There's an occasional cheap racer with grip-shifters parked outside my local pool. That's been around for a while. It's very clean and looks well cared for. Compared to my oily crud-monkey.
Cheap bikes are a bit of a odd area. The problem with picking up something second-hand is that you need to know what you are looking for, and it takes effort. So people with few pennies buy from the supermarket or down the market (half the kids on the local south London estates seem to be riding badly maintained £500+ bikes which I am sure were legitimately sold on by their original owners). Proper bike shops tend to be scary to the uninitiated (a process I expect involves lycra and a trip to 'the back room' à la Pulp Fiction). They might be great if you know bikes. There does seem to be a market for the mid-range – certainly in London with Evans, Cycle Surgery and the like, which cater to the marginally ignorant (like me) with money to spend (trust me, the two are complementary).
It does create an impression that you need a budget of £500+ and a public willingness to sheath yourself in a lycra condom, rather than just a bike. Of course, the supermarket BSOs can be terrible to ride, I feel the pain of the occasional chap I see grinding up Mount Crystal Palace on a full-suspension Apollo, it looks like he's trying to a pedal a mattress stuffed with lead springs. There just doesn't seem a niche for good, cheap bikes (for the reasons mentioned upthread).
That said, I've been an on-off utility cyclist for years. Back as a student in Edinburgh I'd rattle my second-hand Raleigh Arena over the bridges every day. I got back into cycling a few years ago with a £130 Saracen Rufftrax. I'd moved house, was still putting off getting a UK driving licence and my US one had run out, and walking to the local pool was a 30 minute trek, so it seemed like a good solution. I'd not planned to ride it more than that. I still have the bike as my main commuting machine, and it now does a hundred or so miles a week. It's heavy but robust and fears no potholes. It's actually very comfortable to ride, I've even rode it all the way home (London) from the south coast several times. I do have two more expensive bikes (a Ridgeback Hybrid and Giant SCR thing) which are very nice, but for everyday stuff, I grab the Saracen and just ride.