Apr 05 2018
For many industries, regulation serves as a limitation on rapid growth for the sake of consumer protection, but lawmakers and regulatory bodies do not necessarily consider regulation until an industry experiences major growth. While this is sometimes because industries are relatively young, demand for new and safer products often enables regulation and growth to go hand-in-hand. As regulation trends upward, the level of structural risk for affected industries increases. To maintain growth in light of increased regulation, companies are likely to spend on legal services to protect themselves and to stay ahead. IBISWorld expects the following five industries to experience greater revenue gains and heightened regulation over the five years to 2023.
E-Commerce and Online Auctions
Over the past decade, one of the fastest-growing industries in the United States has been the E-Commerce and Online Auctions industry, which includes all online retail websites. The scope of the industry has enabled revenue to grow to $504.6 billion in 2018. This industry has historically been subject to minimal regulation, as states were unsure how to regulate companies that can operate nationally with minimal resources. The industry is currently regulated by the Streamlined Sales and Use Tax Agreement, which requires customers to pay taxes on online sales based on the state taxes of the shipping destination. However, as of 2018, only 24 states have passed legislation confirming the agreement. As the percentage of services conducted online continues to grow over the next five years, industry revenue is projected to grow rapidly, likely resulting in more states confirming the agreement to generate increased tax revenue from online sales.
Data Processing and Hosting Services
As services have increasingly moved online, demand for data processing and hosting services has skyrocketed. The Data Processing and Hosting Services industry provides companies with website and database hosting services and data analytics, which are necessary for providing e-commerce and other online services. The percentage of services conducted online is projected to grow to an estimated 25.0% in 2023, which will sustain significant demand for industry services, but will also lead to greater regulation because web-hosting companies have access to people’s personal data. Hackers have recently targeted databases and other online systems to access personal data. In response to this, legal bodies are expected to introduce regulation creating standards for how to protect personal data.
Donations, Grants and Endowment
Grantmaking foundations and charitable trusts are nonprofit organizations that award funds to other organizations and individuals. These organizations are not subject to income taxes, but are overseen by the Internal Revenue System (IRS), which determines which organizations can be considered nonprofits. Over the next five years, the Donations, Grants and Endowment industry is projected to grow as disposable income rises and unemployment falls. However, under the 2017 Tax Cuts and Jobs Act, donations to nonprofits are no longer tax exempt. This will likely reduce people’s willingness to make contributions to grantmaking foundations. As a result, new regulations will need to be put in place surrounding how these organizations collect donations.
Hydroelectric power companies generate electricity using water as a power source. While hydroelectric power is still not a significant source of power in the United States, demand is still expected to rise over the next five years as focus on green energy rises throughout the country. Over the five years to 2023, revenue for the Hydroelectric Power industry is projected to increase to $5.4 billion. While the federal government has shifted focus away from green energy, 38 states currently have renewable portfolio standards that lay out their plans to shift to renewable energy sources, such as hydroelectric power. As these states shift toward renewable energy, new regulations will need to be enacted to ensure that all hydroelectric power is up to certain standards.
Train, Subway and Transit Car Manufacturing
As populations continue to rise in major cities, municipalities are working to improve their mass transit systems. For example, New York Governor Andrew Cuomo declared a state of emergency regarding the condition of the New York City Subway in 2017. As a result, demand for new train, subway and transit cars is projected to increase significantly over the next five years. However, as this demand grows, and people explore ways to improve transit systems, safety regulations will be crucial for the Train, Subway and Transit Car Manufacturing industry. In 2017 alone, there were 17 major train accidents in the United States. To combat this fatal course, federal, state and local governments will look to create new safety standards for all levels of train transportation, including at the manufacturing level.
Edited by Stephanie Conte. Designed by Emily Lidstone.