The figure takes into account factors such as bicycle manufacturing, retail and cycle-related employment.
The report says £51m was raised for UK manufacturers from the 3.7 million cycles sold in 2010 - a rise of 28% on the number of cycles sold in 2009
More than a million people also started cycling last year, bringing the total number of cyclists to 13 million.
Last year more than £1.5bn was spent on bikes and another £850m on accessories, with the LSE estimating that the cycling industry is now worth some £2.9bn a year.
There are now 23,000 people working in cycling, contributing more than £600m to the economy in wages and taxes.
The report also says rising fuel costs, improved cycle networks, concern for the environment, and the pull of the Olympics are all possible factors for the increase in popularity for cycling.Fewer sick days
And it says a 20% increase in cycling levels by 2015 could save millions of pounds in reduced congestion, pollution levels and NHS costs.
The report says that regular cyclists take 7.4 sick days per year, compared with 8.7 sick days for non-cyclists, saving around £128m through reduced absenteeism, with projected savings of £2bn over the next 10 years.
Dr Alexander Grous, of the LSE, who conducted the research, said: "The good news is that structural, economic, social and health factors seem finally to have created a true step-change in the UK's cycling scene."
Stewart Kellett, of British Cycling which is the governing body of UK cycle sport, said: "This report is further evidence that when more people get involved in cycling there are measurable benefits to the individual, their family, their employer, the environment and the economy as whole."