1. Barclays has pulled out of sponsoring London’s Boris Bike scheme.
Barclays has sponsored London’s cycle hire scheme since it was launched in July 2010, for an initial £25 million over five years.
But in 2011 Boris Johnson proudly announced that the size of the deal would be increased to £50 million and the arrangement extended until 2018.
Awkwardly, Transport for London (TfL) has now admitted that the bank will walk away from the sponsorship deal in 2015, having paid less than £25 million due to deductions for poor performance.
2. The scheme has had to hike its prices, is losing money and is shedding users. Here’s what’s going wrong:
3. It would have been cheaper to give every Boris Bike user a free tube ticket than build the scheme.
Our analysis shows how every single Boris Bike journey ever has been subsidised by over £3 of public money – more than the cost of a central London tube ticket using an Oyster card.
Barclays’ sponsorship deal never covered anything like the cost of the scheme. Transport for London says constructing and operating the scheme for its first six years will cost £225 million – or £37.5 million a year.
Some of this money can be recouped. But Barclays will now pay less than £5 million a year for their five year sponsorship deal, while TransportXtra discovered revenue from the scheme’s users is running at just £8 million for the 2012/13 financial year – the scheme’s most successful period.
In short, after almost three-and-a-half years of operation the schemes’ costs have hit £123 million, income from sponsorship is £16 million on a proportionate basis and revenue is approximately £26 million if we use the 2012/13 figure as a high benchmark.
The remaining £81 million of costs have been picked up by Transport for London, local councils and other public bodies who have helped fund the scheme.
With 26.4 million journeys made by November 2013, this works out at £3 for each and every journey ever.
4. And there’s no sign of the scheme becoming profitable.
Even if you exclude construction costs, the scheme had an operating shortfall of £11 million during 2012/13.
Transport for London has admitted they have no idea whether the scheme will ever break-even, even as its budget for other forms of transport are being cut. Boris Bikes have so far been subsidised by £3 per use, while bus journeys attract an ongoing subsidy of just 17 pence.
5. New figures show how Boris Bike user numbers have fallen down to near launch levels.
The scheme steadily gained users after it went public in summer 2010 but has since slipped back.
Just 514,146 journeys were made using the bikes in November 2013 – down a quarter on the same month last year.
6. Part of the problem is that Transport for London decided to double access fees in an attempt to increase revenue.
A single day’s access to the scheme now costs £2, with journeys over 30 minutes long costing a further £1 each.
So a return trip across central London can now cost £4 – more expensive than two bus fares.
Prices went up at the start of 2013 so the full impact of the rises may only be apparent when annual memberships run out next year.
7. The price rise caused user satisfaction to plummet.
One of the issues picked up by Transport for London surveys was that many people who use Boris Bikes thought that Barclays were covering the whole cost of the project. This made them less willing to accept the price increase of annual membership from £45 to £90.
By comparison, the scheme’s Parisian equivalent is funded entirely by a marketing company in return for free advertising space around the city.
8. Meanwhile Serco, the people running the scheme, are struggling to ensure enough bikes are available.
The scheme is run by outsourcing company Serco, which has the unenviable task of ensuring Boris Bike docking stations are kept fully stocked. Around 70 staff are employed to move the bicycles around the capital but it’s a tough task.
The problem is that the scheme has particularly strong passenger flows – hundreds of users turn up at major London railway stations such as Waterloo and take all the bicycles to central London, meaning there are none left for late arrivals.
Then in the evening it becomes a struggle to find a bike in popular areas such as the City of London, because other people have already ridden them back to the railway station. Where they then struggle to find a free docking station.
Serco has been already been fined for poor performance, while Boris Bike workers went on strike over the summer. They’ve pledged to improve performance.
9. That said, the cycle hire scheme is extending into West London this week, which will boost usage figures.
From Friday 13th December the scheme will be available in the shaded area on this map, with cycle hire stands to be available in Hammersmith and in parts of Wandsworth. This should boost usage.
10. But it costs TfL an awful lot of money to run this scheme.
All forms of transport are subsidised but the Boris Bike scheme is particularly costly.
The main hope for a revival lies with the planned introduction of Oyster-style contactless payment for bikes in a few years’ time, which may increase usage.
And in the meantime TfL is searching for a new sponsor for all of its cycling projects.