Cycle market: Moving into the fast lane

The bike industry is booming – and not just on Tube strike days. James Thompson reports

Whether it is people trying to be healthy, environmentally friendly or save money by ditching the car during the recession, it seems that more Brits are getting on their bikes.

Yesterday, Halfords, the bike-to-car parts retailer, trumpeted robust sales of bikes, as it delivered modest growth of 2.4 per cent in pre-tax profits to £94.4m for the 53 weeks to 3 April. Halfords sold more than one million bikes last year, and while this was about the same as the year before, its average transaction value increased, and it was cycling into the teeth of a fierce recessionary wind.

But it would be naïve to think that there is a huge surge in people cycling, given the burgeoning waistline of your average Brit and the younger generation's addiction to the web. However, the long-term trends point to a bright future for bike shops. The retailers hoping to tap into this growing £350m market are a fragmented bunch.

The market is dominated by Halfords, which accounts for one in three bike sales in the UK.

The rest of the market comprises: the specialists Evans Cycles and Decathlon, the French sportswear retailer; the children's toy specialist Toys R Us; the specialist sporting goods retailers JJB Sports and Sports Direct; the catalogue giant Argos; and the big grocers Tesco and Asda. Assad Malic, an analyst at Credit Suisse, says: "It is a pretty mature market, where we have seen growth in the last year and a half or so. There is still a shift towards more healthy living, which has prompted more people to cycle into work, and there has been a cost driver behind this shift during the recession."

However, unlike other non-food retail sectors, Tesco has not parked its guns on the lawns of the specialist bike retailers to the same extent. Mr Malic says: "The big supermarkets have dabbled into it, but you need to devote a lot of space to bikes, and I am not sure the sales densities make much sense."

Apart from Halfords, the other listed retailers do not break out their sales of bikes, and Evans Cycles was unavailable for comment. But Decathlon – which has six UK sports equipment stores, but plans to have up to 50 over the next 10 years – was bullish about its sales of bikes, particularly those in its second-tier price range, between £100 and £150.

However, there appear to be substantial regional differences between take-up of cycling and the types of bikes they buy.

James Ilbery, the product manager for bicycles at Decathlon, also says: "In London, we have particularly strong growth of city and commuting bikes, but further north sales are stronger on mountain bikes."

Of all the regional differences, some of the most fascinating are taking place in London. Roger Geffen, the campaigns and policy manager at CTC, the national cyclists' organisation, says that cycling on the capital's main roads is up by 91 per cent since 2000, partly driven by the capital having the country's most congested roads. While the congestion charge that was introduced in 2003 gave cycling a "big lift" in London, it was growing before the scheme was launched.

In the capital, there also seems to be a virtuous cycle in motion where injury rates for cyclists are falling despite the soaring take-up rate. Since 2000, the casualty rate for cyclists tumbled by 33 per cent, compared with the average between 1994 and 1998, according to Transport for London. Mr Geffen says: "There is a safety in numbers theory that is supported by good evidence in different cities in Britain and countries including Germany and Holland. In London, there has been an absolute reduction in the number of cycle injuries." He adds that York and Cambridge, which are well known for their army of cyclists, are also "very safe for cyclists".

Mr Geffen is full of praise for certain government cycling initiatives, particularly Cycling England, but says it needs to do more. In addition to the investment in cycle tracks by local authorities, The Department for Transport launched Cycling England in 2005, and it is scheduled to deliver £140m of funding between 2008 and 2011.

The scheme is also open to teenagers, and TfL said in March that more than 200,000 schoolchildren will benefit from £10m of cycle training this year under the DfT's Bikeability scheme.

Whether it is schoolchildren or adults, a key goal of Cycling England is to provide training, such as a simple two-hour course, to people who are interested in giving up their cars in favour of bikes. "As an initiative, it is incredibly effective," says Mr Geffen. However, Mr Geffen says the quality of local authority investment in cycle lanes can vary substantially between different areas. "There is a real inconsistency in local authorities' design standards [for cycle lanes]."

For bike retailers, there are two other reasons why the future looks bright: lots of kids are keen to get into cycling with their families, and the 2012 London Olympics. In particular, Halfords cited yesterday the strong growth in its premium bikes, partly driven by the success of Chris Boardman's gold medal at last year's Olympics in Beijing, and children's products buoyed by new introductions including Bob the Builder and Thomas the Tank Engine models.

The retailer also revealed yesterday that 74 per cent of children would like to cycle more as a family; and one in 10 six- to nine-year-olds could not ride a bike. Factor in the current green, healthy and cost-savings trends in Britain now, as well as an expected boost from the London Olympics, and the cycling revolution could be set to accelerate. David Wild, the chief executive of Halfords, says: "I don't see [growth in cycling] finishing any time soon. I think cycling is so much in tune with contemporary trends."

Invented in Britain: Made elsewhere

Having invented the machine in its modern form – JK Starley's Rover Safety Bicycle, launched in 1885, is accepted as the first recognisable modern bike – Britain has a proud history of manufacturing bicycles. For the most part, however, history is now the operable word.

Britain's best-known bicycle maker, Raleigh, was founded in Nottingham in 1888 and still "creates bikes" there today. But manufacturing – as opposed to creation – was outsourced to the Far East in 2003.

The best-known mass production companies still building their machines here are the folding bike maker Brompton and Pashley, which makes the sort of bicycles that the former prime minister John Major was presumably thinking about when he talked wistfully about "old maids cycling to church".

Brompton, based in west London, is growing rapidly, and now sells more than 20,000 bikes a year, producing revenues of £8m-plus. Andrew Ritchie, the founder, no longer runs the company, but is still closely involved, and retains a 25 per cent stake.

Pashley, meanwhile, sells to both the consumer and business markets – its biggest customer is Royal Mail, for whom it is the exclusive provider of posties' bikes. Every machine produced by the company is hand-built in its Stratford-upon-Avon factory.

There are other small-scale bike manufacturers active in the UK, particularly at the top end of the market, producing custom-built machines.

Still, the UK's bike production is now less than 5 per cent of the 1 million machines a year Raleigh alone was producing in the 1950s.

David Prosser