Productivity challenges lie at the heart of Britain’s ability to compete internationally, grow sustainably and create wealth for all parts of the country. As a major contributor to economic output London – and the City of London in particular – is pivotal in helping the UK economy to succeed. The capital accounts for 15 percent of the population but one quarter of UK output. A job in London is around one third more productive than the UK average.
As previous work by Centre for Cities has pointed out, London and the UK have an ongoing productivity challenge. This emerged at the time of the global financial crisis in 2007 – well before a whole series of other supposedly “once in a lifetime” events. Of these, it was the public health emergency of Covid-19 that led to a dramatic acceleration towards hybrid working practices. Three years on, these changes are very much with us and yet remarkably – as this report points out – our collective understanding of their long-term impacts on the economy are poorly understood.
As employers, we know that many of our staff have enjoyed the benefits that much more working from home has generated for them. Countless surveys show that staff value increased flexibility and the reduced cost and time spent commuting. Many note the importance of an enhanced “work-life balance” that has come with not being in the office so often.
But some of these changes have come at a cost. Our city centres are less busy, many high street shops and smaller businesses have closed, and our public transport system is quieter and more dependent on subsidy. Car use may have crept up outside of central London which raises sustainability questions at the time of a climate crisis. There is evidence too that some employees – especially the young – may be missing out in terms of their career development, social engagement and opportunity to learn from their colleagues.
As this report highlights, the evidence built up pre-pandemic was that there were significant benefits associated with people working in the same place at the same time, especially in knowledge intensive sectors where the City holds a pre-eminent position. Increased density means the economy is able to generate higher levels of innovation and better paid jobs. A big part of the economic case for the Elizabeth line was driven by this factor.
Fast forward to 2023 and we find ourselves living through a real-time experiment in which the longer-term impacts of hybrid working on productivity are at best not yet fully understood. The findings of this report indicate that there needs to be proper research into the longer-term effects of hybrid working. We may also need to adopt a precautionary approach to its long-term implementation. The report notes that a simple step would be to make travelling into work on Mondays and Fridays – when things are quieter – significantly cheaper. This would complement the excellent “Destination City” and “Let’s do London” campaigns that have been rolled out by the City and GLA with much support from the EC BID and others. A campaign to get people back into Central London for work, highlighting the benefits to career development, learning and progression, could be adopted. A productivity partnership between London government, UK Core Cities, major employers, and BIDs would help in the exchange of ideas and emerging evidence of hybrid working on the London economy and how best to manage its impacts. Devolution of more of London’s tax base to its city halls would provide a strong incentive for local and city-wide government to support further economic growth.
Britain is weathering its biggest economic crisis for over seventy years. As businesses battle to play their part in delivering on good growth, government at all levels needs to explore how to support the economy, competitiveness, and sustainability. Understanding the impact of hybrid working and acting to mitigate its unintended effects should be a priority for business and government. This report makes a valuable contribution to doing just that.