Brompton warns of soaring costs for UK manufacturers

Brompton, the foldable-bicycle maker, is facing a pile-up of problems from material shortages to rising production costs in a sign of growing pressure on some of Britain’s most successful companies.

The pandemic-induced boom in demand for cycling and a 6 per cent jump in the price for its handmade bicycles will not be enough to offset extra costs from aluminium shortages, more expensive steel, higher shipping rates and Brexit, according to Will Butler-Adams, managing director.

“If you roll all of this together — logistics costs, Brexit costs, not enough people making bike parts — then it means customers paying more,” he told the Financial Times.

He warned that the price of the London-made bicycles, which rose 6 per cent at the start of the year and cost between £850 and about £3,200, would probably increase further to about 10 per cent compared with 2020 as “we’re not over the worst of it yet”.

The stark message on mounting costs from one of the UK’s pandemic winners highlights the pressure manufacturers face from a storm of global problems from soaring commodity prices to supply-chain shocks, compounding the local challenge of Brexit, which he called the “least of our problems”.

Other small UK businesses, which have enjoyed increased demand for their products in the pandemic, from the country’s only espresso machine maker Fracino to insulation manufacturers, told the FT a similar story of a cocktail of global supply issues and raw material costs hitting margins, with Brexit just an added problem rather than the feared main drag on profits.

Butler-Adams, a key shareholder in Brompton, predicted that the jump in consumer demand for the company’s bicycles would persist beyond the lifting of coronavirus lockdowns after a surge in sales by about 20 per cent to about 70,000 units in the past 12 months.

Consumers will still have enough money left over to buy bicycles even after splurging on eating and drinking out, he argued, adding: “The Roaring Twenties, here we go.”

However, scaling up production to meet that demand will be no easy task, with shortages of raw materials and rising costs, not helped by the grounding of the Ever Given in the Suez Canal that blocked supplies, which the Brompton boss thinks will hit production in six to eight weeks’ time.

The main cost increases are because of rising steel prices, which have shot up in the wake of the pandemic and are used in the manufacture of the bicycles, and a jump in shipping costs, exacerbated by Brexit in some cases.

In addition, the company faces shortages of aluminium, also used to make the bicycles, after a warning from its Taiwanese supplier and processors for electric versions of its products as a result of the chip crisis.

Butler-Adams said the company was working hard to deal with the latest problems caused by the Suez Canal disruption. “We’re all over it like a rash. We know which parts have been delayed. We know whether we need to fly it over and how many we need to fly over. We’re finding ways to keep our continuity going.”

But he added a note of caution: “I’m sure in the next 12 months, something will get us. We can’t keep wriggling out of it.”