Brexit costs push British bike manufacturer into the red

British children’s bike manufacturer Frog Bikes has said mounting Brexit costs drove it into the red last year. 

The company’s annual accounts, released on Wednesday, detailed pre-tax losses of £530,476 for the financial year to the end of February 2022. 

In the report, Frog Bikes co-founders and directors Jerry and Shelley Lawson wrote that the company had struggled with the “continuing friction” caused by the UK’s departure from the EU, which took effect in January 2020. 

“The day to day issues in fulfilling orders have dominated most of our trade relationships with the EU,” the Lawsons wrote. “The business was hit by an unexpected import duty of 47.5%, applied to most of our componentry, after the UK left the EU.

“Prior to this, we had an EU manufacturer’s suspension. A full exemption was granted in November 2021, but not refunded, and the 10 months of additional duties (Anti-Dumping Duties) cost us £1.5m from Jan to November 21, and caused the business to make a loss.” 

The EU is able to impose Anti-Dumping Duties (ADDs) on non-EU companies that export a product to the EU at a lower price than that charged on their home markets. This is considered "dumping" under EU trade law.  

The EU granted Frog Bikes a suspension from Anti-Dumping Duties in 2019, and was set to carry out an audit on the company in 2020, which was then delayed due to Covid. As a result, the suspension was not accounted for and Frog Bikes was charged the duties. 

“After lots of lobbying through Trade Remedies and with various MPs, in November 2021 it was laid in UK law that Frog Bikes was granted an ADD exemption,” the Lawsons wrote. “However for the prior ten months the cost of these duties to us was about £1.5m. For a relatively small business, this was an enormous cost to have to absorb, akin to our entire wage bill for a year.”

The company is still awaiting a refund. 

This meant that as well as impacting its 2022 results, Frog Bikes had to restate its results for the 2021 financial year. In its 2021 accounts, Frog Bikes initially declared a pre-tax profit of £249,016. But now with the costs accounted for, that figure was restated as a loss of £7,474.

Looking forward, the Frog Bikes directors outlined a need to remain price competitive in Europe following the Covid pandemic. “Non-tariff barriers have increased our costs to deliver to our key European markets,” they wrote, “and we compete against European brands which do not suffer from these barriers.” 

The Lawsons added that the company introduced a solution last month to allow it to “get bikes into the EU without our stores having to incur customs and pay VAT”. 

When approached for comment by Cycling Weekly, Jerry Lawson explained what this involves: "After we ship our bikes to Europe and clear customs there, the bikes are in free circulation to be shipped to our trade customers. This removes the onus on our bike stores to account for import VAT and means they can now trade with us in almost the same way they did pre-Brexit.  

"We have already noticed the benefit of this improved solution from an increase in shipments last month."

Frog Bikes is not the first British company to cite the challenges of Brexit on business. Last month, the founder of bicycle storage company Cycloc, Andrew Lang, said new trade rules had led to a 25% drop in sales, equivalent to £100,000. 

Likewise, Rob Webbon, the CEO of clothing brand Presca which is closing down, told Cycling Weekly last week that Brexit made shipping to the EU "very difficult" and "a lot more costly".