London's Uber Ban Is a Big Brexit Mistake
Why would tech companies want to invest in the U.K. and subject themselves to such a slap in the face?
by
Tyler Cowen
3
September 22, 2017, 11:44 AM EDT
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How much to Heathrow?
Photographer: Dan Kitwood/Getty Images
Prime Minister Theresa May made a
big speech Friday on Brexit negotiations, but the bigger news coming out of London may have been that the transit authority, Transport for London, decided
not to renew the license of Uber Technologies Inc. to operate inside city limits. The decision is a clear statement that the future of both London and the U.K. are less bright than we might have thought even a few days ago.
Banning Uber shows that a post-Brexit nation won’t be the libertarian paradise that many Brexit advocates have been predicting or at least clamoring for. The notion was that European Union regulation was horribly restrictive, and British business would blossom under a reign of newfound freedom, if only it could be left to its own devices. Although that was never very plausible to begin with, it was a common argument from Brexit supporters such as MP
Daniel Hannan. It’s now hard to raise that point with any credibility.
The new Britain appears to be a nationalistic, job-protecting, quasi-mercantilist entity, as evidenced by the desire to preserve the work and pay of London’s traditional cabbies. That’s hardly the right signal to send to a world considering new trade deals or possibly foreign investment in the U.K. Uber, of course, is an American company, and it did sink capital into setting up in London -- and its reputational capital is on the line in what is still Europe’s most economically important city. This kind of slap in the face won’t exactly encourage other market entrants, including in the dynamic tech sector that London so desperately seeking.
A striking feature of this decision is the use of an outright ban rather than a gentler negotiation. Whether or not you agree with them, there are
plausible criticisms of Uber. You might think the drivers need stronger security checks, the company needs to be removed from congested areas, it should pay more for local infrastructure, its drivers face subpar labor standards, and so on. Those worries, to the extent they are true, would suggest some mix of higher regulations and taxes for Uber. Yet the announcement of a pending ban is sending a broader signal to London and indeed British business that due regulatory process might be weak moving forward. It’s enough to make one long for the arduous, multistage regulatory decision processes of the EU.
The good news is that the announcement did seem to leave open the possibility of revision through the appeals process. The London transit authority
cited Uber’s approach to crime reporting and medical certification, as well as a lack of transparency to regulators as reasons for the ban. That suggests a revamped Uber might stand a chance. In the meantime, the service is up and running.
But is the best way to deal with business regulation to take dramatic moves that grab headlines and fill my Twitter feed? Or does this tend to politicize and polarize opinion on what should be more narrowly technocratic issues?
The Uber ban might seem like a kind of populist measure, but from the consumer side it is likely to harm wealthy Londoners the least, or perhaps even benefit them. I’ve taken many cab rides and Uber rides in London, and in general I find the cabs to be pretty expensive. But they offer better service. You can find one right away, the drivers have a remarkable and indeed fabled knowledge of London roads, they are on the whole good drivers, and the vehicles are large and comfortable. I prefer to take London cabs over London Uber, even when Uber might be cheaper.
Over time, let’s say Uber would continue to encroach upon the cab business. It then becomes harder to hail cabs, as arguably is already the case. Uber fares might be lower, but the average quality of the ride would be lower too. That’s a better deal for poorer people, and an inferior deal for the well-off. Wealthy people are just fine with paying more and getting the better service. So in essence the Uber ban is locking in a system that harms poorer Londoners the most. Keep in mind the London Tube is not 24/7, and cabs are often more reluctant to pick up customers from dicier neighborhoods.
Of course, London cabbies are better off from the ban, and there are anecdotal
reports of them celebrating in the streets. That’s sooner a sign of bad public policy than a beneficial act for London users and riders, numbering about 2.5 million for Uber. Although cabbies are likely to see higher incomes, an estimated
40,000 people are driving for Uber in London. They will have a harder time making ends meet.
Unfortunately, the U.K. is in a position where it can’t afford too many more mistakes. It just made one.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
To contact the author of this story:
Tyler Cowen at
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