“A customer has just tried to pull out of the sale of a top spec Ridley Noah due to damages to their investments.”
That was the panicked response from one independent bike shop this morning. The effects of Britain’s exit are already profound. In the current climate and with that particular sale representing a good chunk of profit, that’s the last thing any local bike shop needs to hear.
In the short term, at least, the pain for small business is only likely to intensify. Long term, it’s anyone’s guess. Channel Four journalist Jon Snow has already highlighted the dramatic effect of the pound entering freefall; inside just five hours Britain has slipped from the world’s fifth biggest economy to sixth, behind flagging neighbour France. At the time of writing, it’s hit a low not seen in 30 years.
If the pound continues in its decline, price increases are an inevitability for those who import and sell imported goods. As far as those stemming from the Europe are concerned, some 54.5% of our goods arrive from EU member nations.
Kinetics of Glasgow, a small business producing and selling folding bikes, recumbents, electric bikes and speciality orders points out that domestically exchange rates are looking increasingly likely to force price increases.
Owner Ben Cooper said: “I’ll be keeping a close eye on exchange rates. I’m not planning on price increases yet, but it may happen. I’ve got a decent number of orders placed yesterday by customers, which i have not yet paid for and my profit on these is now one third less. Of course, if you’re outside of the UK and ordering everything just got quite a bit cheaper!”
According to the Association of Cycle Traders, its members were primarily in favour of the Leave Vote, with 61.54% far outweighing the 34.62% choosing Remain. At the final count 52% of the public opted out and 48% in.
What’s perhaps more concerning than the short term effects of the result for small traders is that a recent study revealed that 65% of businesses have no preparation for this outcome. Just 2% considered their plan to be ‘extensive’.
With the now enhanced possibility of interest rate rises, small businesses will face further pressure when borrowing to fund business growth, or in some cases, continued existence.
On jobs and official stats show that two thirds of all new jobs stem from small to medium sized businesses. Additional pressure is unwelcome for prospects here.
Exporting into the EU
We recently asked the UK’s cycling manufacturers for their views on overseas trade, among other issues and the opinion was, like the result, divided.
One of those we spoke to was Aprire’s Phil Dempsey who today told us that thankfully he had planned for this outcome.
“The exit will now make it a lot more convoluted to sell into the EU, hence increasing costs, which when we’ve worked so hard to reduce costs in manufacture to bring them in line with China, is not superb for our master plan of having a large factory producing tens of thousands of frames per year,” said Dempsey.
“I’m not worried however, a strategy had already been worked out for exit. All we’ll do now is activate that plan, keep our chins up and use a good old fashioned English hard working attitude and continue to what we are planning and doing, which is making a true British made bicycles in the UK.”
Fibrax managing director John o’Brien added that an out vote hadn’t featured in the firm’s plans, but having survived two world wars, was balancing dismay with the result with optimism for survival.
He told CyclingIndustry.News: “Being a UK Manufacturer rather than importer we will be largely unaffected by currency fluctuations or tariff changes as a consequence of being out, but life would have been simpler being in.
“In my opinion, all it needed was for our politicians to explain all the measurable benefits of being in, rather than all the possible negative points of being either in or out. Had the Northwest and East been told that their areas would be one of the biggest losers in EU grants and job support, they may have voted to be in. If the people hadn’t been told/lied to, that being out would solve all immigration, we would still be in. However the country has spoken and we will just have to get on and sort it.”
Might today’s news affect grey imports, a long term pain in the side of the bike shop trying to earn their fair share? It’s no secret that the bike shop in particular has suffered immensely over the years from goods that come in from European discounters. The manufacturer and distributor too may benefit if such pressure is alleviated.
Those orders from direct sale websites, selling at often below trade cost, will now pack less value for money to the consumer. Law changes permitting, they may in future also carry additional cost in the form of duties. Sure, these damaging to business sales won’t disappear, but it is at least good news that prices are rising on a level playing field.
And what does Rory Hitchens of UK distributor think might also help?
“If things hit the fan we can all escape and just ride our bikes!” Great advice, we think.
Have thoughts of your own? We welcome them here.