FTI Consulting LLP • 1

“These platforms have seen the

emergence of the everyday

entrepreneurs. They are the

challengers, the innovators and

the agitators – constantly

seeking to shake up the market

by solving other people’s

problems.”

Rt Hon Matt Hancock MP, Minister for the

Cabinet Office

Consumer-led innovation has brought about a sharing economy revolution, which is set to see a £9bn

economy grow to £230bn in just ten years. FTI Consulting considers how peer-to-peer business must

work with government, consumers and the private sector to secure market success in the long term.

It is fair to say that the sharing economy is still in relative infancy – though, according to a 2015 PwC megatrends update, that’s a £9bn infant

set to amass a value of £230bn by 2025. Such exponential growth will come with a number of teething problems: how do we appropriately

regulate these disruptive economies? How will traditional business respond to the threat of cheaper, more agile enterprise? What must we do

to ensure fair and stable employment as the workforce shift labour to meet the calls of the sharing economy?

The ongoing feud between Uber and the black-cabs in London is significant for a

number of reasons. It represents both the challenge between the disruptor and

the established market player and the difficult position of the legislator to react to

new business frontiers. The latest milestone – Uber’s High Court win against

Transport for London this month – demonstrates that these businesses are here

to stay. There are already 17 sharing economy companies worldwide worth over

$1bn and according to the UK Government, 70% of the population would share

their idle assets if it were easy or convenient. Business opportunities in the

sharing economy are potentially endless, with solutions offered and in

development for a number of sectors: transport, peer-to-peer lending, home-

sharing, commercial space sublets, time and skills, fashion, food and personal

possession rentals.

The UK Government has recognised the potential for the sharing economy to “turn

Britain into a nation of micro-entrepreneurs”, but this can only succeed if these

companies can challenge the impact of current headwinds. The threat of curtailing

and burdensome regulation could stifle the growth of this lucrative industry. The

bad publicity the sector gets on issues such as safety, employment arrangements

and taxation could also challenge the success of its companies.

These are not new problems. The Coalition Government launched a review of the sharing economy which reported in November 2014. The

report made 30 recommendations to the government on how to unlock its potential. Many of the recommendations have won the support of

the Government, including consideration of the sharing economy in public sector procurement, altering of planning requirements to support

sharing economy innovation and amendments of short term lets. Despite this, a number of issues in the sector still remain.

Shifting the sharing economy into the mainstream

Shifting the sharing economy into the mainstream

Consulting LLP • 2

About FTI Consulting

FTI Consulting LLP. is a global business advisory firm dedicated to helping organisations protect and enhance enterprise value in an

increasingly complex legal, regulatory and economic environment. FTI Consulting professionals, who are located in all major business

centres throughout the world, work closely with clients to anticipate, illuminate and overcome complex business challenges in areas

such as investigations, litigation, mergers and acquisitions, regulatory issues, reputation management and restructuring.

CRITICAL THINKING

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www.fticonsulting.com ©2015 FTI Consulting LLP. All rights reserved.

An opportunity for better regulation

Alongside the final report, the UK Government expressed that it is

“removing barriers that stop people sharing their assets, and will

empower people to make more from their assets and skills.” The

Government must support market developments that provide for a

more sustainable economy; the economic impact of companies like

Airbnb and Uber has already been demonstrated. There have been

numerous calls, usually by incumbents, for the Government to

regulate against potential monopolies, exploitation of data and unfair

competitive advantages caused by companies circumventing current

regulatory apparatus.

Sharing economy companies are well aware of the pressure on

legislators to regulate the industry, and indeed since the subject

gained momentum during the 2010-2015 parliament, many

instruments have been devised to regulate sharing economy

companies, an example being the short-term use of residential

property in London regulation, which limits sublets on a short term

basis in the capital to 90 consecutive nights.

Given its tendency to disrupt established markets, the opposition to

the sharing economy has been fierce and lobbying efforts on its

behalf have been fragmented, uncoordinated and granular to the

issues of the particular company. The report called for the creation of

a trade body to represent this new type of business and with the

support of the National Endowment for Science, Technology and the

Arts, Sharing Economy UK was established, representing the

interests of nearly 20 sharing economy companies including Airbnb,

ZipCar and Compare and Share. As the regulatory landscape evolves,

it will be increasingly important for sharing economy companies to

build advocacy with members of the trade body, its supporters and

external groups to ensure that a coordinated view can be presented

to ongoing policy discussions.

Furthermore, attention should be given to smarter regulation for the

industry. The Government uses the term ‘deregulation’ to describe

the changing treatment of sharing economy companies, but it is true

that regulation can be important – if it is the right kind. Bottom-up

regulation, based on self-governing mechanisms in the sharing

economy demonstrates a natural response to regulatory

requirement. The Government should support the industry to develop

peer-led governance: ratings systems, consumer reviews and

reputation measures to remove the need for costly and rigid

regulation. It is up to sharing economy companies to demonstrate to

government that the private sector can provide these solutions and

that they should be given the opportunity to experiment and innovate

in order to reduce the burden for regulators.

Leveraging the value of data

As the Government continues to commit efforts to bolstering the

UK’s digital economy, particularly its role as a global centre for

financial technology and innovation, sharing economy companies

must meet the opportunity to utilise user data smartly, collaboratively

and responsibly. While the industry has faced criticism that its

monopoly over data could be dangerous, little has been said about

the potential uses of such data. Sharing economy companies can

and should collaborate with the public sector to develop smart and

sharing cities. For example, the mass of data pooled by companies

such as JustPark, the app that allows drivers to rent unused

driveways, could provide invaluable information to local authorities in

town planning. Demonstrating the social value of the sharing

economy will be critical to ensuring the protection of these

companies from harmful regulation.

Demonstrating the social value of

the sharing economy is critical to

ensuring the protection of these

companies from harmful

regulation

Future solutions

We are already seeing partnerships between sharing economy and

established private sector companies. The aforementioned JustPark,

which provides a ‘common sense’ travel solution, has now partnered

with BMW to offer the JustPark dashboard within the next generation

of BMW models. This ‘connected’ travel is just one example of the

integration of sharing economy solutions on everyday life. But why

stop there? What if sharing economy companies applied their

models to social problems like cuts to public services and the

subsequent closures of libraries? These are opportunities to embed

the social value of sharing in public services and the community.

The value of the sharing economy is undoubtable. Looking to the

future, sharing economy companies must engage with government

and consumers to demonstrate that their value is not just for the

micro-entrepreneur and their consumers, but for society more

broadly. The next conversations with regulators must go further than

the existential threat posed by regulation, but instead must explain

how the sharing economy existing is the best challenge to social

issues and economic stagnation.

John Gusman is a Consultant at FTI Consulting

The views expressed herein are those of the author(s) and not

necessarily the views of FTI Consulting LLP, its management, its

subsidiaries, its affiliates, or its other professionals, members of

employees.