After weeks of frenzied discourse around water coolers across the country, the bewilderment following Britain’s vote to leave the European Union is finally settling down. For many, including some of us in the Fat Lama office, the topic has already been discussed to exhaustion and dwelling on the uncertainty is getting tiresome. Which is why, instead of joining the funeral chorus, we wanted to offer our take on how Brexit might actually provide a hopeful prospect for the UK startup scene’s pet project – the sharing economy.
To set the frame for this discussion, I want to note that my optimism for this sector is largely based on the parallels between Brexit and the gloomy economic backdrop of the late 00s, against which the sharing economy emerged. Immediately, I have to concede that even the most pessimistic economist would be cautious to compare Brexit and the global financial crisis in nearly any respect. However, as my focus will be on consumer sentiment, I argue that their implications for the sharing economy could in fact be quite similar. To provide some justification for this claim, let’s look at some of the success stories that have emerged from this sector (note: I use the term “sharing economy” in the widely used but inexact sense that includes companies like JustPark and Deliveroo – the term “technology powered crowd-based capitalism” never quite gained the same traction, go figure).
Consider services like Uber and Airbnb, which both emerged in the late 00s during the peak of the financial crisis. They are often celebrated for their technological innovation and industry disruption that allowed them to provide users with unprecedented value in their respective fields. Taking on the established cab and hotel industries, they represent the David and Goliath setting that set the standard for tech startups to aspire to. And I certainly don’t want to understate their success on these merits. However, I do argue that behind their overwhelming success was also a strong mental precedent that is often overlooked in favour of this appealing narrative.
There is some consensus among sharing economy experts, including sharing economy author and former JustPark CEO Alex Stephany, that the sector’s rapid expansion actually owes much to the frugal mentality of the global financial crisis. The argument goes that the prevailing penny-pinching mindset is what effectively hoisted the sector to critical mass. The premise that people would be attracted to services that moderated their expenses during times of financial hardship certainly doesn’t seem implausible. The same holds for people looking for alternative means to supplement their income. Combined with the technology that allowed people to do this with remarkable convenience, it seems reasonable to argue that this is what set the conditions for the sharing economy’s breakthrough.
So, what does all this have to do with Brexit?
As noted above, I want to be careful not to draw too many parallels with the global financial crisis and Brexit. However, I do believe that they inspire a similar mental precedent that stimulates activity in the sharing economy. In this respect, we can largely ignore Brexit’s actual economic implications for the time being – in the absence of a crystal ball and an Ivy League degree in Economics, this is not something I wish to speculate on. What is pertinent even now, however, is that during times of widespread economic uncertainty, people almost invariably have lower confidence in their future financial and employment prospects. Recently this has been reflected, for example, in European Commission’s consumer confidence indicators, which show that confidence regarding future personal finances in the UK fell by 25% in the months leading up to the EU referendum (between January and May). The corresponding drop in future employment confidence was 82%.
So, how might we see this impact the sharing economy in practice? One way to approach this would be to consider a breakdown of the sharing economy that categorises the sharing economy into two components: capital and labour based sharing. In terms of capital based sharing, I predict this will manifest as increased peer rental activity as people will seek to monetise on the idling capacity of their belongings and moderate their spending. In terms of labour based sharing, I predict especially younger age groups will be more open to the idea of seeking flexible employment through the “gig economy” (which for the purposes of this blogpost I will consider under the umbrella of the sharing economy, although this is terminologically inaccurate).
If we were to attach the appropriate company names to these activities, many will identify that what I am describing is by no means new. We know that people are already used to the idea of Airbnb, Uber and other sharing economy services as viable alternatives in their respective industries. I challenge anyone to count the number of Deliveroo drivers they see on their daily commutes in London and dispute this. And this is really the essence of what I am trying to argue: the effect of Brexit on the sharing economy is not that it creates an entirely new marketplace of crowd-based consumption in the UK. Rather, I argue that it provides an additional incentive for people to participate in an already thriving sharing economy.