Do UK retail markets work well for consumers and businesses?

Do UK Retail Markets Work Well for Consumers and Businesses? Researchers at IFS and CeMMAP are running two workshops for civil servants. The workshops are funded by the ESRC. This is a pilot scheme to promote closer and longer-term interaction between economists at HM Treasury and academic researchers, funded by the ESRC, who are carrying out research about how well product markets are working in the UK.

The pilot is motivated by HM Treasury's long-term aim of developing a framework to assess the competitive intensity of UK markets. The Government views competition and competitive markets as key drivers of productivity. Measuring competition is critical if we are to be able to identify markets where there may be potential competition concerns that might be addressed through the legislative or regulatory system. Measuring competition is also important for evaluating the overall impact of the Government's economic policies.

Previous work has focused on developing economy-wide indicators of competition. However, there are clear limitations in trying to adopt a "one-size-fits-all" approach, across a diverse range of sectors and markets. The aim of this project is to focus on a particular set of markets - the retail sector - to achieve a better understanding of how competition works in practice, and how it might be measured in the context of retail.

We plan to run two workshops. In preparation, researchers at IFS, with HMT input, will write a paper that provides background material. A final meeting will discuss what we learned from the pilot and what the next steps will be.

We choose to start with the retail industry because:

• it represents a large part of economic activity in the UK;
• it accounts for a substantial share of the UK's productivity gap with the US;
• it has been highlighted in policy and academic research as a "problem" sector for the UK and Europe;
• there is a new and growing body of academic research that might usefully inform policy.

An initial paper will set out the broad issues: why we want to look at indicators of competition; weaknesses in existing approaches; and why we see benefits to having sectoral indicators based on a deeper understanding of how competition works in a particular set of markets. This will include a short discussion of the theoretical and empirical literature on the role of competition in promoting economic growth, productivity and consumer welfare, in particular, discussing the importance of understanding the nature of competition in both the product market and in the introduction of new goods and services.

If you would be interested in holding a similar workshop, please contact Bonnie Brimstone at IFS.