‘Brexit has lost us 25% of sales’: British bike storage firm buckles under red tape | Manufacturing sector
A British bicycle entrepreneur says Brexit has buckled his business and left him with a £100,000 hole in revenues, accusing the government of failing to do enough to mitigate its impact on British small exporters.
Cycloc, which has made a name for its distinctive indoor bicycle storage and accessories and includes Stella McCartney, Jonathan Ross and cycling star Mark Cavendish among its customers, says the EU represented 50% of its business before Brexit left it nursing a 25% decline in overall sales.
“It is very disappointing. I am a naturally optimistic person, but in a sense it is very difficult to be positive,” said the company’s founder and designer, Andrew Lang, in his studio in east London.
“One of the things that is quite disappointing about this whole process is that from the outset, we made an active decision to manufacture in the UK. We’ve remained faithful to that and it feels as though the UK government hasn’t necessarily helped us.”
Cycloc’s products have been a British small business success story with its striking wall hangers popular with owners of expensive wheels who want to store them safely inside. They are used by some of the world’s leading cycle brands including Pinerello, whose bikes can sell for as much as £15,000.
A product designer by profession, Lang launched the injection-moulded products in 2006. They quickly found favour among cycling enthusiasts, professionals and distributors, winning a prestigious Eurobike award in 2009, the Oscars of the cycle sector.
Distributors across the EU lapped up the wall-mounted blocks, which cost from £43 and hang bikes in “any orientation or space”, stopping them cluttering up hallways across the continent.
By the time Brexit came along, business was flying with 10,000 units sold in the EU each year and annual turnover hitting £450,000.
But once new rules came into force in January 2021 after the end of the transition period, business started to slow, especially after Amazon stopped fulfilling orders for individual EU customers buying from Britain.
There was also a drop in confidence in British products, says Cycloc’s head of operations, Clare Lowe, with some “EU distributors stopping placing orders, citing cost of shipping and customs clearance as prohibitive”.
The company made every effort to beat what Lang calls “Kafkaesque” Brexit red tape by opening up a warehouse in the Netherlands at the end of 2021 to ensure costly paperwork would only have to be done per truckload crossing from Dover rather than per individual unit.
The aim was to fulfil direct-to-EU consumer business from its website and Amazon and smaller business sales to bike shops but it still cost £10,000 extra in overheads.
As 2022 progressed, it became apparent that EU consumer sales were “not going to recover to their pre-Brexit levels” and the warehouse would be operating at a loss.
“To say the Brexit process was gritty is an understatement,” said Lowe. “Within 12 months of having got it up and running, we just had to take this decision to close it because it wasn’t covering its costs.”
Cycloc’s products are still being sold direct to customers in the EU via an “import one-stop shop” in Ireland, an automated service to cover complex VAT compliance procedures.
Its experience is not unique and highlights the continuing damage Brexit is causing small exporters who cannot easily absorb the new administrative burden as easily as big businesses.
Cycloc’s experience mirrors that of the Cheshire Cheese Company, which made headlines all over the world in 2021, when it declared Brexit had cost it £250,000 in lost revenue leading a government minister to suggest it look to the global market to plug the Brexit hole. Last November, its owner Simon Spurrell, said those losses had ballooned to £600,000 and he had sold the firm to a larger rival to improve his access to the single market.
Lang also tells of the wider impact Brexit has had, diverting the company’s energies from growing its product range. “We have about half a dozen products in the pipeline that are in a very advanced stage but we’ve not been able to commit the capital to bring those to the market yet because of the other Brexit costs and problems we’ve been confronted with,” he said.
Reflecting on the difficult decision to close the warehouse operation, Lang said he could not understand why the government did not support small-scale British manufacturers like him more.
The business is now trying to “pivot pretty quickly” to new markets in the US, Asia, Australia and South Africa, said Patron McCleary, head of marketing, but the “learning” to get into those markets is also a drain on resources.
“In places like China or Hong Kong I’m having to learn a lot about the culture, about buying habits, and how British products are viewed. It would have been easier in Europe, but because of how bad the Brexit actually was, we’ve actually had to be quite reactive rather than being proactive,” he said.
The government did not comment on Cycloc’s experience. A spokesperson said the Trade and Cooperation Agreement (TCA) it signed in December 2020 was “the world’s largest zero-tariff and zero-quota deal” and it had established the Export Support Services “so businesses can make the most of the TCA”.
They added that the UK was further investing to make exports easier and recent data showed trade to the EU was up 0.5% on the third quarter of 2019.