E-scooters at a crossroads
E-scooters at a crossroads

Just turn it off and on again? The digital economy blow back

Words by:
Associate Director
March 11, 2019

As the digital economy continues to balloon, influencing markets, people and society, policy makers are wrestling with its impact and how it can be managed better. While these questions began to take shape in 2018, thanks to exposés on the sheer quantity of data storing and poor practices of social media giants leading to inquiries and calls for action, concerns have continued to gather pace in 2019.

Consumers have reaped the benefits of digital advancement for years, such that negative aspects either seemed unimportant or possibly did not impact them. Faster internet, easier shopping, greater convenience, and access to the latest tv shows; all were noticeable and popular benefits. Yet, while advances have continued, consumers and the media have become more discerning or simply unwilling to accept the negative consequences of the unfettered digital economy.

One of the most obvious instances is the impact on high streets and business who have lost out to the convenience of internet shopping. Unable to sustain themselves, with chains like HMV citing rising costs and business rates pressures, businesses are leaving the high street behind. One in 12 shops have closed in town centres since 2013, with some communities losing over a fifth of high street shops. Traditional financial services like bank branches are also leaving communities behind as more consumers use digital payments and bank online. According to Which?, 60 bank branches are closing a month with some areas such as Scotland being disproportionately impacted.

The decline of physical retail stores and financial services puts some consumers at a disadvantage. Not every community has the broadband or connectivity to live a digital life, and some consumers simply prefer not to. Rural communities, older consumers and the financially vulnerable are acutely impacted by these changes, and forced to become adopters or travel sometimes excessive distances to continue their way of life. This is not the convenience the digital economy promised.

Moreover, the digital economy is now more clearly and negatively impacting the lives of others in our society. Safeguarding has become a key concern, with greater scrutiny on the content children can access on social media and the freedom allowed to post malicious and hurtful content. Government has at least in part sought to address this, if slowly, with the industry still awaiting the results of the Internet Safety Green Paper consultation. Internet safety and the responsibilities of companies such as Facebook have come under intense scrutiny and every additional story contributes to the push for action.

Yet it also extends more widely into mediums that, until now, were niche interests. Video games and interactive entertainment used to be the focus of a select few consumers and policy makers. Now, with an expanding market and interest from a wider audience, policy makers too are looking more closely. The Digital, Culture, Media and Sport Committee has openly sought views on expanding duties of care to video game developers to prevent exploitative behaviour, and the Labour Party wants to crack down on loot boxes and micro-transactions, fearing that they are similar to gambling.

Not only are parts of the digital economy leaving consumers behind, in the minds of some in media and political circles it is now actively harming and exploiting them. This is a far cry from the days when digital innovators were admired as entrepreneurs and champions of consumers.

As greater numbers of companies and sectors are pulled into scrutiny of the impact of the digital economy, it is tempting to see the case for clear intervention. Policy makers openly consider the benefit of new regulations, levies, taxes and restrictions to overcome these issues. In the last 12 months we have seen proposals for a digital services tax, a social media regulator and levy plan, an expert panel on digital competition, and wider proposals for a digital super-regulator to take the place of self-regulation. Andrew Tyrie’s plans to bulk up the powers of the Competition and Markets Authority (CMA) also open up the prospect of more investigations into this space as well.

For some of the companies that make up this sector, particularly those outside the giants of the industry, these could have a significant impact on their business’ outlook and ability to grow and compete.

Companies caught in the cross-hairs must accept there is no easy ride and that the cultural and societal impact of the digital economy will now always leave them open to scrutiny. The digital economy has helped to empower consumers and address some imbalances old markets did not or would not address. While this should not be lost, companies must be ready to address the wider ecosystem they are a part of and have in part helped create. This means digital platforms will have to not only be able to address their direct impact, but also be prepared to answer questions on how their platforms have facilitated undesirable outcomes and what mitigating steps they are taking. Policy makers are now far less likely to accept deflection or give companies the benefit of the doubt.

Telling the story of a company and its work, communicating the beneficial role it plays and managing criticism is now essential corporate messaging and not the nice extra it once may have been. Without it, digital and technology businesses may be at the mercy of quick political fixes, or find themselves left isolated as others take the lead on safety and responsibility in the digital environment.



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