The shift to hybrid working since the Covid-19 pandemic risks undermining London’s position as a hive of creativity and economic productivity, a leading urban policy think-tank has warned.
With office attendance in the capital at about 60 per cent of pre-pandemic levels, the Centre for Cities said it expected a hit to the economy from the reduction in workplace interactions. Some academic studies have shown such interactions lead to increased output.
“Policymakers should be wary that we don’t passively let a public health emergency turn into a longer-term negative impact on the economy,” said Andrew Carter, chief executive of Centre for Cities, which on Wednesday released a report on the effect of homeworking.
Data collected from London Underground in office districts showed the number of returning office workers had plateaued since November 2022. The level of passengers exiting stations from then has stood at about 70 per cent of pre-pandemic norms.
On average, office workers in central London came into work 2.3 days a week, or about 60 per cent of pre-pandemic levels, according to the report. The most common work pattern was two days a week.
Citing several studies with conflicting outcomes, the report said it was unclear what effect reduced office participation would have on productivity in the long term.
However, it referenced over a century’s worth of academic literature demonstrating the economic benefits of face-to-face collaboration, known as “agglomeration” effects. These “would suggest that there will be a long-term productivity hit” from reduced office activity.
“The big risk here is that hybrid working sees a further deterioration in productivity growth off the back of a poor performance over the previous decade-and-a-half, at a time when the London economy needs to move in the opposite direction,” it added.
The report identified a mismatch between workers’ and bosses’ views over how much time at home was desirable, citing recent comments on the need for attendance by senior executives of companies including IBM, JPMorgan and BlackRock.
A survey of 27 countries by the National Bureau of Economic Research, a US think-tank, found that employers wanted an average of 0.7 days of homeworking a week but employees preferred more than 1.7 days.
But despite this disparity in expectations, data from the Indeed recruitment website showed companies have continued to advertise a growing number of hybrid-working positions. That was because of employers’ desire to attract and retain staff in a tight UK labour market, it said.
The Centre for Cities report warned that office attendance might enter a downward spiral if companies gave up office leases on larger buildings and falling ticket sales then led to a reduction in transport services.
The report said the government should support London’s mayoral authority to maintain Tube and bus frequency, despite the financial hit from the pandemic. It suggested innovations such as scrapping peak-time fares on a Friday to encourage workers to travel.
It also warned against offices being repurposed for residential usage, which could lead to a permanent reduction in available work space. This would “limit the ability of the central London economy to grow in the future”, it said.
