Why is the sharing economy important?

Sharing economy

You may be wondering what the sharing economy is. In this context, it refers to a general trend away from buying and selling assets towards renting and borrowing them instead. The most well-known examples of this are Airbnb and Uber, which allow people to make money from their spare rooms and their cars. These days there are also marketplace websites for sharing household assets such as bicycles or gardening equipment, as well as more exotic items such as boats and even private jets.

The sharing economy also extends to talent and services, where instead of hiring permanent employees, companies are increasing their use of short term contractors and freelancers to fulfil their work needs. This is known separately as the gig economy, but it is part of the same general trend.

However, is the sharing economy really a new concept?  If you look back through most of human history, you find that society was more communal and people worked from home using a wide range of skills that they could exchange with each other.  You could argue that the sharing economy is the normal state of things, and the concept of everyone commuting from suburbs to factories or office blocks every day is a strange notion that only took hold in the last century or so.  Now the internet is allowing us to return to the traditional village style of life, albeit as a global village.

That may be a nice theory, but what practical differences could the sharing economy make to our lives?  Fundamentally, it allows for better distribution of assets and services, and so it could form part of the solution to many issues.

UK government estimates put the need for additional housing in England at between 232,000 to 300,000 new units per year, a level not achieved since the late 1970s and two to three times current supply. But imagine if every spare room and space could be occupied, how much difference would that make?  A society that fully embraces the sharing economy would mean that housing shortages would be much less severe than today, and this would have environmental benefits too.

Another example is traffic jams and pollution. A combination of ride-sharing and driverless cars would solve most large cities’ transport problems overnight.

The sharing economy allows many people to make extra money which for some of us could be a lifeline.  As a result, it increases the supply of goods and services, which makes them more affordable, and will result in downward pressure on the cost of living and inflation.

This can be seen in the case of Uber. There may have been some associations with labour exploitation, but despite these complaints many of us are benefitting from getting cheaper rides and some are able to use it as a new source of income so they can support their families, so the benefits are clear.

According to analysis by PWC in 2016, sharing economy activity across Europe has accelerated over the past two years, with 77% growth in transaction value and 97% growth in platform revenue. 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. PWC predicts that the European sharing economy will increase 20-fold to €570 billion by 2025, up from just €28 billion in 2015.

In summary, the sharing economy is solving economic, environmental and social issues, and it is likely to become an integral part of the regular economy in the near future.  You may soon be part of the sharing economy whether or not you intend it.