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Cargo bike delivery company Pedal Me goes into administration after failing to reach agreement with HMRC over debts

The e-cargo bike company said that shareholders have managed to buy back assets from administration, preserving jobs and offering increased liquidity

The electric cargo bike company Pedal Me has been forced to go into administration after it failed to reach an agreement with HMRC over its debts, but a buyout of assets from existing shareholders has managed to save jobs and offer some promise for the future, road.cc has learnt.

The news comes despite the London-based bike courier service company claiming that its gross margins improved to around 50 per cent, while hourly earnings per staff hour went up 20 per cent on the previous year.

Founded in 2017 by Ben Knowles, Rob Sargent, and Chris Dixon, Pedal Me established itself as a revolutionary and eco-friendly new service by using cargo bikes built in the Netherlands by Urban Arrow. The company claims that in central London, it is cheaper and quicker than the taxi service Uber.

> “Adrian, you’re wrong!” Pedal Me’s co-founder on cargo bikes + THAT foggy ride on the Isle of Man

The news was delivered by co-founder Ben Knowles via an email to its shareholders, seen by road.cc. Knowles cites the difficulties imposed on the company in a post-pandemic world, as the disruption caused by Covid meant that its work disappeared overnight. Since then, the company has also found it difficult to raise capital, hindering its growth.

He said: "Frustratingly — even though company productivity has never been higher than over the last few months — with earnings per staff hour running 20 per cent up on a year ago, and gross margins improving to around 50 per cent — the amount of debt we have means that we were unable to accept further investment in the current company without a workable payment plan for our debts with HMRC.

"Despite tireless efforts, we’ve been unable to reach a viable agreement with HMRC — which means there is no realistic chance of trading out of the current debt, even with those offers of investment and ongoing improvements in productivity.

"Having exhausted all alternative options, we have been forced to put the company into administration. At the same time, a group of existing shareholders bought the company assets back from administration as a going concern — preserving the jobs, the service and the mission."

> Pedal Me, the e-cargo bike-based delivery service, warns Amazon: “We’re coming for you”

Bike Taxi, the company underlying Pedal Me, meanwhile, has filed its accounts on Companies House today, which are expected to be made public in the coming days.

In a statement shared with road.cc, Knowles said: "Obviously this has been an incredibly difficult decision, but importantly, the shareholder buyout means we can continue without any interruption in service for our customers.

"The increased liquidity that comes with this process mean we can secure the future of Pedal Me, and move forward with our plans for improving service during busy times and the tech improvements we’ve got lined up. We set Pedal Me up with the intention of transforming cities and I am absolutely determined that we continue our mission to do so."

In the past few years, Pedal Me has gone through a number of crowdfunding investment rounds, the most recent one coming in October last year with offers of over £250k of investment in less than 6 weeks.

The company, which started out with just an earning of £454 in its first month six years ago and now has enjoyed up to £1.4 million per year revenues, had previously smashed its crowdfunding target of £150,000 in 2021 on the very first day of its call for investment.

And in 2020, just a few months into the lockdown but buoyed by its success in the past, Pedal Me warned online shopping giant Amazon, "We're coming for you."

The company had also become a talking point in 2022 by weighing on in the heated helmet debate, banning its riders from wearing them, saying that it believed riders and other road users tend to take more risks when a helmet is worn, and that the "vast majority" of injuries sustained by staff occurred off the bike.

Instead, it claimed that reporting near miss incidents, properly training riders, maintaining its fleet of cargo bikes, as well as tracking poor rider behaviour is more effective.

The news of Pedal Me folding means that the bike industry's topsy-turvy status-quo looks like it will be maintained going into 2024 as well, after a troubling 2023 which saw the likes of a number of UK-based cycling retailers enter administration, including the widely-popular WiggleCRC, along with distributors 2pure and FLi Distribution.

Just last month, there were reports of Orange Bikes going into administration as well, but the iconic British mountain bike brand has been saved from permanent closure, after it was announced that it was set to continue trading following the acquisition of its frame manufacturing partner Bairstows Sheet Metal.

> What the hell is going on in the bike industry? Wiggle Chain Reaction turmoil discussed plus pro cycling's idiot problem on the road.cc Podcast

Adwitiya joined road.cc in 2023 as a news writer after graduating with a masters in journalism from Cardiff University. His dissertation focused on active travel, which soon threw him into the deep end of covering everything related to the two-wheeled tool, and now cycling is as big a part of his life as guitars and football. He has previously covered local and national politics for Voice Wales, and also likes to writes about science, tech and the environment, if he can find the time. Living right next to the Taff trail in the Welsh capital, you can find him trying to tackle the brutal climbs in the valleys.

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52 comments

Avatar
brooksby | 5 months ago
1 like

Quote:

"Having exhausted all alternative options, we have been forced to put the company into administration. At the same time, a group of existing shareholders bought the company assets back from administration as a going concern — preserving the jobs, the service and the mission."

I had thought that phoenixing a business like that was frowned upon. Putting the company into administration because it can't pay its debts while at the same time selling off everything that might have been used to paid those debts?

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Rendel Harris replied to brooksby | 5 months ago
0 likes

brooksby wrote:

I had thought that phoenixing a business like that was frowned upon. Putting the company into administration because it can't pay its debts while at the same time selling off everything that might have been used to paid those debts?

The money paid to the administrators for the assets will be used to pay off the debts, seems as though the company has been given plenty of time to prove that they could use those assets to create funds to repay their debts and has failed to do so.

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Robmb | 5 months ago
4 likes

Ben and friends didnt have a clue - this was not a profitable biz - huge losses every year - £2.9m culm  to FEB23. Only reason funded on Crowdcube was because investors were solfd a story to by the company about future growth and profits -  a pure fantasy. These guys couldnt manage a cabbage. We told Ben and investors that they didnt know what they on about and again we have been proved right. Start ups need real entrepreneurs to make them work not fantasists. Nothing to do with Covid. Just really poor management. Where has all the cash gone Ben?

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don simon fbpe replied to Robmb | 5 months ago
0 likes

Interesting...

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Rome73 replied to Robmb | 5 months ago
0 likes

I worked with Ben for about 4 years (not with PedalMe) and just as he started up his business. He had drive and determination. But, my word, was he chaotic and unorganised. He really couldn't organise 'a piss up in a brewery'. 

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KiwiMike | 5 months ago
1 like

So HMRC destroyed investor value by refusing a debt repayment scheme from an obviously profitable business hit by the black swan that was COVID. If I was an investor I'd be F'ING furious at HMRC, not the PedalMe management. 
 

Next time HMRC/govt bail out a bank, contract services business, steel mill or other 'too big to fail' major firm to the tune of £Bn's remember that's *our* money they'll bung to their mates, but not to the rest of us. 
 

This isn't on management, this is on Tory MP's. 

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Robmb replied to KiwiMike | 5 months ago
4 likes

Utter rubbish. Pedlame has never amde a penny of profit and has to date lost almost £3m. They owed HMRC in Feb23 so a year ago almost £500k in unpaid employment tax. Staggering mismanganemtn for which Ben and his fellow idiots should be struck off. Thats out money he is wasting. 

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Hirsute replied to Robmb | 5 months ago
2 likes

Those accounts are not pretty reading - funding the cashflow by building up creditors and bank loans.

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underworld99 | 5 months ago
5 likes

Having invested twice with 'bike taxi ltd', the underlying owners of pedal me, it leaves a pretty sour taste in my mouth that a select group of shareholders can buy the business back on the cheap and just start again. Having also used the business a number of times I won't ve going back to using pedal me II. But thems the 'brakes' 😬

That said, this is the second example of a crowdfunded company 'suddenly' having to pay a whopping tax bill which I'm guessing is a combo of extremely poor tax planning and/or HMRC becoming much more draconian after covid.

The second business also miraculously is starting again by buying the assets of tge failed company....

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Global Nomad | 5 months ago
2 likes

Just to balance all the criticisms of the business model - HMRC i.e the public/you, have allowed a business to go into administration and not repay its debts, that then is immediately bought out by existing shareholders, which clears all debts and carry on as if nothing happened with the same business model staff and assets.....

The only loosers here are you and me as tax payers.

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don simon fbpe replied to Global Nomad | 5 months ago
1 like

HMRC follow instructions of the government, not the will of the people. That would need PR, not FPTP. So putting responsibilty on to the public as a whole is somewhat disingenuous.

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HoarseMann replied to Global Nomad | 5 months ago
1 like

Given the size of the cuts the government made to the active travel budget last year, I'd say they can afford to take the hit of PedalMe's unpaid tax bill.

Perhaps it's a bit like a reverse stealth tax, leaving debts in lieu of active travel funding?!

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Rendel Harris replied to Global Nomad | 5 months ago
3 likes

Global Nomad wrote:

Just to balance all the criticisms of the business model - HMRC i.e the public/you, have allowed a business to go into administration and not repay its debts, that then is immediately bought out by existing shareholders, which clears all debts and carry on as if nothing happened with the same business model staff and assets.....

The only loosers here are you and me as tax payers.

Allowing a business to go into administration does not mean that it doesn't have to repay its debts, it just gives some protection from legal action whilst the administrator decides on the best course of action. In this case the assets of the business have been bought from the administrator, who will use any derived income from the sale to pay off the tax owing, or a portion of it. It's difficult to say whether that's a good deal without seeing the amount of debt owed and the amount raised from the sale of assets, but although it's clearly not a desirable situation for any of the parties it may be the only way the taxpayer can receive any of the monies owing.

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AidanR replied to Global Nomad | 5 months ago
2 likes

Not necessarily. HMRC are preferred creditors, so they will likely get at least some of what they're owed. We'll find out more in due course when the liquidator's report is posted on Companies House.

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Robmb replied to Global Nomad | 5 months ago
1 like

Thats not how an admin works. 

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wycombewheeler replied to Global Nomad | 5 months ago
0 likes

Global Nomad wrote:

Just to balance all the criticisms of the business model - HMRC i.e the public/you, have allowed a business to go into administration and not repay its debts, that then is immediately bought out by existing shareholders, which clears all debts and carry on as if nothing happened with the same business model staff and assets.....

The only loosers here are you and me as tax payers.

this business cannot manage it's debts, the administrators step in to sell their assets (presumably to the highest bidder) the funds generated from that sale pay the existing creditors (HMRC first, shareholders last)

What difference to HMRC does it make if the assets are bought by tyhe previous owners or someone else?

But I have to wonder

1) where did the existing management get the funds to buy the assets

2) why do they think they can make a profit now, but not before? 

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muhasib | 5 months ago
4 likes

So being simple is this 'pedal me reborn' and the debt stays with a defunct company so the HMRC debt isn't repaid to any real extent and the crowdfunders lose the lot?

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AidanR replied to muhasib | 5 months ago
2 likes

That's basically it, yeah

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Robmb replied to AidanR | 5 months ago
1 like

No. Depending on what was paid for these assets and whether there were other secured lenders on the failed Co, HMRC will get the cash  - which is why they have chosen thos route. im no fan of HMRC but Ben and Friends are pure fantasists and HMRc would have seen this from their various promises - which they alwasy failed to keep. Rubbish biz and this new version wont last long. 

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don simon fbpe | 5 months ago
0 likes

I wonder what went wrong with the business plan...

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jaymack replied to don simon fbpe | 5 months ago
3 likes

....and why did they owe the tax man money? That would appear to suggest poor management's to blame. Rule 1: never loose money; Rule 2: always pay the tax man; Rule 3: never forget rules 1&2.

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Robmb replied to jaymack | 5 months ago
0 likes

Chronic management.

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mark1a replied to don simon fbpe | 5 months ago
1 like

No need to wonder, it's reported in the article. Substantial debts to HMRC, and unable to reach an agreement for repayment. That level of debt made it difficult to raise further investment, despite improving margins. 

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don simon fbpe replied to mark1a | 5 months ago
0 likes

.

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don simon fbpe replied to mark1a | 5 months ago
0 likes

Who the fuck invests in a company that plans to create a debt with HMRC?

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mark1a replied to don simon fbpe | 5 months ago
4 likes

don simon fbpe wrote:

Who the fuck invests in a company that plans to create a debt with HMRC?

Creating debts or a liability with HMRC is part of doing business, it's paying it on time that is the crucial thing. The latter is clearly what went wrong, which is what you appeared to be wondering.

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don simon fbpe replied to mark1a | 5 months ago
1 like

I'm wondering how an unviable company ever got off the ground.

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RoubaixCube replied to don simon fbpe | 5 months ago
1 like

Because some business exploit buzz words and slogans like "Going Green" and "Green Agenda" , "Great for the environment"  or "Zero Emissions" to curry favor with the government or other big businesses which they wish to get in bed with. All of a sudden they get a huge cash injection of a few million to invest into the business.

I mean as a business alone. It wasnt a terrible idea to use cycling infrastructure for small deliveries when roads these days are quite heavily congested. There is merit behind the whole idea.

 

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don simon fbpe replied to RoubaixCube | 5 months ago
0 likes

Perhaps someone should put a business plan together to see if it's viable. smiley

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AidanR replied to don simon fbpe | 5 months ago
4 likes

It wasn't unviable. But like many business it got hit hard by the pandemic and had to take on a lot of debt. Then the interest rates on that debt went through the roof and the cost of servicing became too much to bear.

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