Dr Jesse Matheson, Professor Gianni De Fraja and Dr James Rockey report on their research which shows that increased hybrid working could affect the economy in city centres and those areas where people live.
City centres lying empty because so many people are working from home have received considerable media attention since the pandemic took hold. As the picture of a post-COVID world slowly comes into focus, it seems we are unlikely to return to the office in the same numbers as before. Large companies such as Aviva, Dropbox and Facebook have already committed to continuing remote working in the years to come.
This has important implications for where economic activity takes place. Not only will it affect city centres, it also means that many residential neighbourhoods are likely to change permanently.
To help understand these geographic shifts, we have recently published the results of a research project. In this paper we show which neighbourhoods in the UK will be affected for better or worse and what it will mean for how the economy operates in future. In deference to the online meetings app that has become an ubiquitous part of remote office working, we decided to call these effects the zoomshock.
We calculated the zoomshock as the change in economic activity due to working from home that has taken place within each UK neighbourhood. Simply put, this is the difference between two phenomena: the inflow of employment, which refers to people who live in a given neighbourhood and normally work elsewhere but are now working at home; and the outflow of employment, which is people who normally work in that neighbourhood but live elsewhere and are now working from home.
By our calculations, the potential reallocation of economic activity across different areas is large. The City of London, which is the heart of the UK financial services industry, could lose over 70% of its labour force if everyone who can work from home does so in the long term. This would equate to £9.1 billion in annual earnings. If the average worker only worked from home one day a week post-COVID, that would still account for £1.8 billion in lost activity, but it could well be that two or three days a week becomes the norm.
This economic activity will instead become less geographically concentrated, spread across different residential neighbourhoods. As an example, the local authority area of Lewisham in south-east London could see an increase in output of up to 60% relative to pre-COVID economic activity, or approximately £1 billion a year. You can see in the map below how we are forecasting this to play out across the capital, with shades of blue representing gains and shades of red representing losses.