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What the Sharing Economy means for how we think about UK GDP

Leading economist Diane Coyle guest blogs for techUK on her recent Sharing Economy report for SEUK, and how we can think about the value of this new wave of intermediaries to the UK economy.

Diane CoyleThe sharing economy consists of platforms that bring people together, matching supply and demand. A strong motivation for early participants in the sharing economy was the potential benefit (social and environmental) of consuming less and collaborating more. This emphasis on collaborative consumption and human relationships remains a strong driver.

Many successful businesses have now emerged in the sector. That so many consumers (whose priorities may be ethical as much as convenience or price) seem to be choosing sharing economy platforms indicates that they benefit from them. The providers of assets or services will benefit in other ways. For example, through services available in the UK some consumers choose to share, as well as homes and cars, their leftover food (Olio), their cats (Cat In A Flat) and even their toilets (AirPnP). Participating individuals can earn hundreds or even thousands of pounds a year in additional income from sharing access to their under-used assets or skills, significant sums when average earnings that have risen very little in real terms since 2008.

The signs are that the sharing economy, consisting of platforms enabling people to get more from their under-used assets and skills, is growing rapidly in the UK. But it is impossible to track its contribution through official economic statistics.

One reason is that the sharing economy leads to win-win efficiency gains not included in the definition of Gross Domestic Product.

The Consumer Price Index (CPI) only includes only purchases by consumers from businesses, so sharing economy exchanges between individuals are by definition excluded from the CPI, and lower prices that benefit consumers are not being recorded.

Existing statistics also need to be modernised to account for new patterns of working and earning income. Even when this should be captured by today’s data, current methods of tracking the economy mean there are large gaps.

It is not possible to calculate the size of the sector from official statistics. A recent report predicted revenues could reach £9bn a year by 2025, but this may be an underestimate. The income individuals earn through participation in the sharing economy in the UK may already amount to billions of pounds a year. This report suggests 3% of the UK workforce is providing a service through a sharing economy platform.

There is an urgent need to understand the sharing economy better, given the potential of the new platforms to enable millions of people in the UK to earn more income from their assets and skills; to give consumers access to more choice and lower prices; and to contribute to productivity and growth. The fact that sharing economy activity might even reduce measured GDP underlines the shortcomings of existing definitions and statistics.

The context is the wider recognition of a need to modernise economic statistics. The interim report of Sir Charles Bean’s Review of Economic Statistics noted that digital activities, including specifically the sharing economy, are not well captured in existing statistics such as employment and GDP figures. In its response, the Office for National Statistics rightly said “There is a need to consider and make progress in the measurement of new forms of economic activity.” The sharing economy is a rapidly growing sector that must be better measured; this report sets out the data needed.

There is frustratingly little information available on the UK’s sharing economy – frustrating because of signs that it is growing rapidly, and because there is a vacuum in terms of the evidence needed for debate and sound policy. This report has described the measurement gap, and also noted the wide acknowledgement that there is a need for better data on the sharing economy, and the wider digital economy. Sir Charles Bean’s review of economic statistics, whose final report is due shortly, and the ONS’s response to its call for the modernisation of statistics, is very timely. We end here with some specific suggestions for the statisticians.

The key point is that the statistics needed to measure the sharing economy will need to collect data from the perspective of individuals, not just businesses or even platforms. This is because it is inherently peer-to-peer, and is disintermediating many of the organisations traditionally used as a source for collecting statistical information, especially big firms. And as noted in this report, it is blurring the conventional boundary between ‘the economy’ and everyday life; understanding this is vital if the government is to develop policies that enable the economy to grow and people to work and earn as they want to. The ONS is beginning to explore ‘big data’ approaches and techniques such as web scraping to start to tackle the measurement gap. But the peer-to-peer character of the sharing economy is likely to make other approaches such as additional surveys or survey questions necessary. It is interesting to note that the US’s Bureau of Labour Statistics has recently announced that it will repeat in 2017 its ‘contingent worker survey’, last carried out in 2005.

 

>>> Check out the full report by Diane Coyle for Sharing Economy UK 

 

For further details on techUK work on the Sharing Economy and engagement with the Sir Charlie Bean Review, contact Charlotte Holloway.

 

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