The UK Government and the Sharing Economy

For anyone keeping even half an eye on the sharing economy, recent developments in the UK Government’s stance towards this new sector have been very interesting. Since launching an independent review in November led by Debbie Wosskow, the big question on everyone’s lips was what would government do to support platforms like Uber, Airbnb and Hassle that are evolving disruptively fast. The question that was perhaps asked a little less was what could legislation actually do?

A glance at the government’s report

On March 18th, the Government finally published its response to the November review, and can be read in full here. Its foreword by the Minister of State Business, Enterprise and Energy echoes the enthusiasm of George Osborne’s 2015 Budget announcement.: the government wishes to provide the best environment in the world for a sharing economy to prosper.

Yet, for all its enthusiasm, in actual fact government is restricted by its law. The response to Debbie Wosskow’s review is a good example of how difficult it is for legislation to keep up with the tech revolution. In few places, it suggests that the old world finds it difficult to fully understand the new one.

Some interesting and progressive steps have been taken: the government is going to create not one but two pilot “sharing cities”, where – I quote from the original review – “transport, shared office space, accommodation and skills networks are joined together and residents are encouraged to share as part of their daily lives.”  Leeds City Region and Greater Manchester have been chosen, the former focusing primarily on transport and the latter on community assets.

There will be sharing economy options made available to government staff in the area of transport and accommodation. Furthermore, better guidance and support regarding taxation and insurance has been promised.

However, the response was not all plain sailing and some pretty definitive negative answers emerged, particularly in the area of regulation. For some sectors, such as accommodation, the response was very positive: “regulations should be proportionate”. However, in many areas the government proved less flexible. For example, it maintains that activities that profit from sharing transportation with strangers fall within the scope of taxi and private hire vehicle legislation and need licensing as such.

A big legislative headache concerns the employment status for users of the sharing economy. There are users in the sector that try to make a living as freelancers on sharing economy platforms. The  Government’s response to the request for greater clarity as to what the employment status of such users is, rather honestly admits that there is much confusion over legal definitions within the sphere of employment. In short, it is going to explore this matter in more detail and in the meantime, sharing economy freelancers are left with a question mark regarding their status as workers.

Why does the government (and why should you) care about the sharing economy?

According to Benita Matofska’s recent research the global sharing economy is growing faster than Facebook, Google and Yahoo combined. While in its first 7 years, the former has been valued at $15 billion, the Silicon Valley giants combined were valued at $11billion over a comparable amount of time. Moreover, every day $28 million is invested in the global sharing economy and by 2025 its value is estimated to rise to $335 billion.

Credit to PwC.

This is all the more significant when you think of the positive impact of the sharing economy: it is not a consumption-based economy. It is a model that exploits unused or underutilised assets without draining new resources. The average UK car sits idle 23hrs a day: rather than producing more cars, making greater use of the ones we already have is simply sensible!

Another big plus is that the sharing economy has three times greater impact for low income communities.

Currently, 28% of the global adult population is part of the sharing economy. In the UK alone 64% adults participate in sharing activities. The UK certainly has a higher “sharing rate” than average. Soit is encouraging to see the government attempting to establish Britain as the hub of the sharing economy.

However, there is a lot of competition for that prime position. Most of the main global sharing economy platforms are US companies. Even in Europe there are other countries openly competing to home sharing economy companies: Amsterdam was named the first “sharing city” of Europe.

The positive attitude of the government towards the sharing economy is certainly encouraging and its impact on the sector is not to be underestimated. But. And this one big but, there are major limitations to its support.

We’ve already been through the weighty limitations of legislation, slowing down the speed with which government can move to assist the sharing economy: there is a very long way to go in effectively but non-invasively regulating the industry.

The big gap in the response, which seems to go beyond dated legislation – and I’m worried goes as far as a misunderstanding on behalf of old world institutions of new world obstacles – was in providing no real support for the problem of trust highlighted in Debbie Wosskow’s review.

Why is trust a problem?

It’s in the name: sharing economy. Sharing requires us to trust people, whether it’s to use our assets, or to let them drive us, or even trusting them with safeguarding our property in their attic for the weekend. Any form of sharing requires an exchange which is fundamentally based on trust.

In Benita Matofska’s report, trust was the number one blocker to the growth of the sector. If the sharing economy is to gain greater traction with broader and less trusting audiences, companies need to establish a level of trust within their platforms.

The cornerstone of this trust is verification of digital identities. In her review, Debbie Wosskow asked the Government to allow sharing economy platforms to acess GOV.UK Verify, which is a governmental tool for verifying the identity of workers in government services. The response was a rather unhelpful maybe, which sounded much like a no. There is no indication that there will be any form of national ID verification widely available to the private sector.
A final thought

My assessment of the government’s response, is that it’s a promising start, but that there are major barriers that are left to be broken — namely, regulating fairly and adequately a sector that is very diverse and constantly changing.

It was encouraging to see that the government promised an API (a digital interface that will allow organisations that qualify, to completely digitise the process of accessing the criminal history records of individuals) through the Disclosure and Barring Service, the government body that issues reports on criminal histories. Onfido was particularly supportive of this proposal, as it could save  our customers considerable time and money.

The big hole in this response for me, though, was misunderstanding just how important an issue trust and digital identification is for sharing economy platforms. The good news is that the startup world is already taking care of the problem.

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Patrick is a Biz Dev at Onfido, and he's all about helping companies onboard more customers and prevent fraud. In his spare time, he learns code and hikes in the internet-less parts of this world.