The sharing economy grows up

How the UK has embraced the sharing economy 

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The UK has emerged as a sharing economy hub

Our recent study for the European Commission shows that sharing economy activity across Europe has accelerated over the past two years, with its five key sectors generating revenues of €3.6bn and facilitating €28bn of transactions in 2015. The UK has emerged as a hub for the sharing economy within the region and contributed to around a third of this activity in 2015. The UK’s sharing economy has grown the fastest in Europe, with transactions almost doubling to £7.4bn in 2015, and platforms taking home £850m of this total. It’s also become the home to a number of sharing economy success stories who are rapidly expanding outside UK shores, such as Lovehomeswap, Justpark and Hassle.

What has sparked this adoption and will it continue?

This achievement reflects a number of factors, chief amongst them being a digitally literate and entrepreneurial population and the UK’s attractiveness as a location to incubate and accelerate sharing economy enterprises. Going forward, we expect the UK’s sharing economy to expand at over 30% per year over the next decade, generating £18bn of revenue for platforms and facilitating about £140bn worth of transactions per year by 2025. European countries may see their sharing economy marketplaces mature and the UK will need to be conscious of this as they continue to grow.  

 

Collaborative finance leads in transaction volumes – but peer-to-peer transportation tops the revenue list

Our research shows that collaborative finance and peer-to-peer accommodation are the two largest markets in terms of volume of activity, accounting between them for over three-quarters of the UK’s total. Recent estimates highlight that the UK makes up nearly 80% of Europe’s alternative finance market and at a city-level, London is now Airbnb’s third biggest city in terms of places to stay globally, and is the home to leaders in peer-to-peer accommodation including Onefinestay, who serve the luxury end of the market. However in terms of revenues, peer-to-peer transportation is the UK’s biggest sharing economy sector, capturing over a third of UK platform revenues, with short-distance ride-hailing services such as Uber, and car clubs such as Zipcar, proving particularly popular.

Continued strong growth in revenues and transactions over the next decade

Looking ahead, we think peer-to-peer transportation will remain the largest sector of the UK sharing economy as measured by revenues, driven by urban ride-sharing apps and parking sharing platforms growing at over 35% per year. And the collaborative finance sector will continue its strong growth as the UK establishes itself as a FinTech hub in Europe, with nearly £70bn of financing projected to flow through these platforms in the UK by 2025, up from £3bn today.

However, we expect the fastest-growing of the five sharing economy sectors to be on-demand household services, which could see revenues expand at roughly 45% a year to 2025. The UK has driven the sector’s strong development, with rapid take-up of on-demand business models in areas such as DIY tasks, dog walking and dry cleaning. The UK has also contributed one of the sharing economy’s quickest-growing stars: in just three years London-based Deliveroo has built a network of 5,000 agents delivering restaurant food across 68 cities in 12 different countries[1].

Achieving the UK’s aspiration to be the centre of the sharing economy

The UK’s position as a major European hub for the sharing economy has been supported through a wide range of policy interventions aimed at creating a positive environment for sharing economy business models.

There are many examples. The rapid rise of peer-to-peer finance in the UK has in part been fostered by regulatory developments such as the introduction of the peer-to-peer ISA wrapper, and the requirement for UK banks that decline loan requests from small and medium-sized enterprises (SMEs) to refer those customers on to alternative sources. 91% of alternative finance platforms in the UK regard the existing regulations as “adequate and appropriate”. And the government has removed local bottlenecks to sharing economy activity. For example, in 2014, Communities Secretary, Eric Pickles issued guidance to local councils to enable driveway sharing by residents, through platforms such as Justpark.  

However it won’t be easy for the UK to deliver against its stated goal of becoming a global centre for sharing economy innovation and growth. The growth of these services have raised tensions in a number of areas. Short-term Airbnb rentals have come under attack for displacing the longer-term rental stock – and ridesharing has been challenged both in the courts and on the streets by black cab drivers.

A proactive approach will be needed both in understanding the full range of impacts of sharing economy services and managing any unintended consequences. Improving participation in more community-orientated sharing economy services should be a top priority. The UK has been slower at adopting services such as long-distance ridesharing and tool sharing and can learn from countries such as Italy and Spain where a culture of sharing has become more embedded in local communities. To this end, we are working with Sharing Economy UK, (SEUK) on a Trustmark that platforms can attain and signpost on their websites to facilitate trust and attract potential new users.

In addition, we see opportunities for the proactive approach from central government to spread to regional and local levels where public sector organisations and platforms could work more nimbly together to deliver real change in local communities. This would build on the success of car sharing schemes in a number of London boroughs where all stakeholders have worked together to promote their take up and reduce congestion from local roads.

What’s clear is that the sharing economy is here to stay as an increasingly important component of our businesses and lifestyles. The UK has been at the forefront of growth and innovation in Europe’s sharing economy since its inception. But all stakeholders will need to re-double their efforts and embrace lessons from others if the UK is to be the home of the next billion-dollar organisation in the sharing economy. 


Contact us

David Lancefield
Global leader of Economics and Policy
Tel: +44 (0)20 7213 2263
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John Hawksworth
Chief Economist
Tel: +44 (0) 20 7213 1650
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Robert Vaughan
Manager, Strategy and Economics
Tel: +44 (0)207 212 2521
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