The Covid-19 pandemic and the lockdowns that came with it inadvertently forced many advanced economies into a big experiment, with large shares of workers in their economies shifting to remote working. This triggered a debate about the future of work, with the virtues of remote working for employees being extolled and many predictions made about the death of the office.1
Much of this debate though was presented from the perspective of the employee. There are very clear upsides to remote working, such as not having to commute (which brings both money and time savings) and being able to better balance family and working commitments. So, it is understandable that this view has got a lot of attention.
But it hasn’t usually presented the position of the other key actor in the location of jobs: the employer. The motivations of this actor will influence what the future world of work will look like. And it has also tended to overlook what benefits the workplace brings to the employee, for example through on the job learning from colleagues. In doing so, it has presented remote working as a free lunch – everyone will benefit from this change in working.
Both the academic literature and the revealed outcome of where jobs (particularly the knowledge-based ones that are in principle the ones that can most easily be done at home) are located in developed countries suggest that, prior to the pandemic, there were considerable benefits for workers and firms clustering in cities and city centres in particular. This resulted from the benefits that cities offer to businesses and workers through a process known as agglomeration.
The purpose of this research is to review what agglomeration is, why it is important, and what this may mean for London and the national economy depending on where people ultimately do their jobs in the future. It is structured as follows. Section 3 reviews what the literature says about agglomeration and how this has shaped London’s economy. Section 4 looks at the return to the office in central London since lockdowns have been lifted, in part by using the results of a survey commissioned for this report. Section 5 presents scenarios that could emerge in the future. And Section 6 concludes and offers guidance to policy makers.
Box 1: Defining London
Unless otherwise stated, London is defined in this report as the primary urban area (PUA). This captures the built-up footprint of the Capital and is the Greater London Area plus the authorities of Broxbourne, Dartford, Elmbridge, Epping Forest, Epsom and Ewell, Gravesham, Hertsmere, Runnymede, Spelthorne, Three Rivers, Watford and Woking.