Executive summary
Across the economy, consumers struggle to tell the difference between good and bad products. Critical information, from price to quality, is either missing, hard to access, or hard to compare. The markets are ‘shrouded’.
This has obvious costs for consumers, but the effects on the economy run much deeper. If consumers cannot identify the best products and services, firms have no incentive to
compete on quality, stifling innovation. The most productive firms, who can offer the best products and services, struggle to differentiate themselves and grow, stifling productivity growth. And when the shrouded market itself is designed to increase productivity – such as markets for business advice and services – the inability to distinguish good providers makes the difference between services that deliver large productivity improvements, and a regrettable expenditure.
We estimate that deshrouding markets could add £5–23bn to the UK economy; three times the benefit of full–expensing, one of the government’s flagship productivity policies and one
of its most expensive. Yet, until now, this lever has been largely overlooked.
This discussion paper presents the case for deshrouding markets, provides examples of shrouded markets in practice, and provides preliminary suggestions for deshrouding through policy. We welcome feedback on the ideas and further recommendations.
