit more paperwork but nothing more than what we do when exporting a bike to the USA or Australia for example." Jay Tolan, General Manager Orange Bikes
“This is where the impact has really been felt already, as a distributor of goods (importer) we are at the mercy of the markets for exchange rates and free trade. We currently distribute goods from European and American brands, the fall in the pound could have profound effects on the costs of our goods, as the pound falls sharply against the dollar in particular, if that is sustained, price rises may be inevitable. The fall against the euro hasn’t been as significant but will likely still have an impact. Freedom of trade is a big deal for us, we can buy and move goods from our European brand partners such as Sidi and Castelli easily right now but who knows what trade agreements will be in place for the future. Will we be able to negotiate trade deals with the U.S that offer similar tariffs to those we enjoy now? Time will tell." Martin Astley, UK Brand Manager for Intense Cycles
“We have already been seriously affected, the plummeting value of the sterling has meant losses to us and higher prices to our customers, and I cannot see it improving in the short to medium term, especially with the uncertainty that is surrounding us at present and the long period it will take to exit the EU. Uncertainty is very, very bad for business, and in the long term who knows, it could be worse, or it could be better, but probably no change. I can just see a few years of pain and end up in exactly the same place we are now." Ady Nash, Riviera Bike biking holidays (based in Italy)
Dirt: Will your company have to make some serious changes to deal with the new challenge your business faces? Job loses, rise in prices, possible relocation, etc.
“There is no question of relocation of our manufacturing whatever the consequences of Brexit. We are a UK manufacturer and always will be. The weakening of the pound is actually helping our business regarding exports, but again there is uncertainty regarding tariffs in the future when exporting to Europe and the rest of the world. We don’t see any reason for price rises as we only import raw materials and add so much value through our staff here in Barnoldswick." Alan Weatherill, Hope Technology
“Luckily Madison is a well-financed and well-run business so I have no serious concerns for the future but there will undoubtedly be some big challenges to overcome. Short term pressure on pricing for sure but longer term we don’t know what impact Brexit will have on the UK consumer and their disposable income. If the country goes into recession and we see significant job losses, obviously this could have a detrimental impact. Whether or not we retain the same access to the European market could also have a significant impact." Dom Langan CEO at Madison
“The rise in prices is inevitable if the pound stays this weak. That’ll be across the board though for everyone though. Puncture repair kits might see a spike in sales though? Maybe fewer rock gardens? Jokes aside, from my perspective I think that it will really affect everyone here negatively. After price rises there will be cuts. From my understanding the first thing is usually marketing which gets cut. Less cool videos and projects." Olly Wilkins, DMR Brand Manager
“No, and it’s important all of our staff know their jobs are safe. We do not see this having a major impact on our business. The only possible immediate impact would be a loss of confidence and spending power amongst the public. Riding your bike is the best possible escape from this madness though, so hopefully people will keep coming!" Martin Astley, Director BikePark Wales (BPW)
“Yes, we'll have to make some changes. We're on the verge of welcoming the new 2017 model year which brings with it new bikes, specs and components. Prices should be readjusted to compensate for the weakening of the pound against the dollar but we'll try and hold our prices to protect our dealers and customers in the short term. We were faced with similar issues in the last recession but we continued to make and sell bikes so we'll have to adjust to weather the storm. Like most businesses, we rely on a stable economy for growth, so as soon as the economy settles back down, we'll be back to business as usual." Jay Tolan, General Manager Orange Bikes
“We are in a strong financial position and we have strong brands so there are no immediate concerns. Price increases are highly possible though and further down the line trade agreements could have a significant impact." Martin Astley, UK Brand Manager for Intense Cycles
“We will still be in the EU for at least the next two years so nothing will change at the moment. We are a UK registered business. Our next step will be to move everything and re-register in Italy, and change our nationality. This has of course other issues and different tax systems which will make things more difficult but not impossible, but higher prices are inevitable, and this will be the same for all Brit MTB businesses operating in Europe." Ady Nash, Riviera Bike biking holidays (based in Italy)
Dirt: What good (if any) do you think this decision has had in relation to your business? And has the decision already made working with UK/European partners difficult?
“We’re not sure this is such a good decision as it’s created so much uncertainty in the UK and problems with confidence in UK consumer. However now the decisions been made we need strong and decisive leadership. Politicians from all sides need to stop with party politics and move forward with decisions that are good for the country as a whole." Alan Weatherill, Hope Technology
“I have no doubt that there could be upsides for business but so much depends on what our politicians manage to negotiate as part of the exit and their vision for life outside of the EU. Unfortunately, this is what concerns me the most, as I think no government properly understands or cares about small and medium size businesses such as those found within the UK cycle industry and there is clearly a lack of a coherent plan at the moment. However, potentially there is scope to change import duties for bikes and accessories. There could be government driven incentives to encourage the manufacture of bikes and accessories within the UK. There could also be the chance of MAP pricing as seen in North America to help protect the independent bicycle retailer and the invaluable technical support they provide to the everyday rider. Brexit is a leap of faith into the unknown and gamble for sure and only in time will we know if we made the right decision." Dom Langan CEO at Madison
“No good so far. Hard to see too far into the future until the new arrangement comes into play. I guess it’s pretty early to comment right now but I can’t say I have had any conversations which would lead me to believe it was a good choice for us here at DMR." Olly Wilkins, DMR Brand Manager
“Perhaps people will choose to holiday in the UK rather than travel abroad, I guess we could stand to gain from that." Martin Astley, Director BikePark Wales (BPW)
“We're always flying the ‘Handbuilt In Britain’ flag so we'll see if there are more people who will decide to spend their pounds on UK manufacturing to keep Britain moving throughout these difficult times ahead. Especially now as the direct brands who sell in euros won't be as attractively priced in the near future. Any positives so far? A weak pound means that our export customers who pay in sterling are enjoying a better than normal deal. So much so that we've seen increased orders from them in the last few days. They're stocking up now while the pound is so low." Jay Tolan, General Manager Orange Bikes
“It’s tough to see any positives right now, the exchange rate issue is our main challenge right now so we are planning and flexing price models to test various possible outcomes. We will be fine but this has certainly created some challenges!" Martin Astley, UK Brand Manager for Intense Cycles
“I cannot see any good coming from the result in regard to our business, we rely on the freedom of movement we currently enjoy, be it travel, money, labour etc. I just hope that the UK will not pull up or cause any barriers. All of this depends on what will be negotiated and whether Article 50 will be initiated, at least with Wales doing so well in the Euro football, I have at least some pride left." Ady Nash, Riviera Bike biking holidays (based in Italy)
Lennard Van Winden, CEO of Oneway Bike, the distributor for CUBE Bikes in NL, UK and Ireland:
“First and all we regret the outcome of the referendum. Being able to work with international companies across borders is a great experience and very inspiring on many levels. Other cultures learn us a lot about ourselves and the world we live in. Being able to travel freely around Europe for holidays, education or business is something our generation grew up with and it's a shame this might be about to change.
Trading with our UK dealers will not change until the UK has actually left the EU. This process will take many years and until that time nothing changes for business day to day. The process and required paperwork to sell and transport product from our warehouse to the dealer will remain the same for at least the next two to three years. What happens after that is a big unknown and we will be bale to adapt to the new situation as it presents itself.
The immediate effects are visible in the market from an economic point of view. The current uncertainty will influence consumer spending and the overall economy. Perhaps even for a longer period of time. The British Pound has fallen almost 15% against the Euro, compared to last summer. That means 1 pound buys you 15% less in Europe. Our bikes are produced in Germany and most of the parts are sourced in the Far East. That means we buy from the factory in Euro and sell in GBP. The RRP's for CUBE bikes are confirmed in the summer usually. That means bicycle prices for 2017 are going up. This will have an impact on the bicycle package the rider will be able to get their hands on in 2017. This will be the same for all brands available in the market. We are confident that CUBE will keep the position in the market that we have and we will continue to offer a very strong and complete bicycle package for an attractive price."
Frank Aldorf, Canyon’s Chief Brand Officer:
"We respect the decision of the British electorate. It is a significant decision, which will have a considerable impact, the extent of which will not be known yet. The only thing we can do is consider, how it will affect our business in the short and in the long term. There will be a period of transition before an actual exit takes place. So there will be time to implement any changes and be prepared to comply with new laws, trade restrictions and duties. We will monitor the developments very closely and will adapt accordingly while prioritising the interests of our customers and our employees. Our primary focus remains serving our customers’ needs."