Three and a half years after the final ballot was cast, the UK officially leaves the EU at 11pm tonight. While we previously heard horror stories of bike shortages, price rises and huge profit hits for bike brands, it seems like nothing is going to change... for now at least.
Most of these gloomy predictions came as the UK was staring down the barrel of a no-deal Brexit. At that time, the government was unable to come to an agreement on a deal, Boris Johnson was saying he would rather be "dead in a ditch" than agree to a Brexit extension and the deadline was looming. Eventually though, an extension was passed, a deal agreed and Boris Johnson granted a mandate by the British public in a general election in December, allowing him to pass his Brexit deal and begin Britain's withdrawal from the EU.
Tonight the UK enters a transition period where it will be separate from the EU’s political and legal process but is still subject to most EU rules. What this basically boils down to is the UK's Members of the European Parliament (MEPs) leave their seats, but negotiations will continue to determine the future relationship between the EU and the UK. This transition period is currently penciled in to finish on December 31, 2020.What happens during this period?
The key thing to note is that the UK remains part of the single market and customs union that the EU offers. This is a frictionless trade agreement that allows goods and people to pass freely between nations in the EU. The UK will also continue to trade with countries outside the EU under EU terms while the transition period is ongoing. This basically means the bike industry will continue as normal for the time being.
Dominic Langan, the CEO of Madison, the UK's biggest distributor, told us, "Until we know the terms of any deal it is hard to know how to fully prepare." Although he did say that they were working towards creating a distribution center in Ireland for shipping parts and accessories. He said: "We are seeing really positive growth in Ireland over the last couple of years and this is something we would probably do anyway. Brexit is making the decision easier for us to make, but it has forced the timing."
Alan Weatherill, Sales and Marketing Manager at Hope, said, "There is no understanding at all as to what's happening after Brexit. Whatever the government says about how we will treat imports, that doesn't mean that anything we export to the continent will be treated in the same way... We'll be carrying on as normal until the end of the year now."How has Brexit affected the British bike industry so far?
Currency fluctuations have been the biggest impact so far, with the pound still around 15 cents lower against the dollar since the day of the Brexit referendum. This is simply too much for brands to swallow so prices have altered accordingly. For bands that import, this will likely have meant increased prices, however, brands that manufacture in the UK have been able to offer cheaper products to EU customers as a result. Jay Tolan, General Manager at Orange, said, "As the pound weakened off a bit, the pricing for Europe got a lot better. The bikes were cheaper than they had been previously so there had been a bit of influx." The pound is likely to continue to be volatile for the foreseeable future so expect prices on bike products to continue to mirror this.
With fears stoked about goods entering the country, we also asked about stockpiling and found that most brands hadn't considered it. 661 told us that they only import product four times a year and, as their product is non-perishable, they didn't believe a delay at customs would significantly affect their business. At Madison, Langan said they had, "good levels of stock and very sophisticated planning algorithms in place," and that they were, "suitably stocked to cope with any transitional disruption to the supply chain."
The only brand we spoke to that had stockpiled was Hope. They increased their stock levels of raw materials when Brexit fears first surfaced and have maintained that high level of stock until now. They believe they have a "few months" of materials should any disruption happen at the borders post-Brexit.The future relationship with the EU
Top of the to-do list for the UK government will be to arrange a new trading agreement with the EU. The 11-month time period is shorter than any other previous EU trade deal, which has led to the Institute for Government, an independent think tank, claiming that both sides may end up “prioritising a largely goods-only free trade agreement” with negotiations on services, "likely to be postponed until after December 2020". The exact terms are still up in the air but with proposed options ranging from "Bespoke Norway", to "Reverse Ukraine" or "Canada Plus", there are plenty of ways it could go. The British bike industry will be holding its breath and hoping for favorable terms that don't cause too much disruption.
There is one catch here, these negotiations need to happen quickly. If a trade deal is not negotiated by December, then the UK (apart from Northern Ireland) could revert to trading on WTO terms, which many commentators have compared to being as harmful as a No Deal Brexit in the first place. The final scenario is a possible extension by two years to December 2022, as long as this is agreed by both parties by July this year. The rest of the world
As the UK has been trading under EU rules with the rest of the world for the past few decades and it will continue to do so until December in the transition period. However, it will have to renegotiate trade deals with the rest of the world as it leaves the EU. It has already agreed to continue trading under EU rules with 20 existing blocs that includes 50 countries including Switzerland, Norway and most of Central America (a full list can be found here
). However, this means re-negotiating its terms with countries such as Canada, the USA, Taiwan and China.
It can officially begin these trade negotiations tomorrow, however they cannot be implemented until the end of the transition period. The result of these negotiations could have serious consequences for both manufacturers in the UK and customers of UK brands around the world but it's too early to say what this will look like at the moment.
So, this time next year, things could look very different for the British bike industry, but for now it's business as usual as the limbo continues. We'll update you on any significant updates as the negotiations continue.