A couple of comments on the report from the London Cycling Campaign
office:
"The health costs in this study also appear to be inconsistent (based
on several sources) and I have no idea where the figure of 15,000
cyclists entering the ‘Capital’ (sic) comes from. 27,000 entered
central London (TfL defined cordon) in the morning peak in 2009 based
on the TfL travel in London report 3, page 60.
and another:
"The Sky report really is trash, produced as a marketing brochure to
justify the government money being invested in delivering 200,000
Skyriders.
The really disappointing part is that if an informed attempt had been
made to cost the health benefits and the transport efficiency benefits
of increased everyday cycling then the outcome would have been many
times higher.
The methodology to do this does exist. For example the HEAT assessment
tool developed by the World Health Organisation (advised by LCC) was
used in the recent examination of cycle hire in Barcelona which showed
massive benefits for those people who switched from car travel to
cycling."
Despite its flaws, the report did garner lots of positive media
coverage for cycling. And it highlights the gap in the 'market' for a
really thorough analysis of the financial benefits of cycling, either
in the capital or across the UK.
Mike Cavenett
LCC communications officer
On 25 Aug 2011, at 11:54, john meudell wrote:
> Ok, done the sums.
>
>
>
> First point, table 4 and 5 cycle sales and value, along with
> associated assumptions.
>
>
>
> As I mentioned, cycle sales have been in decline for a couple of
> years, with 2009 sales 2.91m at an average import price of £78.65
> per unit, giving a total import value of £229.6m. Now, accepting
> the report is correct, that cycle sales in 2010 are 3.7m (noting
> ProdCom provisional 2010 data is not due for release until about
> now), and assuming a 5% increase in import price (£82.58), that
> would make the total value of cycle imports in 2010 £305m.
>
>
>
> If the value of retail sales were as suggested, £1.62Bn, that would
> imply an import to retail margin of 430%, making cycling probably
> the most profitable trade in the UK (so why did Halfords pull the
> Bike Hut concept…?).
>
>
>
> That is not reality. Noting that the cycle retailers margin on the
> average cycle is somewhere in the region of 40%, total real margin
> on bikes through the entire supply chain is probably not more than,
> at best, 200% over import price, making total UK retail cycle sales
> no more than £915m, considerably below that suggested.
>
>
>
> Given this discrepancy, I would want to see sound confirmation of
> revenues in the other segments of cyclists spend in these two tables.
>
>
>
> (Note: I do have a plot of cycle sales since 1997, constructed from
> ProdCom data, but the configuration of this server means I can’t
> send it. That said, I’m sure someone can suggest a way of getting
> it out to you.)
>
>
>
> I’d also note the use of the term “Gross Cycling Product” (one
> assumes an attempt to (pseudo-) relate to Gross Domestic Product).
> In a gross domestic product calculation, import cost is subtracted
> from the output price…..in which case the GDP sales value quoted
> should really be £610m.
>
>
>
> The second major point I have is in the use of discounted cash flow
> and NPV. Discounted cash flow only has relevance in comparative
> investment appraisal….NPV has no meaning in terms of real money and
> anything besides internal investment appraisal. Here we seem to
> have an analysis that combines a calculation of a benefit in 2010,
> then tries to calculate a component over a ten year life cycle on a
> discounted basis….I note with no investment attached to it. Given
> I’ve spent the best part of 30 years involved with capital project
> appraisal I find the approach somewhat weird!
>
>
>
> In the same vein, I also find it hard to understand the choice of
> discount rates, given that government (presumably the target
> audience) use only a single, well publicised, discount rate to be
> found in the Treasury “Green Book”. This is currently 3.5% (where
> “project” cost and revenue streams are up to 30 years)….so why
> generate three arbitrary rates that have little application except
> outside of private sector internal investment appraisal?
>
>
>
> Furthermore, the DCF analysis only considers the “savings” in the
> context of “employment”, but doesn’t consider the “investment”
> required to achieve that outcome….the calculated result being
> therefore somewhat optimistic (though, presumably, the assumption is
> that the only costs would be cycle sales).
>
>
>
> Finally, in terms of the analysis, other major benefits, such as
> overall health and congestion, are ignored, arguably benefits much
> larger than the pure employment aspects. I would, however, note
> that to date, evaluations of these two have been poor to non-existent.
>
>
>
> The only thing I do find encouraging is the attempt to assemble
> benefits and costs in a systematic manner, albeit very crudely.
> That approach, and the report, is let down by gaping holes in the
> evaluation stemming from, in my view, likely crude and self-
> interested aims of the sponsors, combined with lack of knowledge of
> the authors.
>
>
>
> I have to say I find the errors and omissions highlighted above
> worrying. Even within the limitations of this particular analysis,
> the author has failed to use solid trade and economic data that is
> freely available and should be well known to staff at LSE.
>
>
>
> UK Treasury and other analysts are not stupid. Like the SQW
> analysis commissioned by Cycling England a couple of years back,
> analysis like this actually has the opposite effect of that desired,
> and undermines not only the arguments for improvements for cyclists,
> but also the credibility of those cycling sector arguments ….with
> the consequence that we’re even less likely to be listened to than
> we are now…….
>
>
>
> Must try harder………a lot harder!
>
>
>
> Cheers
>
>
>
> John Meudell
>
> C.Eng, MIMechE
>
> Swansea University
>
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