London risks losing its aura as a 'fun' place to work, economist fears
Capital could lose £178m in 2021 as companies decline to send all workers back to offices
Major cities such as London face more economic pain as some companies resist the government’s efforts to encourage workers back to their desks this week, economists have warned.
Pablo Shah, a senior economist at the Centre for Economics and Business Research (CEBR), fears that the capital could have lost its aura as a “fun” place to work, particularly in the digital and creative industries.
“We had a management meeting in the office last Tuesday and were able to see what London looks like as the lockdown eases. To be frank, it looked like a ghost town,” Shah said. “London last week did not look very attractive to the talent it needs.”
That could mean more woes for the troubled hospitality sector, just as the government launches its “eat out to help out” discount meal scheme on Monday in an attempt to kickstart the economy out of the deepest slump in centuries.
Since Saturday, employers in England have been allowed to judge whether staff can safely return to offices. But many, including banks, legal firms and tech companies, are taking a cautious approach and are not rushing employees back to their desks – potentially for many weeks or months.
Many of CEBR’s own clients, such as finance firms and insurers, are not going back to offices until next year. It predicts that in 2021, the “new normal” will be 30% of London-based employees still working at home on any one day.
That would equate to £178m of lost spending on lunch, after-work drinks, coffee/tea, snacks, stationery and other office equipment each month, compared with before the coronavirus crisis, the CEBR has calculated.
However, London could suffer a sharper fall in economic activity, if it cannot recover its lustre.
“If business is scared off by this, if the potential labour force either doesn’t come or goes home, if people don’t think London is where they want to live and hence fail to attract new businesses, the effect on London’s GDP could be a huge multiple of this,” Shah said.
About £2.3bn of spending in shops, pubs and eateries near London employment hubs was lost or displaced between March and June, the CEBR said, with the city lagging behind other regions for the number of people returning to workplaces.
Other cities are also likely to struggle as major companies stick with homeworking.
Google and NatWest Group are allowing employees to work from home until 2021, even though they now have more discretion to allow them back to the office.
Many staff at Lloyds Banking Group, HSBC and Barclays are also expected to work from home until at least September, while the energy operators SSE and National Grid will review their working arrangements next month.
The slump in consumer spending has already forced several retailers into administration, including Monsoon and Quiz. Many other chains have missed rental payments as they struggle to keep afloat. Even the technology giant Apple has asked its landlords for a rent cut, according to the Sunday Times, despite reporting record sales in the last quarter.
More than 72,000 establishments have signed up for the eat out to help out offer in an attempt to lure customers through their doors. More are joining daily, the government says.
The scheme, which is set to cost taxpayers about £500m, aims to help the country’s devastated hospitality industry, which employs 1.8 million workers, get back on its feet. Anyone visiting a participating restaurant, cafe or pub on Mondays, Tuesdays and Wednesdays throughout August will receive the half-price discount of up to £10 per person.
Restaurants have had to register with the scheme. A webpage on www.gov.uk lets consumers search for participating restaurants within five miles of their home.
They range from independent establishments, such as the Ivy in London’s theatreland, to garden centres and even cafes at English Heritage sites – as well the big national chains such as Pizza Express, Costa, McDonald’s and Nando’s.
Customers are not required to download a voucher, as the discount is applied when the bill is presented and claimed back by the restaurant. The discount does not apply to takeaways, alcoholic drinks or the meal’s service charge. It is capped at £10 a person – so if two people spend £50 on food they will only get £20 knocked off the bill.
If they can stomach it, users can eat as many times as they like, breakfast, lunch and dinner, three days a week.
Pubs and restaurants in suburban and rural areas – those with outside space – look set to be very busy.
More than 40 Michelin-starred restaurants are taking part in the discount scheme. Some popular outlets have reported being inundated with people seeking reservations.
However, it remains to be seen how many inner city eateries that usually serve office workers will decide it is even worth opening up.
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