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New trade body campaigns on independent bike dealers’ Cycle to Work scheme concerns

Initiative’s “financially unsustainable” commission model will be initial focus of Bicycle Dealers Association

A group of independent bike shops have launched a new trade body, the Bicycle Dealers Association (BDA), to tackle a number of issues facing retailers – with their initial focus being the Cycle to Work scheme, whose current model they describe as “financially unsustainable.”

The businesses that have set it up include several that were mentioned in an article in the Financial Times at the weekend which highlighted problems they have faced since the £1,000 threshold for bikes bought under the scheme was abolished last year.

> Cyclescheme now claimed to be "unviable" for retailers following change in threshold

The limit applied to all businesses providing benefits under the tax-friendly scheme to their staff, other than those regulated by the Financial Conduct Authority.

One business owner, Will Pearson of Pearson Performance, said that since the limit was scrapped, his margins are being squeezed on higher-value bikes. Meanwhile, providers of certificates under the tax-friendly initiative benefit from a flat rate of commission, irrespective of the cost of the bike, with Cyclescheme in particular singled out for criticism.

The south west London-based business has been joined in setting up the BDA by Bespoke Cycling, Cycle Exchange, Cyclefit and Velorution,  all of which are based in London, plus Moreton-in-Marsh, Gloucestershire bike shop Cotswold Cycles and Saddle Safari from Marlow, Buckinghamshire.

Other businesses are encouraged to join, and the BDA has set up a Twitter account.

Phil Cavell of Cyclefit told Cycling Industry News that for now, the Cycle to Work scheme is “the most irritating issue for shops on a big list of complaints.”

He said: “We want to be constructive and we’ve worked very hard to have constructive conversations, but there’s lots of people invested and often more so than we thought.

“Maintaining things as they are seems to be their plan and we’ve been met with silence wherever possible.

“So we’re starting a pressure group. It was originally single issue, but we’ll move more generally to become a trade body.”

In a position statement published on the trade-focused website, the new group said, in relation to the Cycle to Work scheme: “We have tried, over an extended period, to positively engage with the bicycle industry, to discuss a more rational and fairer system.

“This has been an unsuccessful process – there seems to be considerable resistance to change because of vested interests predicated on a history of excess profits within the Cycle to Work administration sector.

“In essence, we feel this is a failure of appropriate governance and oversight.”

Pointing out that “The costs associated with administering the scheme are largely the same if the bike is £500 or £5,000,” it says that “Cycle to Work providers levy a percentage on the whole transaction – typically 5 per cent to 15 per cent,” which it insists is “ unfair and leads to excess profits.”

Moreover, it maintains that since Cycle to Work providers only take commission from retailers, whose margins on bikes and accessories range from 25-25 per cent, the way the scheme currently operates is “a financially unsustainable model,” and one “largely funded by the bicycle retailer and the UK taxpayer in combination.”

The BDA goes on to say: “The current financial burden, on the shoulders of the UK taxpayer and bike-shops, cannot be what the UK government intended at the inception of the scheme?”

It suggests “a more balanced scheme where retailers, manufacturers and the UK cycle industry share the financial burden, based on reduced or capped fees, that benefits from structured government oversight.

“We would further suggest that a proportion of the fees contributes to a cycling advocacy and sustainable transport initiatives.

“We invite like-minded bicycle retailers to join us in the struggle for a fairer Cycle to Work marketplace, with appropriate oversight,” the BDA added.

The UK’s leading provider of vouchers under the Cycle to Work initiative, Cyclesheme, was reported by the FT to take commission of 10 per cent on bicycles and 15 per cent on accessories.

In a statement, the company’s Adrian Warren said: “At Cyclescheme, we have historically charged an agreed percentage rate of commission for our services. But we also realise that since the £1,000 cap has been lifted and the price of bikes has risen under lockdown, this means an uncapped commission may not be the best way forward. The last thing we want to do is to treat bike shops unfairly.

“That’s why we have already been working directly with bike manufacturers and retailers to agree a new commission structure that means we all receive value from bike sales while also working collaboratively to continue to encourage more people to ride bicycles.

“Talks are ongoing, but we are confident we will have a new commission structure in place in that benefits everyone,” he added.

Simon joined as news editor in 2009 and is now the site’s community editor, acting as a link between the team producing the content and our readers. A law and languages graduate, published translator and former retail analyst, he has reported on issues as diverse as cycling-related court cases, anti-doping investigations, the latest developments in the bike industry and the sport’s biggest races. Now back in London full-time after 15 years living in Oxford and Cambridge, he loves cycling along the Thames but misses having his former riding buddy, Elodie the miniature schnauzer, in the basket in front of him.

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OnYerBike | 3 years ago
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“a more balanced scheme where retailers, manufacturers and the UK cycle industry share the financial burden"

Without trying to reignite the much more general debate about whether or not cycle to work schemes are, in principal, a good thing. I don't see why retailers, manufacturers or the UK cycle industry should take any of the burden. I don't see why the bike shop should receive any less money because someone is buying a bike through a scheme than if they are buying it with cash.

If anything, I think employers should pay the fee (with a revised structure) - after all, they typically advertise the scheme as a "benefit" to employees, and also benefit from reduced employer's NI contributions.

Simon E replied to OnYerBike | 3 years ago

OnYerBike wrote:

I don't see why retailers, manufacturers or the UK cycle industry should take any of the burden. I don't see why the bike shop should receive any less money because someone is buying a bike through a scheme than if they are buying it with cash.

Which is why I suggested yesterday that the scheme shoud be changed, perhaps a transaction between the shop and the customer, maybe or another route involving the employer (so the tax relief is still made available) or even Direct Debit.

As it stands the scheme eats a chunk of the LBS's margin, which is an even more significant factor in recent years as online shopping has made such a dent in sales.

I'm sure it wouldn't be hard to create a simpler process for employers, with some benefit for employer and employee.

mdavidford replied to Simon E | 3 years ago

Strictly speaking, the transaction (purchasing the bike) is between the employer and the shop. The fee to Cyclescheme and the like is a commission for access to their marketplace. It's similar to price-comparison sites charging insurers, utility companies, etc. commission on sales through their service. They control the largest marketplaces, and the shops have to pay for access to those customers. There's nothing to stop a shop and an employer transacting directly if they wanted to, but most employers prefer to contract out, for free, the administration, which then leaves the shops over a barrel.

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