Brompton stockpiles £1m in parts as contingency for “shit hits the fan” No Deal Brexit

Rich_cb wrote:

In a no-deal Brexit we the EU27 would be able to adjust our their tariffs to only protect industries in the UK EU27.

And so it goes on. Reducing tariff (and non-tariff) barriers is a good objective but a no-deal Brexit is just as likely to see them increase. We're leaving a tariff-free area of half a bilion consumers and entering... well, what? More barriers to trading with our largest market for a start (in the case of a no-deal Brexit).

Brexiteers often talk about how we could negotiate better deals as if other countries are queuing up to give us whatever we want (also what they said about the EU...). Where's the evidence? As far as I can tell, trade deals take a long time and plenty compromise. Other countries want concessions to lower their tariffs: will the Great British Public give India the immigration visas it wants? Or accept US genetically-modified food or liberalise access to the sainted NHS?

Rich_cb wrote:

Most bikes would get a lot cheaper which will encourage more people to cycle

I'm not sure it's really the cost of bikes which is deterring people...

Duncann wrote:

And so it goes on. Reducing tariff (and non-tariff) barriers is a good objective but a no-deal Brexit is just as likely to see them increase. We're leaving a tariff-free area of half a bilion consumers and entering... well, what? More barriers to trading with our largest market for a start (in the case of a no-deal Brexit).

Brexiteers often talk about how we could negotiate better deals as if other countries are queuing up to give us whatever we want (also what they said about the EU...). Where's the evidence? As far as I can tell, trade deals take a long time and plenty compromise. Other countries want concessions to lower their tariffs: will the Great British Public give India the immigration visas it wants? Or accept US genetically-modified food or liberalise access to the sainted NHS?

Rich_cb wrote:

Most bikes would get a lot cheaper which will encourage more people to cycle

I'm not sure it's really the cost of bikes which is deterring people...

Cost is a barrier to entry. Reducing barriers to entry can never be a bad thing.

Trade deals do come with compromises.

Our current deal with the EU involves compromises on immigration, taxation and law making.

Despite these compromises it isn't even a true 'single market' for the service sector which makes up 80% of our GDP.

Yorkshire wallet wrote:

The European Union is like a girlfriend you've broken up with and have since found out was only using you for you money and preferred her other friends to you anyway. Half of you is torn with fond memories of good times but after you've split it turns out she really never felt the same way and actually used to treat you with disdain but really you were too love struck to see it.

Alternatively, the EU was a loyal girlfriend that provided you many years of peaceful if unexciting living. You've now had a mid-life crisis, shagged Tracy from accounts as she promised much with her low cut blouse and wonder bra, now you've co-habited you realise they have swung below the belly button, she made a strange comment about your last taxi driver and she pissed herself round at your mothers on boxing day!

alansmurphy wrote:

Yorkshire wallet wrote:

The European Union is like a girlfriend you've broken up with and have since found out was only using you for you money and preferred her other friends to you anyway. Half of you is torn with fond memories of good times but after you've split it turns out she really never felt the same way and actually used to treat you with disdain but really you were too love struck to see it.

 

Alternatively, the EU was a loyal girlfriend that provided you many years of peaceful if unexciting living. You've now had a mid-life crisis, shagged Tracy from accounts as she promised much with her low cut blouse and wonder bra, now you've co-habited you realise they have swung below the belly button, she made a strange comment about your last taxi driver and she pissed herself round at your mothers on boxing day!

That sounds far too detailed to be simply a metaphor. Good Christmas Alan?

Oh, and fuck Brexit.

Mungecrundle wrote:

It isn't binary. srchar makes a very good case for a British company that sees an opportunity for growth and is making investment in the UK to realise that potential. He is taking a view, taking the risk with his capital and will hopefully stand to make the rewards if things work out as he expects. Leaving aside the economic impact of Brexit which the overwhelming majority of UK industry view as having negative consequences. I personally resent that so many of the freedoms, rights and opportunities that I and my children had to live, work, travel and study in Europe are no longer guaranteed. I never lost my country, I never felt under threat of EU regulations (most of which act for my benefit) and above all I have never resented migrants who come to the UK to fulfill vital roles and contribute to our society.

I agree and think both the UK and the EU will be poorer (in many senses) for Brexit.

handlebarcam wrote:

If a weak pound is such a boon to manufacturers like Brompton...

It isn't. A weak pound only helps exporters in the short term, typically as long as their forward currency hedge lasts . As everything from steel to orange juice is traded in dollars, and the UK imports everything from steel to orange juice, a falling pound damages manufacturing industry. (Take a look at Jaguar. In 2016 they could export every car they could build. Now they are on a 3 day week)

Griff500 wrote:

A weak pound only helps exporters in the short term, typically as long as their forward currency hedge lasts . As everything from steel to orange juice is traded in dollars, and the UK imports everything from steel to orange juice, a falling pound damages manufacturing industry. (Take a look at Jaguar. In 2016 they could export every car they could build. Now they are on a 3 day week)

This is incorrect. Let's say you make widgets out of 500g of aluminium that costs $2/kg. You sell those widgets for $10.

When GBPUSD is 2, your aluminium costs $1, or 50p. Your sale price is £5, or £4.50 profit per widget.

When GBPUSD is 1, your aluminium now costs £1. Your sale price, however is now £10, so £9 profit per widget.  However, we're going to take this opportunity to cut the price of our widgets, so we win more business, driving growth.

Obviously, it is even better if you hedged your FX exposure at 2, as your raw materials still cost 50p, but it's plain wrong to suggest that it all goes to shit when your last FX option expires.

That is a very simplified example, but it illustrates the point; manufacturing is all about adding value. If you're an exporter, the value you add is essentially priced according to the home currency of your customers.

Jag are f*cked because nobody wants to buy their diesels anymore.

srchar wrote:

Griff500 wrote:

A weak pound only helps exporters in the short term, typically as long as their forward currency hedge lasts . As everything from steel to orange juice is traded in dollars, and the UK imports everything from steel to orange juice, a falling pound damages manufacturing industry. (Take a look at Jaguar. In 2016 they could export every car they could build. Now they are on a 3 day week)

This is incorrect. Let's say you make widgets out of 500g of aluminium that costs $2/kg. You sell those widgets for $10.

When GBPUSD is 2, your aluminium costs $1, or 50p. Your sale price is £5, or £4.50 profit per widget.

When GBPUSD is 1, your aluminium costs $2, or £1. Your sale price, however is now £10, so £9 profit per widget.  However, we're going to take this opportunity to cut the price of our widgets, so we win more business, driving growth.

Obviously, it is even better if you hedged your FX exposure at 2, as your raw materials still cost 50p, but it's plain wrong to suggest that it all goes to shit when your last FX option expires.

That is a very simplified example, but it illustrates the point; manufacturing is all about adding value. If you're an exporter, the value you add is essentially priced according to the home currency of your customers.

Jag are f*cked because nobody wants to buy their diesels anymore.

You'll have to explain the immediate doubling of sale price. I would imagine that unless the customers' salary increases at a similar rate that there would be a dramatic drop off of unit sales. I would expect the sale price to remain the same and profit to decrease. As my profit decreases I'd start looking for a cheaper source of employee, perhaps even join a trading block in order to source these people and increase my market...

don simon fbpe wrote:

You'll have to explain the immediate doubling of sale price.

In the example, we are exporting to the US. Customers in the US pay $10 for our product. At 2 bucks to the pound, that's a fiver. At 1:1, it's a crisp tenner.

However, like Brompton, we would cut our prices in that example to a level that will increase units sold while maintaining an increased margin, in order to increase overall sales.

You'd have to be mad to join a trading bloc with which you'd run a perpetual trade defecit, unless you are happy to take on the increased debt that inevitably comes with it. How are we doing on public and personal indebtedness in the UK at the moment...?

srchar wrote:

Griff500 wrote:

A weak pound only helps exporters in the short term, typically as long as their forward currency hedge lasts . As everything from steel to orange juice is traded in dollars, and the UK imports everything from steel to orange juice, a falling pound damages manufacturing industry. (Take a look at Jaguar. In 2016 they could export every car they could build. Now they are on a 3 day week)

This is incorrect. Let's say you make widgets out of 500g of aluminium that costs $2/kg. You sell those widgets for $10.

When GBPUSD is 2, your aluminium costs $1, or 50p. Your sale price is £5, or £4.50 profit per widget.

When GBPUSD is 1, your aluminium now costs £1. Your sale price, however is now £10, so £9 profit per widget.  However, we're going to take this opportunity to cut the price of our widgets, so we win more business, driving growth.

Obviously, it is even better if you hedged your FX exposure at 2, as your raw materials still cost 50p, but it's plain wrong to suggest that it all goes to shit when your last FX option expires.

That is a very simplified example, but it illustrates the point; manufacturing is all about adding value. If you're an exporter, the value you add is essentially priced according to the home currency of your customers.

Jag are f*cked because nobody wants to buy their diesels anymore.

You of course missed the orange juice. Devaluation leads to wage inflation because much of our food is imported and the Jag workers still need to feed their kids oj and pork bellies, and the cost of gas to heat the factory is priced in dollars, and the robots to do the machining priced in dollars... .

Then of course there is the fact that we aren't selling in dollars, 42% of what we sell is sold in euros, and the euro is also suffering partly because of Brexit, so buying in dollars and selling in euros, we lose.

As I said, long term, devaluation doesn't help manufacturers at all.

As for Jag diesels? Sales of F type (all petrol) have plummeted, as have their hybrid SUVs. German manufacturers don't seem to be struggling, despite being at the centre of the diesel scandal.

Chris Hayes wrote:

Ah, the boost to GDP from the project fear tax.   Still, I suppose its slightly better to store their Schwalbe tyres in Crawley than watch them get burned along with our sheep in Calais...or maybe we could burn our own livestock, just like the old days... We could have pyres along the Channel Coast

Ah, the boost to GDP from the project fear tax.   Still, I suppose its slightly better to store their Schwalbe tyres in Crawley than watch them get burned along with our sheep in Calais...or maybe we could burn our own livestock, just like the old days... We could have pyres along the Channel Coast

Ah, the boost to GDP from the project fear tax.   Still, I suppose its slightly better to store their Schwalbe tyres in Crawley than watch them get burned along with our sheep in Calais...or maybe we could burn our own livestock, just like the old days... We could have pyres along the Channel Coast

Ah, the boost to GDP from the project fear tax.   Still, I suppose its slightly better to store their Schwalbe tyres in Crawley than watch them get burned along with our sheep in Calais...or maybe we could burn our own livestock, just like the old days... We could have pyres along the Channel Coast

JHC, bring on the delete button now!

BehindTheBikesheds wrote:

Still don't see how this is going to effect the supply chain, that has no lofgic behind it?

Given most parts come from outside the EU and it'll cost less to buy from outside the EU post leaving this is a bit of a risk, unless they beleive that the pound will drop massively in the near future?

Remember what happened in 2008 when all the analysts got it completely wrong, remember how the pound bounced back, suppose none of you remember when the travel shops were offering 96-97p to 1 Euro?

They already saw an upturn post Brexit announcement, what makes them think this is going to dramatically change? Isn't there going to be greater demand for bikes due to finances of families/individuals, the pushing of motors out of towns and cities, particularly places like London which are having an ultra low emission zone so most people can't afford to run cars and some might actually buy bikes.

Good luck to them whatever happens but it's a typical panic reaction IMHO that has already cost them 5% of the total purchase at the very least.

Go on, how will that work?

don simon fbpe wrote:

BehindTheBikesheds wrote:

Given most parts come from outside the EU and it'll cost less to buy from outside the EU post leaving 

Go on, how will that work?

The EU mandates import duties on bikes and bike parts. I can't remember the exact figures off the top of my head, but it's something like 15% for bikes and 5% for parts.

One would hope that the UK government would see fit to lower import duties post-Brexit in order to improve competitiveness.

srchar wrote:

don simon fbpe wrote:

BehindTheBikesheds wrote:

Given most parts come from outside the EU and it'll cost less to buy from outside the EU post leaving 

Go on, how will that work?

The EU mandates import duties on bikes and bike parts. I can't remember the exact figures off the top of my head, but it's something like 15% for bikes and 5% for parts.

One would hope that the UK government would see fit to lower import duties post-Brexit in order to improve competitiveness.

Why would the EU impose such a tariff? I see that some countries are targetted to nearly 50%...

don simon fbpe wrote:

Why would the EU impose such a tariff?

Protectionism, which I don't find as distasteful as many free-market economists.

However, when you're forcing everyone to pay more for their food than they otherwise would, in order to keep the inefficient French farming industry afloat, and your central bank sets monetary policy with the sole aim of keeping German manufacturing dominant, it starts to taste rather sour.

srchar wrote:

don simon fbpe wrote:

Why would the EU impose such a tariff?

Protectionism, which I don't find as distasteful as many free-market economists.

However, when you're forcing everyone to pay more for their food than they otherwise would, in order to keep the inefficient French farming industry afloat, and your central bank sets monetary policy with the sole aim of keeping German manufacturing dominant, it starts to taste rather sour.

Given that btbs is promoting cheaper cycling in a no deal brexageddon, how bad an idea would it be to scrap these tariffs? And we've touched on the currency fluctuations as being a bit too risky. How are we going to achieve this cheap cycling utopia?

don simon fbpe wrote:

how bad an idea would it be to scrap these tariffs?

It would be an excellent idea, but we are currently prevented from doing so by dint of our membership of the customs union.

srchar wrote:

don simon fbpe wrote:

how bad an idea would it be to scrap these tariffs?

It would be an excellent idea, but we are currently prevented from doing so by dint of our membership of the customs union.

Then what would happen? And we're back to why they are there in the first place. Wouldn't it just allow cheap (and nasty) manufacturers to fill the market place with more junk. For protectionism to work, surely you need a manufacturing base to protect?

don simon fbpe wrote:

srchar wrote:

don simon fbpe wrote:

how bad an idea would it be to scrap these tariffs?

It would be an excellent idea, but we are currently prevented from doing so by dint of our membership of the customs union.

Then what would happen? And we're back to why they are there in the first place.

I don't follow you Don. We're leaving the customs union, which means we'll be free to set our own tariffs. What happens next is up to the government of the day. Readers of this article may prefer to leave tariffs in place on folding bikes, to protect Brompton, set them low or zero on other types of bike in order to make cycling cheaper and therefore more attractive, and set them to a zillion percent on eBikes to stop people arguing about them.