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Regardless of how anyone feels about the result of the Brexit referendum last week, nobody can honestly say they fully understand what the UK’s imminent withdrawal from the European Union (EU) actually means. Particularly given the structural de-coupling of Britain from the EU will not take place for at least two years, at which time the global economy might look quite different from today.
Still, this doesn’t prevent incandescent youths who voted ‘Remain’ from hurling heartfelt hashtags of despair towards the 50+ age group who mostly voted ‘Leave’, or others from feeling ‘Bregretful’ about the vision they’ve bought into. They believed it would be a plum future, but it could turn out to be a lemon.
It seems the only happy people are economists, policy wonks and anoraks who delight in the prognostication opportunities that uncertainty brings.
Which brings us to the question you clicked on. What does Brexit mean for cycling? Let’s begin by looking at the country which will be most directly impacted before zooming out.
CYCLING IN BRITAIN: A SNAPSHOT
A London School of Economics report commissioned by British Cycling and Sky determined that, in 2010, the UK cycling sector employed 23,000 people (earning a combined GBP500 million) and contributed GBP2.9 billion to the overall British economy – 85% of which resulted from the sale of bikes and cycling accessories.
How many bikes? Recent data from The Confederation of the European Bicycle Industry (CONEBI) – extracted from official import statistics from Her Majesty’s Revenue and Customs (HMRC) – shows bicycle imports to the UK increased by 8.3% year-on-year in 2014 to 3.63 million units. While it’s a little way off from the post-millennium high of 3.92 million units (2006), it’s in-line with the 3.6 million average seen over the last decade.
The HMCR import figures are not disaggregated by commodity code so it’s not possible to see, for example, how many of those 3.63 million units were expensive composite road bikes vs inexpensive children’s bikes. However, 2014 export data from Taiwan’s Bureau of Foreign Trade shows that Taiwan shipped 588,000 bikes to the UK in that year with an average unit price of US$281 – in other words, the type of bikes more likely to be sold by a speciality bicycle retailer to consumers with more than just a fleeting interest in cycling.
Beneath the robust import figures (proportionately the same as Australia’s, in per capita terms) are notable levels of participation. Following its evaluation of cycling in the UK, market research firm Mintel claimed that “one in twenty (5%) Brits ride every day, a fifth (21%) mainly cycle at the weekend and some 13% cycle to their place of education or workplace most days.”
The exploits of Bradley Wiggins and Chris Froome, together with the presence of Le Tour in the UK in 2007 and 2014, have had a particularly material impact on how people ride. British Cycling, the national governing body of cycling in the UK, reported that its membership base grew to 116,644 last year – “an all-time high” according to its 2015 Annual Report – citing 51% of all 2015 memberships were taken out by people interested in cycling competitively. It concluded that a retention rate exceeding 80% “showed increasing engagement” in cycling.
Among the most serious cyclists in Britain are the 156 riders on UCI-registered road teams – including 14 signed to World Teams – who make up a little over 4% of the global pro cycling peloton. Let’s also not forget the 15 track cyclists heading off to the Olympics this year; the British Government has thrown GBP30.5 million at British Cycling’s Rio campaign.
THE BREXIT IMPACT
Hopefully, the above paragraphs illustrate that the business and sport of cycling in the UK is doing quite well – perhaps better than ever. What effect might the ‘Leave’ vote have on both?
We’ve already seen the first tangible result of Brexit – extreme volatility in the markets. As the referendum result began to emerge, the British Pound took a haircut as investors dumped GBP and fled to safer environs. It has since rebounded slightly against major currencies like the Japanese Yen (JPY) and US dollar (USD), but for how long remains to be seen.
If the Pound remains weak against the JPY and USD, this will inevitably have a knock-on effect on the price of bicycle imports, which are generally purchased from factories in USD. Even if UK importers have USD forward cover (i.e. they have contracts in place for USD at a better, pre-determined exchange rate) – this can only delay inevitable price increases if the Pound’s relationship to other major currencies doesn’t improve.
Assuming the economic fallout of a Brexit also continues to be amorphous in the months (and perhaps years) ahead, broader economic uncertainty may also be a drag on consumer sentiment, translating to a fall in demand for non-essential goods – like a new bicycle, or even a new bicycle accessory.
In this environment, it can be expected that bicycle orders (MY2017 production is currently in full swing) are already being trimmed, or even cancelled altogether. Note this is far easier for a subsidiary (e.g. Giant UK) to do than an independent distributor, who might still be forced to accept their full order. In any case, it’s certainly too late to toggle specification (e.g. swapping out Shimano brakes for Tektro) in an attempt to reduce retail prices; this option will only become available for MY2018 bike models, the planning for which is already well underway.
Even if the price of bikes goes up and general inflation takes hold, this does not necessarily translate to a reduction in participation at a grassroots level.
IS THAT ALL?
So far, we’ve only touched on the potential impact of a devalued currency and negative consumer sentiment. It can be argued that the UK has weathered uncertainty and unfavourable currency movements in recent years, yet participation in cycling continued to grow.
The really interesting scenarios relate to existing EU trade regulations which the UK would no longer have to adhere to, post-Brexit.
Currently, it’s possible for a company in the UK to trade inventory with related parties in the EU without incurring any import duties. So, for argument’s sake, if a bike brand has a UK warehouse and a French warehouse, they could potentially shift inventory back and forth between the two in order to be more responsive to changing demand. Assuming the European Council is not simply going to allow the UK to keep all of the same trade benefits it has now, this will change. Less stock agility equates to risk-averse tendencies, meaning UK consumers may get less choice in future.
The real game-changer could come in the form of imports from China. At the moment, the European Commission slaps Chinese-made bicycles with a 48.5% anti-dumping duty. This protectionist tariff was first applied in 1993 as a response to the huge volumes of cheap Chinese-made bikes flooding European markets and threatening the livelihood of European bicycle producers.
However, a newly-independent United Kingdom might not adopt this tariff. Only 52,000 bikes were produced in the UK according to CONEBI’s 2014 figures and it appears that the vast majority of these were Brompton folding bicycles – and most of those were exported. Without a local manufacturing economy to protect, could it be that British consumers will see more Chinese bike brands enter the market?
Questions also arise about matters which are much more mundane (like certification) but these are perhaps beyond the scope of this discussion.
So far, UCI President Brian Cookson has abstained from commenting on the referendum result. It makes sense for the leader of a global sporting body to appear apolitical, but there will likely be repercussions for the sport that go beyond Great Britain.
Firstly, those Tour de France starts on British soil in 2007 and again in 2014: it’s currently relatively straightforward for the French race to dip in and out of other EU nations, but new layers of bureaucracy that might accompany an independent Britain – including visas, insurance, customs checks, etc. – may mean TdF organiser ASO is far less inclined to head across the channel.
Anecdotally, the visits of Le Tour to the UK massively boosted the profile of cycling there, so the potential loss of this massive direct marketing vehicle may see future grassroots participation on a different, flatter, trajectory than might otherwise have been the case.
However much #brexit may have blown up on Twitter in the last few days, the UK’s WorldTeam riders have also been absent from the discussion – with the exception of Team Sky’s Geraint Thomas, who seemed most concerned with the impact on another sporting code.
We may leave the EU. But Wales, Ireland, England and Northern Ireland ain't leaving Euro2016 yet… ??
— Geraint Thomas (@GeraintThomas86) June 22, 2016
But what challenges await British riders and teams like Sky and One Pro Cycling in a new setting of UK independence?
For starters, all Brit riders who are currently domiciled in another EU country may need to jump more hurdles to remain there if existing residence and freedom of movement regulations a tightened.
Team Sky and One Pro Cycling might reasonably expect their operations will become more expensive and complicated to run, relative to the status quo – particularly when it comes to hiring staff and riders from EU nations. Again, while the settings of a new regulatory framework remain unclear, it’s logical that doing business within a trading bloc is more straightforward than it is between countries without similar laws or free-trade agreements.
It’s also worth noting that Team Sky backer and News Corp owner Rupert Murdoch is a notable pro-Brexit campaigner. Go back through any of the paragraphs above to see what gains British cycling has made in recent years are at risk of being undone, now Brexit — which several of his New Corp media outlets pushed for — has ultimately materialised.
THE SCOTTISH WILDCARD
It is less than two years since a majority of Scottish voters declined the opportunity to become a separate country in a 2014 referendum – but that solidarity with the rest of the UK was predicated on certain assurances, such as continued EU membership.
Now though, the country “faces the prospect of being taken out of the EU against our will,” said Scotland’s First Minister Nicola Sturgeon hours after the Brexit result was confirmed. Some 62% of Scots voted ‘Remain’ in the Brexit referendum but, given Scots evidently feel so strongly about staying inside the EU, they could vote for independence from the UK if the option presents itself.
A slimmed-down ‘United Kingdom’ consisting of England, Wales, and Northern Ireland would no longer be able to select a future Sir Chris Hoy for its national team. This downside goes both ways: just last week, British Cycling announced its 15-rider track squad for the Rio Olympics, which included Scottish athletes Katie Archibald and Callum Skinner – in future, they could instead be part of a much-smaller national Scottish team which would have to secure its own Olympics quota allocation.
The impact of a separation would have the potential to trickle down all the way through national road championships to club racing. The effect on the development of Scotland’s emerging cycling talent could be profound.
BLIND CORNERS AHEAD
It’s not too difficult to imagine a scenario where financial markets drag down the currency further, large corporations pull out of the UK, higher inflation sets in, unemployment rises and people stop spending. In this scenario, the participation of Britons in cycling could go backwards.
On the upside, some CT readers outside the UK may see their local currency stretching further when making purchases with Wiggle, Chain Reaction Cycles or any one of the myriad e-tailers based in the UK. This works both ways though – the purchasing power of those companies has also now contracted, which might see future prices trend up.
How about those cancelled MY2017 bike orders? Such actions might not only be limited to British importers. There is a lot of talk about Brexit ‘contagion’ across the EU, which could foreseeably cause brands across the EU to wind back their forecasts and factory orders. But the parts needed to assemble those bikes have already been ordered. What does a company like Shimano do in this scenario of foregone revenue? Raise prices?
We’ve outlined some of the ways a Brexit might reasonably spillover to pro cycling, but there are also some left-field possibilities. It would be tenuous to suggest there will be any Brexit blowback for Brian Cookson, but perhaps future presidential candidates from Britain will be overlooked by UCI stakeholders if British Cycling atrophies.
The fallout from Brexit is analogous to a mystery cycling trip. Imagine you were told that tomorrow you were going for a long ride, but were given no other information. How would you pack? Would you take a road bike or MTB? How about clothing? Or would you just stay at home, because all of the uncertainty made it impossible to plan accordingly?
Whatever happens, the Brexit ride will go on and it is sure to be eventful in ways we can’t comprehend.
About the author
Cam Whiting is the founder and publisher of Cycling iQ, a website focused on Asia’s role in the globalisation of road cycling. Whether it’s a new UCI race in Indonesia, chatting with a pro cyclist from Japan, a visit to the Chinese factory that makes frames used in the WorldTour or uncovering data on road bike sales in India – if it’s related to road cycling in Asia, it will be at Cycling iQ.