A report on the sharing economy and how much it contributes to UK productivity has been released today, launched by Business Secretary Sajid Javid. Written by Diane Coyle, a leading economist, ‘The Sharing Economy in the UK’ focuses on how the economic impact of the sharing economy is measured, and then makes recommendations on how it should be.
The report ties in with the Government’s Productivity Plan, which aims to tackle the UK’s long-term productivity problem. Its findings show a really key theme – that traditional measures of productivity, like GDP, just don’t capture the impact of the sharing economy. It doesn’t account for time saved, or increased choice in the marketplace, that the sharing economy in the UK now readily offers.
The reason for this lies in the way GDP (Gross Domestic Product) is calculated. The Consumer Price Index (CPI) measures only purchases by consumers from business, so transactions between individuals are excluded. It also doesn’t cover new patterns of working and earning income that the sharing economy offers for so many, which means the income that the public earns through the sharing economy may already amount to billions of pounds a year, but it’s not measured!
The report suggests that the amount individuals earn through participating could be £9bn a year by 2025, and that already around 3% of the UK workforce are offering a service through a sharing economy platform.
By way of example, Liftshare currently have over 26,000 people confirmed as sharing a journey on our business schemes (and these are just the ones we know about; lots of people will be sharing informally or are sharing and just haven’t clicked the button on the site to tell us yet). Each of our lovely liftsharers save on average £1,000 a year. That’s £26,000,000 saved in petrol or other transport costs, through Liftshare alone! These savings can then be spent elsewhere.
If an aspiring traveller books accommodation for a mini-break through LoveHomeSwap, no money is exchanged, so the hotel they would have stayed in had they not shared earns less revenue. However, the traveller then spends that money elsewhere, so no change in GDP is recorded, but actually, the consumer has got a considerable amount more for their cash.
So why is this so important? Well, to put it simply, the sharing economy is so big that it can’t be ignored any longer. Not including it within UK productivity measures will give a misleading picture. Innovation charity Nesta estimate that a quarter of the UK population has engaged in a sharing economy activity. And that can be really wide-ranging; from sharing a lift to booking a room on Airbnb, or hiring out a garage on JustPark. All this, and; better data will make for a better policy debate in Government, so that the UK can nurture and grow its blossoming sharing economy.
Ali Clabburn, Liftshare Founder and MD, said “Diane Coyle’s great report highlights how outdated the current methods of tracking GDP are. For far too long economists have been overlooking the huge productivity benefits of sharing as they have not included the data within the GDP calculations. So many policy and investment decisions are based on GDP forecasts so it is hardly surprising that it has taken a while for sharing to take off. For instance in the last 18 years our Government have not done anything to support, promote or encourage more people to share car journeys. However in that time Liftshare have helped individuals to share at least 30 million car journeys and save themselves over £150 million. Up until now economists would look at that saving and think it was hurting GDP- hopefully now the bright ones will realise that saving money through sharing increases our productivity. Perhaps GDP should become GDP+S.”
Deloitte released a report in May 2015 on Smart Mobility, and this had some big predictions, including an estimation that increasing liftsharing could save £21.2bn ($30.3bn) annually worldwide. That’s saving on vehicle upkeep, road infrastructure costs, and congestion costs. Deloitte also estimate that there would be 22,915 less traffic-related accidents each year and a reduction in CO2 emissions of 9.1 million metric tons – giving societal savings of £236m ($338m) across the globe!
In terms of the amount of sharing economy companies, the UK only comes second to the US – which is staggering when you consider that the States is 38 times the size!
Of course, the sharing economy doesn’t just save money; it also saves time, and offers consumers greater choice, neither of which are included in GDP calculations either.
So, the benefits of the collaborative economy are clear, but they’re not being recorded against official national statistics. Now time will tell and economists can look at modernising and clarifying the measurements, to give a true indication of the sharing economy’s impact on the UK.
Author Lex Barber