New government team could help tackle unlawful practices in the shadow economy
A new government team focused on the shadow economy could help tackle unlawful working practices in sectors such as hand car washing, say NTU researchers. Their research shows how fragmented regulation and limited information can allow businesses that repeatedly break employment and other laws to operate largely unchecked.
As a sector which is regularly held up as an example of the shadow economy in the UK, hand car washes will now receive special attention through a new shadow economy team that will operate in the new Fair Work Agency (FWA).
Since NTU began its focus on good work back in 2019, we have been exploring this type of work and business sector, trying to shine a light on poor and unlawful practice from business owners, managers and regulators through our Work, Informalisation and Place Research Centre.
We began by understanding the size and shape of key sectors and working with regulators, enforcement agencies and local authorities to understand more about them and how we might improve the sectors we focus on.
Since providing the first confirmed estimate of the hand car wash sector (about 5,000 businesses and perhaps 40,000 workers) we’ve moved on to explore how these sectors continue to operate on our main roads and in our petrol station forecourts despite many years of attention by agencies like the Police, GLAA and Office for Labour Market Enforcement.
Our research highlights that many businesses operate within a different set of organisational norms with little concern for failing to comply with the laws and regulations they should be following. With a focus purely on business growth, these sectoral pockets of non-compliance can be left in the shadows, but the current government’s renewed focus on work has helped to rekindle a multi-partner approach to this issue.
NTU has been involved in a set of projects exploring licensing and alternative forms of regulation, which led us to the House of Lords this autumn to showcase new approaches that could be adopted. We’ve used data science, APIs (Application Programming Interfaces) and technologically enabled transparency to challenge poor and unlawful practices, and with partners have been finding new ways to tackle the shadow economy.
Together, we are looking to ensure the new Fair Work Agency has the tools and the insights to tackle unlawful practice and ensure businesses operate on a fair and level playing field. This partnership approach developed alongside the GLAA has helped to build the case for the shadow economy team, and we look forward to working alongside it as it takes its place within the FWA.
Our research also tells us that we need a mandatory licence scheme for serially non-compliant and unlawful activity in the hand car wash sector. The issues at play are too well embedded to be changed by competition and voluntary schemes alone.
By bringing transparency to business ownership, tax compliance, payroll information and business rates, we aim to enhance regulators' and enforcement agencies' abilities to ensure better business practices across the whole sector, allowing them to focus on serial non-offenders and those with links to serious organised crime and human trafficking.
A scheme which records these business details is the first step. In a sector where wage theft is endemic, we need to provide a clearer market segmentation to allow limited resources to focus on highest need. At present, all hand car washes need attention, so regulators, police and local authorities have no easy way to target their enforcement work.
The current fragmented regulatory environment also makes it easy to hide in plain sight, reducing our ability to collect the required taxation, ensure businesses are insured and that workers and consumers are protected from malpractice.
Our hope is that the new FWA and the shadow economy team will play a key role in the drive to improve this sector and others like it. A fresh look at this issue is needed, and a data-enriched and tech-enabled well-supported FWA will play a critical role in this mission.
Rich Pickford, Head of the Nottingham Civic Exchange
Dr James Hunter, Principal Lecturer in Public Policy, School of Social Sciences
Ian Clark, Emeritus Professor of Work and Employment, Nottingham Business School
Nottingham Civic Exchange
Nottingham Civic Exchange has been established by Nottingham Trent University to maximise research, policy and practical impact by bringing together university expertise with partners seeking to address the needs of communities. Nottingham Civic Exchange acts as a resource to look at social and economic issues in new ways. This means facilitating debate, acting as a bridge between research and policy debates, and developing practical projects at a local, city and regional level.
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