Is cycling really worth that much to the UK?

This week nearly every cycling publication, and most of the mainstream press to boot, reported that cycling is worth nearly £3 billion to the UK economy and growing.

The ever-eloquent Dynamite Files sounded a note of caution that I’ve not seen in many other places:

2 NO CHANGE The London School of Economics
The world of numbers is a confusing one for this humble, word-loving blog. On the one hand, it’s probably a good thing that bike-related sales experienced a 28 per cent increase last year, and that cycling now generally seems to be a “sustainable trend” in Britain. On the other, the report by the LSE which identified this “step-change in the UK’s cycling scene” was commissioned by British Cycling and Team Sky’s paymasters, and it was written by a cyclist from the seemingly unconnected field of “innovation and productivity”. So if someone cleverer than The DYNAMITE! Files could take a look at Dr Alexander Grous’s report and tell us if its findings stand up or if it’s a load of PR flimflammery, we’d be much appreciative. Cheers.”

Well let’s start at the top…

The report is subtitled “Gross Cycling Product”

Now I’m a rubbish economist, but even I know that you should never trust the gross value of anything because it’s the net value that counts. Here’s a rough reckoner of the difference between Gross versus Net.

The first thing that springs to mind that might have a significant impact is currency exchange rates. Pretty much the vast majority of bikes sold come from the Far East, in particular China and Taiwan. Any fluctuation in exchange rate would affect the cost to business and purchaser in the UK.

Let’s take the example of a fairly standard bike, with a frame made in Taiwan and components by Shimano (Japan) and see what we we can find out about the net cost. Let’s call it a classic Cycle to Work scheme 999GBP bike. That price point hasn’t shifted.

I stuck the period August 2009 to August 2011 into for a few currencies to see what change had occurred. Here’s the results for various useful currencies in CSV format

In that period, the pound sterling (GBP) has gone from being 157 Japanese Yen (JPY) to in the region of 126 JPY. So in rough terms, you get 20% less JPY, which in turn means that the cost rises by the same for your Shimano component being bought and put onto the bike you purchase.

On top of that Shimano prices have risen considerably to offset this. For example, this claim on London Fixed Gear (LFGSS) in March 2009 has them putting 30% on list prices. I don’t believe this has been the only rise over that period.

Now look at the Taiwan frame and maybe other parts. The Taiwanese Dollar (TWD) has gone from 54 to 46 over the same period. That’s around 15% drop, again reappearing in the net cost.

So on both those currencies, you’re looking at it costing roughly 17.5% (split the difference) more for the same bike for the retailer without even adding a penny to the price.

That’s before you factor in UK inflation rates which have pretty much doubled in the last couple of years. And stick in the 2.5% increase in VAT at the beginning of 2011 which not only adds to the gross cost but forced a cut in margins.

OK I’m being slightly unfair as apparently this report is into the gross cycling product for 2010. But it’s not unrepresentative of some of the factors that you might like to consider before considering that £3 billion figure again or the claim that

“28 per cent increase in volume of cycle sales in 2010, generating £1.62b”

But enough of fag packet economics, here’s some other things to consider

What is a cyclist?

By far the most difficult thing for me about the report for me is the definition of cyclists. Here’s how the report breaks down the main segments

  1. Occasional Cyclist: Cycles infrequently; less than other categories
  2. Regular Cyclist: Cycles 12 or more times in the past year
  3. Frequent Cyclist: Cycles once per week or more

And here’s how those segments represent the market:

… almost 4.3m (33 per cent) are classed as Regular Cyclists, 5.4m (41 per cent) are classed Occasional Cyclists and 3.5m (26 per cent) are classed as Frequent Cyclist

So to be a Regular cyclist you only have to ride your bike once a month, on average. And to be classed as Frequent you only have to ride your bike once a week. That’s a pretty loose definition of regular for me. It’s regular in the sense of haircuts; tax; payslips and a decent meal out – not in the sense of getting up; nor going to work; nor buying a pint of milk.

By this same criteria I would be classed as a regular car driver for 2011, having hired a car on holiday for a fortnight and made roughly 20 trips during the holiday. I’d also be a regular cyclist, having hired a bike and made a similar number of separate journeys.

Hang on you say, why are you counting separate journeys? Well because these figures tend to count going to the beach and back as two separate “trips”. In fact in one day I made at least 6 “trips” as we hopped along the coast for lunch and a swim.

I could spend hours asking similar questions, I don’t want to waste my day off doing it. So next time you see a report paid for by people who rely on a positive picture for their funding and people who are investing corporate wealth for some form of return: Ask yourself what the story really is.

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