The global sharing economy is the biggest financial phenomenon of the 21st Century: and thankfully the UK finds itself right at the heart of it
By 2025, the sharing economy could generate a potential revenue opportunity worth $335bn, and PwC estimates the UK’s slice of the pie could be worth around $15bn (or £9bn).
The on-demand, or sharing, economy is and will be a new frontier of innovation and as such, will force us to question how businesses and economies work in the future. Countries around the world are tackling the question of this nascent trend – in the US, for example, even Hilary Clinton has been taking about “hard questions” the “gig economy” raises.
The UK has taken significant steps towards addressing these issues with the launch of the UK’s trade body for sharing economy businesses, SEUK, which is working with Oxford University’s Saïd Business School developing the world’s first comprehensive sharing economy ‘trustmark’.
Trust and responsibility
The aim is to establish responsible practices and high trust standards to guide both sharing economy businesses and consumers, ensuring workers, consumers and businesses are properly protected in a sharing economy future. So what is it about the UK that makes it a hub for innovation support, and specifically, home to the global sharing economy?
The booming UK technology scene is the perfect environment for entrepreneurial businesses. Since 2010 the UK tech sector has grown by 17 per cent, creating almost 30,000 jobs according to Tech City UK.
Research from GP Bullhound reported that as of June 2015, the UK was home to 17 ‘unicorn’ businesses, businesses with a valuation of $1bn plus, 13 of which are based in London. This is more than the total of Sweden and Germany put together.
Furthermore – according to Tech City UK, just five years after the launch of Tech City, venture capital into London is now 10 times higher than in 2010 and tech sector employment has expanded by almost one-quarter since 2010 (three times the pace of the overall UK jobs market) according to KPMG. They also estimate the UK tech sector is now directly responsible for at least one million jobs.
A fertile ground for innovation
This success can be, in part, accounted for by Government support, driven by a clear aim to make the UK a fertile ground for innovative technology businesses. Take the example of crowdfunding. a great example of the role an innovative approach towards regulation can play.
The UK’s crowdfunding regulation is arguably the best in the world – it is both well developed and acts proportionately for different participants. Crowdfunding in the UK is now blossoming and our regulation is seen as the poster child for the rest of the world.
And sharing economy businesses have certainly benefited from a similar focus. For example, in the 2015 Spring Budget, the Chancellor announced a number of policies to better support sharing economy businesses and users, including:
- The launch of ‘sharing city’ pilots in Leeds and Manchester
- Making it easier for people to share homes and spare rooms through platforms such as Airbnb, Love Home Swap and onefinestay
- Encouraging local authorities to apply discounted rates to those wanting to use shared community workspaces
- Encouraging use of the sharing economy in Government departments
In a further nod to supporting the sharing economy, the Government is set up an Emerging Industry Action Group focused on the sharing economy, which will see Government departments work with, amongst others, Sharing Economy UK.
The aim is to identify where regulation is holding back the sharing economy, and oversee delivery of the policies the Chancellor announced in the Spring Budget, as well as future policies.
A developed representation of the sharing economy industry places the UK ahead of the curve in the global sharing economy, with other nations such as China seeking to follow. This makes the UK a welcome home to sharing economy businesses worldwide.
Popularity with consumers
According to Nesta, by 2013/2014 25% of adults in the UK were already using an online technology to share their assets or resources. This popularity with consumers was one of the driving forces when in March 2015 Sharing Economy UK (‘SEUK’) was launched, the trade body representing and championing the UK’s sharing economy industry – from some of the world’s most influential sharing economy businesses to innovative and industry-defining start-ups, across a spectrum of sectors.
SEUK members sign up to a central code of conduct and are currently working with the Skoll Centre for Social Entrepreneurship at Oxford University’s Saïd Business School (SBS) to develop the world’s first comprehensive ‘trustmark’ for responsible sharing practice.
This should mark a real step forward in fully protecting UK consumers, and further establishing the UK’s place as the global head of the sharing economy. SEUK has also placed a real focus on the relationship between sharing economy businesses and the insurance industry.
There have already been real improvements made, with UK insurers starting to recognise the new business trend and the need to better service new sharing economy business models. A good example of this is that the British Insurance Brokers’ Association released a guide to insurance for sharing economy businesses – and at least ten brokers have already signed up.
However, this is not the time to rest on our laurels, but to push forward both in terms of realising potential and expediting the UK’s claim as the home of the global sharing economy. So what are the main challenges and how do we overcome them?
As mentioned, great progress is being made with regards to insurance, but it is still not a simple process for businesses to secure apt policies and it can take months of hunting and negotiating, time that should be being used to drive growth. Due to the innovative models of these businesses taxation is often another stumbling block.
A guide to tax
HMRC and HM Treasury would do well to create a guide to tax in the sharing economy, and an online tax calculator to help users of sharing economy services to easily work out how much tax they are liable to pay.
As with most high growth small businesses, financing can also pose a challenge. Therefore Government backing in terms of targeted financing for sharing economy services is a must.
The UK is comfortably leading the way in Europe; we’re home to more sharing economy businesses than Europe’s next three most prolific hubs – France, Spain and Germany – combined.
However the US is the reigning champion, producing more than half of the 865 start-ups in the sharing economy. Denmark and South Korea, it could be argued, are more intrinsically wired for sharing, as cities like Copenhagen and Seoul have undertaken huge sharing projects in the past with varying degrees of success, highlighting strong Government backing.
However, where the UK is streets ahead is in the collaboration of the businesses operating within the sharing economy sector in the UK – SEUK is an integral part of that. It’s imperative that those in the sector push together to overcome challenges, change public perception, force Government to re-think archaic legislation and protocols and the best way to do that is by getting behind industry representation and pushing forward as one.
Further reading: Govt ‘actively removing barriers’ for sharing economy