The sharing economy ' here today and here to stay30 Apr 2015
The sharing economy – here today and here to stay
All the indicators are that the growth of the sharing economy is accelerating, as it establishes itself as a familiar and everyday part of the broader economy, says Guy Rigby, Head of Entrepreneurial Services at Smith & Williamson.
In his Budget speech, the Chancellor announced a number of measures designed to support the sharing economy. These were in response to the 30 or so recommendations made by Debbie Wosskow (entrepreneur, investor and sharing economy expert) in her independent review of the economy published at the end of last year.1 Wosskow’s report, which considered what the UK should do to sustain its position as a global leader in the sharing economy, has kicked off a flurry of activity across the industry.
Whether referred to as the sharing economy, the collaborative economy, the access economy or collaborative consumption, these terms all describe the same global phenomenon. So what is the current value of this economy to entrepreneurs and businesses and does the UK have the right plans in place to ensure its long-term success?
A brief snapshot of the sharing economy
Defined as the “online platforms that help people share access to assets, resources, time and skills” by Wosskow, her review notes that total revenues for five key sectors of this economy – peer-to-peer lending, peer-to-peer accommodation, music/video streaming, car sharing and online staffing – could grow to £9bn in the UK by 2025, up from £500m in 2014.
A report from the innovation charity Nesta2 found that 25% of the UK population have used digital technologies to access money, knowledge, goods and services through collaborative activities. Nesta categorises the economy into four “pillars” by activity type: consumption, finance, production and learning.
While most attention is currently focused on collaborative consumption and finance, Wosskow’s review suggests a number of potential growth sectors to watch closely for ‘sharing’ innovation, such as clothes and fashion, food production and distribution, B2B and logistics. Many traditional businesses are expected to supplement their existing services with models that include sharing.
Probably the most familiar term used to describe the sharing economy, this is about individuals gaining access to goods or services through bartering, exchanging, leasing, lending, renting, reselling, swapping or trading. Popularised by eBay over 20 years ago, many different models have now entered the market, with AirBnB, Uber, Velib and Zipcar some of the best-known success stories.
Wosskow’s review highlights the real financial benefit to ‘microentrepreneurs’ doing business in this economy, for example:
- 20,000 property owners in the UK are renting out their driveways through JustPark, making an average of £465 a year (£810 in London)
- people renting out their cars through easyCar Club earn an average of £1,800 a year
- a typical Airbnb host in London earns around £3,000 over 33 nights each year.
The online alternative finance market now exists alongside traditional financial institutions and includes crowdfunding (equity, rewards and donations), peer-to-peer lending (P2PL) for businesses and consumers, invoice trading, community shares, pension-led funding and debt-based securities.
According to the first comprehensive pan-European benchmarking of alternative finance, published in February by the Cambridge Centre for Alternative Finance, the European market grew by 144% last year to almost €3bn and could exceed €7bn in 2015. The UK is the largest European centre for alternative finance, at £1.78bn (€2.34bn) in 2014, and is regarded as an innovative leader with some of the most advanced online platforms.3
Nesta projects that if current growth rates continue, the UK alternative finance market could grow to about £4.4bn this year. Of the alternative finance models, equity-based crowdfunding is the fastest growing, with an average growth rate of 410% for the 2012-2014 period.
By value, P2P business lending takes the biggest share of the market with £749m in 2014, followed by P2P consumer lending (£547m), invoice trading (£270m) and equity crowdfunding (£84m).
Will the UK remain a global leader in the sharing economy?
Some of the most active businesses in the UK sharing economy, including Airbnb and Zipcar, have recently come together to set up a trade body, Sharing Economy UK (SEUK), to act as a single voice for the industry. SEUK aims to champion the sector and ensure best practice across Europe. This trade body will encourage inward investment into the UK, represent the economy to the government, and use the collective buying power of its members to negotiate on behalf of its members, for example with insurers.
The Government’s response to the Wosskow review, as outlined in the Chancellor’s Budget speech, suggests that the UK is serious about being a leader in the sharing economy arena. In its published report, the Government responded to each of the 30 recommendations made by Wosskow, and detailed a number of initiatives aimed at creating further opportunities within the industry. These measures include:
- launching a pilot 'Sharing Cities' in Leeds City Region and Greater Manchester in 2015-16, to trial local sharing initiatives in the areas of transport, public space, health and social care
- introducing legislation to make it easier for individuals to sub-let a room and for non-residential properties to rent out their existing parking spaces
- exploring the extension of a national service to advertise spare government space to businesses, individuals and community groups
- engaging with the Start Up Loans Company to promote the use of task-sharing sites when starting a business, and directing job-seekers to time bank and task-sharing opportunities where appropriate via Job Centre Plus staff
- encouraging local authorities to support the sharing economy, for example through shared workspaces and marketspaces.
All the evidence suggests that the sharing economy is here to stay, and that savvy entrepreneurs and growth businesses will be seeking to embrace it and all the opportunities it offers.
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