‘Brexit cost my bike business an additional £ 250,000 in just two months, and I don’t see any bright spots’

A co-owner of a Welsh business said Brexit cost him around £ 250,000 more in the first two months of this year and that he sees no positive signs of Britain leaving the EU .

Frog Bikes, a manufacturer of children’s bikes that employs around 50 people at its Pontypool factory, has a customer base that spans the world.

However, the effect of Brexit and the UK trade deal means the company has spent much of this year adjusting to a challenging new way of doing business.

“I can’t say there was anything positive,” said Jerry Lawson, co-founder of Frog Bikes, of the impact of Brexit on the business. “There is extra paperwork, and there are additional costs. And there are a lot of unknowns.”

Jerry co-founded Frog Bikes in 2013 with his wife Shelley. The two were looking for bikes for their children and, after finding nothing suitable, decided to go into business by creating their own range of affordable bikes for children. After three years of growth, in 2016 the company opened its factory in Pontypool with support from the Welsh government. It is from here, in an industrial area just outside Mamhilad, that Frog Bikes are assembled before being shipped to customers around the world.

“The business is growing,” Jerry said, speaking to WalesOnline on Wednesday. “Great Britain [market] last year increased by 18%. “

In eight years, Frog Bikes has developed a loyal customer base overseas as well as the UK, selling more and more bikes each year in countries like the US and Hong Kong, as well as in EU countries such as Germany, France and the Netherlands. However, despite all of its successes and continued growth, 2021 has been a difficult year for the company due to circumstances beyond its control.

The reason? Brexit.

“We had a positive and transparent discussion ahead of the Brexit vote,” Jerry said. But, he explained, much of that had changed now.

Brexit-related issues began as soon as the referendum result was announced in 2016, as Frog Bikes braced for a range of possible scenarios.

“The challenge we had was we didn’t know what Brexit was going to look like, so we did a lot of scenario planning,” Jerry said.

Finally, on Christmas Eve last year, the UK government announced that a trade deal had been reached with the EU in the form of the “EU-UK Trade and Cooperation Agreement”.

Much of the discussion at the time was about the “Canadian Style” trade deal as a way to avoid tariffs on goods from the EU. However, for companies like Frog Bikes, there was still a lot of uncertainty about what the 500-page document would mean for them.

“The problem was then we had no idea what that really meant other than everyone was talking about seamless trade and non-barrier to trade,” Jerry said.

Just over four months after the start of this new arrangement, however, the Pontypool-based bicycle maker hasn’t found much truth in Prime Minister Boris Johnson’s claims about the ease of trade.

“We are stuck in customs both on this side and in European countries,” Jerry said, referring to one of the major problems that Frog Bikes has faced since January. “The paperwork is also amazing. For starters, some countries wanted the paperwork to be written in their language.”

Until Brexit, standard customs had not been done this way and the company did not need customs declaration forms for shops in the EU.

“Now we send them a commercial invoice with a lot of customs information. Plus, it’s four or five times that we have to print it.” The customs declaration includes information about the country of origin, shipping codes, and VAT information, among others.

In addition, European stores to which Frog Bikes sends its products may also have to pay VAT, courier fees and consignment fees to receive them under the new UK-EU trade agreement.

“Spanish stores are charged 60 euros per shipment. They may be charged a commission or finance charge by the courier. So, they can recover the import VAT, but they cannot get the shipping costs, and they can’t get the commission fee or finance charge billed. “

“So if we send them just three bikes, that equates to an increase of around 50 euros to the consumer per bike. And that then means that’s a real barrier.”

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The concern, he added, was that the company simply wouldn’t be able to do business with some European stores in the future if it became unsustainable.

“We grab them by the skin of our teeth right now because a lot of them are very frustrated and worried. I don’t know how long we’ll keep them if we can’t find a way around the delays. , paperwork and additional costs. A store that we’ve known for seven years that we do business with … came back and contacted me because they are really struggling. They don’t know what the costs are every time. “

On top of that, in an attempt to minimize costs to the consumer, Jerry explained that the cut in profits that EU stores got from selling Frog Bikes had diminished.

“If we reduce the margin that stores get by 2% or 3%, that means the price increase for consumers is lower,” he said.

Before Brexit, the EU accounted for around 47% of the company’s activities. Now, however, Jerry has explained that he can see that percentage go down.

“Unless we find a viable solution to the barriers, the non-trade barriers, we can see that go down because we will lose these stores. And we know that because we speak directly with the stores. And when we have a lot of stores in these stores. markets, and they all feel the pain, it puts our business at risk. And the challenge then is, if we lose those sales, where do we go to catch up? “

In addition to the uncertainty surrounding import fees for European stores, Frog Bikes, like countless other manufacturers, has seen increased component costs and huge increases in shipping costs.

As a result, the company spent more than £ 250,000 on Brexit-related costs in February of this year alone – just two months after Brexit went into effect.

“It completely wiped out our profits last year,” Jerry said.

He explained that, in all of his years in business, 2021 has been the most difficult time he has known.

“We’ve had different things over the years. There’s been the dot-com explosion, you’ve had the banking crisis, but it’s a lot worse. And if I look at how we were doing last year. , on a pandemic basis, it’s much worse than that too. “

Are there any bright spots coming out of Brexit for the bike maker?

“I guess that makes us more resilient,” Jerry laughs, discussing the only benefit to getting out of the whole situation.

However, for Frog Bikes the foreseeable future will be devoted to learning how to adapt to the new way of doing business in a post-Brexit world.

“We have a good team, they will find solutions, it just takes longer,” said Jerry.

“I’m sure we’ll find a solution. It’s just a bit of a painful, emotional roller coaster of running a business.”