'We’re actually selling bikes at a loss' - Leading retailer blames Cycle to Work schemes for drop in profit

A leading cycle retailer has said that his business is "selling bikes at a loss", with the cut taken by Cycle to Work scheme providers in the UK a major factor. 

Mark James, of Sheffield’s JE James Cycles, told Cycling Weekly that the schemes require urgent overhaul.

"Obviously in 2023 when all the prices crashed, suppliers have been raising their trades up and squeezing the margins of retailers," he said. "So we're earning less than we've ever done and then we've got cycle schemes taking percentages out, which means we're actually selling bikes, at a loss, when we do it in cycle schemes.

"And most dealers don't realise they don't put the costs in, so they only see an amount. But once they actually physically take their costs out of it, they would realise that they've actually lost money. It's a dire situation."

The Cycle to Work program gives employees of enrolled companies tax deductions on bikes and equipment, which are paid through salaries, in a bid to get more people commuting by bike. Customers buy vouchers from Cycle to Work scheme providers, before redeeming them at retailers that sign up to the scheme.

James previously claimed that the schemes - which allow people to save tax on bikes via 'loaning' them from their employers - are "sucking the lifeblood" out of bike shops. 

He had made the comments after a meeting between the Association of Cycle Traders and the All Party Cycling and Walking Parliamentary Group in Westminster last month.

James urged the government to end action this week: "We'd like the government to end the scheme in its current practice, and actually take out the middle men."

One of the biggest gripes from traders with the various schemes is the "excessively large" commission that many make on sales orchestrated by the bike shops. 

As a result, more than 650 independent cycle retailers recently signed up to a campaign launched by the Association of Cycle Traders, calling on the UK government to take action to adjust a scheme it is largely in control of. 

The Department for Transport has made clear that it is unmoved. "Participation in the scheme is entirely voluntary for retailers and it is for individual scheme providers to set commission fees," a spokesperson said, in a recent statement provided to GCN.

Gavin Hudson of Butternut Cycles in London told Cycling Weekly that he was appalled at the statement from the DfT and the government’s indifference to the scheme's issues. 

"There is a distinct lack of understanding in parliament and within the DfT about how the scheme works and who pays for it," Hudson said. "I think that is quite a shocking thing for them to say."

"The fundamental unfairness with the cycle scheme is that the fees are paid by the bike shop but the choice of cycle scheme is made by the employer," he continued. "The fee scale is chosen by the scheme so there is very little incentive for an employer or a scheme to reduce fees or charge a fair amount given that the people who pay the fee are the bike shops. 

"I do think the cycle schemes sometimes forget who is paying their bills. The answer is not employers, it’s the bike shops."

Hudson’s view was echoed by James who added that he feels cycle to work schemes are rarely used for the purpose of actually travelling to work. 

"Cycle schemes are supposed to be ridden at least 50% of the time by the user, backwards and forwards to work, but nobody's tracking it and it's not being used for that," James said. "So people are just buying e bikes and expensive bikes, because they are big tax earners and saving a lot of money, but the cycle dealers are going out of business because the amount we're actually paying is way too high."

"We are just unhappy with the fact that it seems to be landing the whole burden on the retailer," he said. "Although we want to continue doing the government scheme, it's making it impossible for us."

The Department for Transport was contacted for comment in relation to this story.