Report: E-Commerce Reducing UK Inflation

A new report by investment banker Schroders shows that increased e-commerce competition and efficient Internet business models will push UK consumer prices down by 0.2 percent a year for the next three years.

The report adds that while the “Internet effect” will be felt unevenly across the different sectors that comprise Britain’s retail price index, the price of household goods will experience a sharp decline of about 15 percent over the next three years.

However, the overall decline of UK inflation will ultimately depend upon how quickly Britain takes to the Web, the study concludes.

“At around 15 percent of the population, the Internet is poised to shake off niche status and move up the growth curve into the fastest phase of development,” the report notes. “This is seen as the threshold at which it becomes economical for companies to launch and distribute products through the Internet.”

Still Behind

While the report paints an optimistic e-commerce picture for the United Kingdom, it is still lagging behind in online growth.

In August, Prime Minister Tony Blair commissioned a blue-ribbon panel to examine why UK e-commerce companies are behind online firms in the United States, Australia and some Northern European countries.

Prohibitive Tolls

However, according to many industry observers, the UK’s slow adoption of e-commerce has nothing to do with the initiative or talent of British companies and entrepreneurs. In fact, the recent success of Freeserve’s IPO on the British stock exchange and Wall Street proves that e-commerce has come to the boiling point in the UK.

Many analysts contend that telephone access charges are preventing e-commerce critical mass, and the growing controversy has prompted many advocates of e-commerce in Britain to call for the elimination of the tolls. The belief is that the abolition of the fees would jump-start the UK’s Internet economy, since individuals and businesses would suddenly be able to afford telecommunications services that were previously out of reach.

A Pan-European Online Bank?

Meanwhile, in an unrelated development, Lloyds TSB Group Plc said yesterday that it will test a pan-European Internet offering that it hopes to launch sometime this year.

According to the Financial Times, the British bank hopes to woo about one million customers from outside the UK to its new online bank.

Such a project would be Lloyds TSB’s first move into Europe and would likely include a series of acquisitions in Europe, where the bank plans to quickly grow, the paper added.