Chair of SEUK Debbie Wosskow

The sharing economy is confounding Britain's statisticians

Are traditional measures of productivity falling behind the times?

by Rebecca Smith
Last Updated: 18 Mar 2016

Even defining the so-called sharing economy confuses (and frustrates) some people, as the trend has developed into a full-blown sector and now seems to incorporate more and more firms under its umbrella. Business secretary Sajid Javid has just launched a new report, which suggests the sharing economy has confounded official measures of UK productivity too.

The report, written by economist Diana Coyle and commissioned by sharing economy trade body SEUK and Airbnb, suggests that while the sharing economy is 'growing rapidly' in the UK, it's 'impossible to track its contribution through official economic statistics'.

SEUK defines the sharing economy as one which uses internet technologies to connect distributed groups of people and organisations ‘to make better use of goods, skills, services, capital and spaces’, sharing access and hence reducing the need for ownership. UK-based firms include peer-to-peer parking service JustPark, peer-to-peer lending service Zopa, home exchange platform Love Home Swap and currency exchange platform TransferWise.

Analysis by PwC in 2014 said the UK sharing economy was worth an estimated £500m per year. Its top five sharing economy models could be worth £9bn by 2025, which gives an indication of its potential.

But one of the issues flagged up by Coyle is that the sharing economy leads to so-called ‘win-win efficiency gains’ which aren’t included in the definition of GDP. Similarly, measures of inflation only take into account purchases consumers make from businesses, so exchanges between individuals, which are commonplace in the sharing economy, won't be noted. 

There's also the point that some effects of increased participation in the sharing economy – such as people not buying so many consumer assets – could actually reduce reported economic growth. Coyle said at a time when real incomes for many have been flat for years ‘the benefits they can gain in living standards from the use of digital platforms... could be significant’.

It's also hard to quantify the effect it has on jobs. Work within the sharing economy doesn’t fall within existing employment categories, sharing economy activity is not the primary or full-time occupation of many of its participants and the digital economy ‘in general is under-recorded’.

The report suggests changing official economic data collection to focus more on individuals, since the sharing economy is inherently peer-to-peer. More nuanced questions on surveys of individuals could provide more helpful information, while engagement between statisticians and businesses involved in the sharing economy would provide guidance on the sector definition and the best process for data gathering. It should also shed some light on another question the government will be interested in knowing the answer to  how much potential tax income they might be losing out on.

The Office for National Statistics came under fire late last year in a report by Sir Charlie Bean, where he said it was failing to keep up with the times and needed to make better use of technology. It's a slightly different scenario here, but a similar concern raised. If the sharing economy grows at the rate its proponents claim it will, it's important the government has a real sense of what its contribution is to the economy. 

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