Working from home could have ‘long-term negative impacts’ on London economy, report warns

Working from home could have ‘long-term negative impacts’ on London economy, report warns

London’s ongoing hybrid working “experiment” could put the capital’s economy at risk. That’s the stark warning in a new report from the Centre for Cities think tank and Imperial College, supported by the City of London’s EC business improvement district.

An initial strong return to the office after Covid restrictions were lifted in February 2022 has seen Transport for London ridership back to 70 per cent of pre-pandemic levels, confounding predictions of a permanent “new normal” of remote working, the report, titled Office Politics: London and the Rise of Home Working, finds.

But attendance has “flatlined” this year, with central London workers coming into the office on average for just 2.3 days a week. That could bring unintended consequences for a geographically concentrated “agglomeration” economy based on innovation, face-to-face working and on-the-job learning, the report says.

“The key question is, if this is what working patterns will look like from now on, what impact will they have on productivity?” it asks. “Will a capital running on two to three days per week in the office be enough to both reverse the productivity struggles it has faced over the last thirteen years and drive up long-term prosperity?”

With the impact of hybrid working on productivity still uncertain, policy-makers should take a “precautionary” approach rather than make short-term decisions which might do longer-term harm to individual workers as well as to the wider economy, inadvertently undermining agglomeration benefits, the report concludes.

“Policy makers should be wary that we don’t passively let a public health emergency turn into a longer-term negative impact on the economy,” said Centre for Cities chief executive Andrew Carter.

“Home working has delivered many immediate benefits for workers in knowledge-based industries. But these immediate benefits must be balanced with the potential longer-term costs of lower levels of creativity and less on-the-job learning, particularly for younger workers who do an unofficial apprenticeship through learning from their older colleagues.

“London’s city centre has been an enormous success story over the last hundred years. Unless something fundamental has changed in how people generate and share ideas, the future should be at most a moderated version of the past.”

The government and the Mayor of London should now consider slashing peak fares on Fridays as part of a new “back to the office” campaign, alongside protecting existing public transport services and convening a “productivity advisory council” with business to conduct more research into the impact of hybrid working on productivity, the report recommends.

There are wider warning too. Delaying improvements to the capital’s transport system based on assumptions about permanent lower demand would be premature, the report says. And policy makers should also be wary of allowing new housing in central London to “cannibalise” office space, limiting future growth.

The centre’s latest report follows its research earlier this year which focused on the capital’s “plummeting” productivity growth over the past decade and a half, with the finger pointed at a “sharp slowdown” in the performance of the city’s “superstar” firms in finance, information and professional services sectors.

London’s growth averaged just 0.2 per cent between 2007 and 2019, down 2.9 percentage points compared to the previous decade, it found, with the capital’s sluggish  performance the “main drag” on UK productivity overall.

Read the Centre for Cities report IN FULL.

Twitter: Charles Wright and On London.

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