Frog Bikes has released its annual accounts for the financial year to the end of February 2022, reporting losses of more than half a million pounds as co-founders and directors Jerry and Shelley Lawson point to the “continuing friction” from Brexit holding their business back. 

Back in April 2021, the owners of the children’s bike manufacturer based out of a factory in Pontypool, said Brexit had cost them an extra £250,000 in the first two months of the year, a story which appears to have been repeated in the year that followed.

In the accounts for the financial year to the end of February 2022, spotted by Cycling Weekly, Frog Bikes reported pre-tax losses of £530,476 as mounting Brexit-related costs pushed the business into the red.

> “It is very difficult to be positive”: Brexit lost Cycloc 25% of sales, founder reveals

Commenting on the losses, the Lawsons said they had struggled with “continuing friction” since the end of the Brexit transition period at the start of 2021.

“The day to day issues in fulfilling orders have dominated most of our trade relationships with the EU,” the couple who set up the business in 2013 after a “fruitless bike hunt for their own two children” wrote.

“The business was hit by an unexpected import duty of 47.5 per cent, 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.

Frog Bikes’ EU audit was delayed due to Covid, meaning the suspension from Anti-Dumping Duties granted for 2019 was not accounted for, something the company is still awaiting a refund for.

Frog Tadpole Kids Balance Bike
Frog Tadpole Kids Balance Bike (Image Credit: Farrelly Atkinson)

“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 continued.

“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 lack of refund meant Frog Bikes also had to go back to its results for the 2021 financial year and restate the pre-tax profit of £249,016 as a loss of £7,474.

“Non-tariff barriers have increased our costs to deliver to our key European markets,” the Lawsons said, noting “we compete against European brands which do not suffer from these barriers” and hoping they can find a solution that will “get bikes into the EU without our stores having to incur customs and pay VAT”.

> Brexit and the bike industry: we ask UK brands, retailers and distributors how the new rules are affecting them

“I couldn’t say there was anything positive,” Jerry Lawson said about Brexit in April 2021. “There’s extra paperwork, and there are extra costs. And there’s a whole lot of unknown.

“The paperwork is also incredible. To begin with, some of the countries wanted the paperwork in their language. Now we send them a commercial invoice with a whole lot of customs information. Plus, it’s four or five times we have to print it.”

Earlier this month Brompton’s CEO bemoaned “bloody Brexit” during an at length interview about the state of play in the bike industry. Will Butler-Adams noted the folding bike manufacturer’s pre-tax profits for the last financial year were down 24 per cent to £7.3 million despite revenues rising 40 per cent.

But it is not just the b-word, of course, and Butler-Adams also outlined a combination of factors, including Brompton’s supply chain being affected by the Russian invasion of Ukraine and tensions between China and Taiwan, with both Ukraine and Taiwan producing titanium used in the folding bikes’ frames. On top of that there are the ongoing effects of the Covid pandemic, rising energy bills and a cost of living crisis.