The government is encouraging City workers to return to the office in the hope of offering a lifeline to the many businesses that depend on their custom, and by extension those businesses' landlords.
Unless the City (and other financial districts) regain something approaching their former concentration of workers, the businesses that have grown to cater to them will be in the direst of straits and unemployment and failed companies will be the likely result.
The government has, in essence, decided to shelve its expensive furlough scheme and lay the responsibility for supporting affected industries back on the consumer.
But getting the financial services industry back into offices is going to be a tough ask.
Working from home works
If the last few months have proved anything, it’s that remote working works. Last week, JP Morgan’s Daniel Pinto said the bank is set to introduce a new permanent model for all its global employees rotating between the office and home.
Without a plausible case for an improvement in productivity, persuading financial services workers that they should return to the dubious pleasures of lengthy, overpriced commutes on crowded transport to sit in unhealthy offices far from home seems to have little appeal.
The UK government appears to be equating the return of children to school with a resumption of office work — and some cynics would suggest that the real aim of the former is to encourage the latter. But while having kids at home with no school meant it would be difficult for workers to go to the office without making childcare arrangements, schools being reopened makes no difference at all. Bankers and investors are perfectly happy to work from their (newly child-free) peaceful homes, even more free of distraction than ever.
People care more about safety
Working from home is not for everybody, just as many found the strain of an open plan office or trading floor a grating, unproductive and stressful environment. But there is still a pandemic on, and working from home is pretty much our best defence against it.
In Europe, office workers have returned to their workplaces in far higher numbers than in London, a Morgan Stanley survey found. Public transport use recovered far more in Paris and Madrid than London throughout July and August, according to data from public transport company Moovit.
This change corresponds with a sharp increase in infection levels. In Madrid, infections climbed from 33 per 100,000 during July to 401.9 per 100,000 just a month later. In Paris, the infection rate jumped from 25 per 100,000 in mid July to 112.3 per 100,000 a month later. In London, where workers are largely still at home, infections increased from 10.5 to 22.6 per 100,000 — far below the UK's peak.
Encouraging office workers to return in order to support City businesses is likely to prove a false economy if it prolongs the pandemic, especially once lockdowns are reimposed to quell infection rates.
The fact is that lockdowns or remote working are not the issue. Whatever the government says, until people feel safe and confident the City will be too quiet to support its businesses. Sweden, where the government did very little in the way of imposing lockdowns, has not escaped the economic shocks afflicting its more careful neighbours.
But even if a vaccine were developed today, and distributed rapidly and efficiently so that the virus was all but eradicated by the end of the year, the City’s heyday as a hive of workers is likely behind it.
While full-time remote working for 100% of City employees is likely still some way in the future, office working five days a week for 12 months of the year, looks more and more like a thing of the past.
Now that it’s clear that so much business can be conducted from our homes, employers will be looking to reduce their office space overheads. Workers will be moving to areas where housing is cheaper and space is more plentiful and, rather than spending money on City sandwiches or on train tickets, they will spend that money locally, reviving, and creating jobs in, the areas in which they live that have for so long suffered from a lacklustre daytime economy.
Meanwhile, there will still be a part to play for City offices and retailers. Workers will still need to come together to meet in person, to train and hire new staff, to socialise and network. That will require office space, places to eat, drink and gather.
The City is dead
The transition will be painful. In the short term, jobs will be lost. The jobs that are created elsewhere will arrive only slowly and those newly unemployed will often not be best placed to fill them. The ramifications for the commercial real estate industry will be similarly brutal.
But while it’s nice to support struggling industries where we can, the fact is that if doing so means prolonging the pandemic, we will do more harm than good. To put it bluntly, how many people should die so that Pret and others can stay open and pay rent? That is the stark choice we face.
The shift away from the City as a full time human hive could be as drastic as the deindustrialisation of the 1970s and 1980s that hit large swathes of UK cities, some of which are still recovering. But no one in their right mind thinks that the UK should bring heavy industry and manufacturing back as a way to drive the economy and that is without the moral incentive of keeping safe from a pandemic.
The government’s priority should be to support lost wages, perhaps with a more restricted but longer lasting version of its furlough scheme. Despite the Treasury's heavy demands, the Gilt market remains a cheap and seemingly inexhaustible source of funds.
In the medium term, the government must invest to facilitate the transition to a new and more geographically distributed economic model. It should have some ideas already — reducing the country's economic reliance on London has been on the policy agenda for years.
Encouraging office workers to support these businesses when the pandemic remains a clear risk is short-term, knee-jerk thinking and has no place in the UK's plan for long-term economic recovery and growth.