Centre for Cities has worked with Professor Dan Graham and his team at Imperial College London to produce Office politics: London and the rise of home working, published in partnership with EC BID, to highlight the potential unintended impact on the Capital’s economy of a long-term shift to hybrid working.

Brought about by the Covid-19 lockdowns, the ‘big experiment’ of remote working triggered a debate about the future of work. The upsides for the employee are clear, but the debate routinely overlooks the benefits that face-to-face interaction brings to companies and the wider economy. Analysing the latest research on current working patterns in the City of London, the report assesses the potential long-term impact of hybrid working on the Capital’s productivity growth.

The report finds that:

Predictions of a fully remote new normal have not materialised

The lockdowns instigated as a result of the Covid-19 pandemic triggered a mass experiment in the way that large parts of the economy functioned, with millions of people switching to home-working. The predictions of a permanent wholesale shift to fully remote working have not come to pass – 2022 saw a sustained return to the office in central London.

But the world of work in April 2023 would have been unimaginable as recently as January 2020. A survey commissioned for this research finds on average central London workers came into the office 2.3 days per week, 59 per cent of January 2020 levels.

London has embraced hybrid working but its economic impact is uncertain

Although the economic impact of hybrid working since lockdown is not yet fully understood, policymakers should be asking the question as to whether a London running on 2.3 days per week in the office will be enough to both reverse the productivity struggles it has faced over the last thirteen years and drive up long term prosperity.

Agglomeration – the geographic concentration of economic activity – in large part shapes London’s economy. High-productivity, knowledge-intensive activities which make up the most productive parts of the UK economy are concentrated in central London. This is because face-to-face interaction helps us to share information, come up with new ideas and facilitates on-the-job learning, all important elements for how knowledge-based industries operate.

There are clear and immediate benefits to home working to the employee, not least in terms of reduced costs from commuting. But the literature on agglomeration and emerging evidence of the impact of the home working experiment shows that there may be less obvious long-term costs from reduced spontaneous interaction between colleagues. If this is the case then there will be a productivity hit to the economy and a wage and career progression hit for workers.

There are three main production benefits to agglomeration

Policymakers should not passively encourage a reduction in face-to-face interactions

To encourage a further shift in working patterns, policy makers should look to encourage the benefits of office working while reducing the costs to workers of doing so. On the positive side, national government and the Mayor of London should work with businesses to create a positive campaign to encourage an increase in the minimum number of days expected in the office. On the cost side, the Mayor of London should:

• Maintain existing service levels on public transport so as not to increase commuting times
• Reduce fares by temporarily scrapping peak morning fares on a Friday, the quietest day of the working week, to boost ridership

The Government and the Mayor of London should also:

• Manage the balance between residential and commercial space in central London so that the former does not cannibalise the latter. A shift away from commercial space would limit central London’s growth potential
• Improve public transport infrastructure and avoid delays to long-term investment decisions based on short-term assumptions of demand remaining permanently low
• Conduct more research into the impact of hybrid working on productivity. The Mayor of London should support this with the establishment of a Productivity Advisory Council made up of businesses with experience of hybrid working

“The Covid-19 pandemic and the lockdowns that came with it inadvertently forced many advanced economies into a big experiment in new ways of working. What this does to an economy that relies on creativity and interpersonal interaction is still unclear. But the historic context is vital: 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.

“Home working has delivered many immediate benefits for workers in knowledge-based industries, such as reduced commuting and more flexibility. 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.

“Lifting Covid-19 restrictions on its own has not been enough to bring some workers back. 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.”

– Andrew Carter, Chief Executive, Centre for Cities.