01Executive Summary

Covid-19 turned what had been very busy office districts in the heart of our biggest cities, and London in particular, into ghost towns. There were many who claimed that this would be the so-called ‘new normal’, with those who could embracing fully remote working permanently. But fast forward three years and, while current working patterns would have been unimaginable as recently as January 2020, it is also clear that the ‘new normal’ that was widely predicted hasn’t materialised.

This report focuses on how working patterns in London, the place that benefited the most from face-to-face interaction in the UK pre-pandemic and saw the largest shift to remote working during it, have responded since the lifting of Covid-19 restrictions. Through a survey commissioned for this research, it shows that in April 2023:

• On average central London workers came into the office 3 days per week, 59 per cent of January 2020 levels.
• The most common working pattern was two days in the office. Of those who go to their workplace, 31 per cent do so two times per week. That said, almost half of workers went into their workplace for three, four or five days.
• Younger workers were more likely to be in the office than older workers, as were workers who lived within Greater London.
• Three quarters of companies have mandated that their workers come into the office at least one day per week, and over a quarter of workers come in more frequently than this baseline requirement.

These working patterns are a result of a strong return to the office since restrictions were lifted. Data from Transport for London on Tube exits in parts of the Capital dominated by offices shows how the recovery has played out from virtually no commuting during lockdowns. In particular, it shows that there was a large increase in exits in the second half of 2022 (despite storms and strike action), with exits up 40 percent between April and November 2022.

This should come as no surprise. There are no free lunches; unless the pandemic has caused a fundamental change in how people generate and share ideas, the future should be at most a moderated version of the past.

There is a long literature on the importance of agglomeration in shaping the geography of the economy, which this report summarises. Its impact on London specifically meant that not only were the UK’s knowledge-intensive activities concentrated in central London in particular on the eve of the pandemic (making it the high productivity, high-wage economy that it was and making the UK economy more productive as a result), but that they had been for at least a century running up to it. It is these benefits that mean that fully remote working has not become the dominant model of working post pandemic.

The debate around the future of work that happened particularly in the first year of the pandemic did not sufficiently take this into account. It focused on the perspectives of the employee only, rather than the employer. There are very clear upsides to greater flexibility for the employee, not least a large reduction in commuting costs. But this has to be balanced against the benefits to innovation and creativity of workers interacting with each other face-to-face and of the on-the-job learning that happens when colleagues are in the same room. (The latter, especially for younger workers, effectively amounts to an unofficial apprenticeship.)

The concern for London – and the wider UK economy as a result – is that the return to work that has been seen in central London since restrictions were lifted appears to have stalled in 2023 to date. Since January exits from the same TfL stations has remained around 70 per cent of February 2020 levels, with around half of all working hours being done remotely.

The key question is, if this is what working patterns will look like from now on, what impact will they have on productivity? And for London in particular, 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?

Because this is an experiment, there is little evidence available to answer this question definitively but there is strong evidence that face-to-face interaction has positive impacts on innovation, creativity and learning, and so long-term productivity as a result. The big risk therefore is that, because the benefits of home working (such as reduced commuting costs) are very visible and instantly realised by the worker, and because the benefits of office working are both longer term and less visible, policy is shaped by these short-term benefits and unintentionally does longer-term harm.

Given this, local and national government should not passively let a public health emergency turn into a longer-term negative impact on the economy. The reticence from most businesses to go beyond asking employees to come back to the office more than three days a week is understandable given the perspectives of employees and how tight the labour market currently is. This means that there needs to be collective action to continue the recovery, with both the national government and the Mayor of London working with businesses to create a positive campaign in order to encourage an increase in the minimum number of days expected in the office.

Policy should also look to minimise the costs of office working to the employee where feasible. This means maintaining the frequency of public transport services schemes to limit the time cost of commuting by public transport. And it means reducing monetary costs too. The latter in particular is a challenge given the financial hole Covid-19 has created for transport authorities. However, if a temporary scrapping of morning peak fares on a Friday – the least popular day for office work – caused a substantial increase in commuting, it could see an overall increase in revenues.

Policymakers should also be very cautious of policy being overly influenced by the short-term nature of the debate on home working as this could come at the cost of longer-term prosperity by inadvertently undermining agglomeration benefits. As well as maintaining frequency of public transport services and traffic management in London, it will need to continue to:

• Manage the balance between residential and commercial space in central London so that the former does not cannibalise the latter. Switching commercial property to residential use is not easily undone. All things being equal, a major shift towards residential would limit the ability of the central London economy to grow in the future.
• Improve public transport infrastructure. Delaying long term decisions on further investment today in the belief based on short term evidence that demand will be permanently lower stores up problems for tomorrow.

Finally, the Government should be more proactive in attempting to measure the impact of hybrid working on productivity. If this lies at the heart of future decisions about land use and transport investment then it should conduct research on what this impact is to better inform future policy decisions. The Mayor of London should contribute to this through the establishment of a Productivity Advisory Council (akin to the Chancellor’s Economic Advisory Council) made up of businesses to feed in the impact of hybrid working and other issues on the productivity of the Capital.