Home working could slash £12 billion from consumer spending

Lower consumer spending linked to home working could see businesses lose out on £12 billion, according to a new study. With no extension of the UK’s state-sponsored furlough scheme in sight, that figure could see the equivalent of 250,000 jobs lost.

According to a new forecast from Big Four firm PwC, if pandemic levels of home working persist, lower consumer spending and a decrease in economic clustering could reduce UK GDP by £15.3 billion every year. Of that figure, £12.1 billion would come from lower consumer spending, thanks to office workers spending fewer days in city offices.

With workers still understandably uncomfortable with the prospect of returning to their office, or facing the crowded commute surrounded by strangers in the middle of a potentially lethal pandemic, PwC suggested continued home working would mean less money being spent on surrounding shops, cafes and cultural amenities. Assuming that the UK Government does not follow the likes of France, Germany and Spain in extending its job preservation scheme in October, this might have the knock-on impact of job losses, as businesses cut down on ancillary workers whose jobs relate to populated offices.

Canteen workers, security guards and waiters could be among those whose jobs hinge upon workers being present in offices. Meanwhile, another a result of office workers spending fewer days in city offices could be less money being spent on surrounding shops, cafes and cultural amenities. The lower spending associated with a persistent shift to working from home could see UK GDP fall by around £12 billion, the equivalent to 250,000 jobs per year. While it is unlikely that such a situation would persist beyond 2021 – with the likelihood being that a Covid-19 vaccine will have been distributed by then – it is still a severe situation for the immediate future, especially as the Government seeks to roll back its economic support of businesses and employees.

Jonathan Gillham, PwC’s chief economist, said, “We've seen office and home working pitted against each other in recent months but it’s not as simple as one being more effective than the other… While continued working from home could help level up smaller cities and rural areas, it would have a disproportionate impact on lower paid workers in bigger cities… A blend of office and home working is the best way to help cushion our economy as the furlough scheme draws to a close - getting more people back to offices safely is critical. The UK is a services-based economy that’s powered on people coming together face-to-face.”

PwC’s warning has been echoed by the Government, with Foreign Secretary Dominic Raab having recently told the BBC that home working is damaging the economy. As fears grow for city centre businesses grow, he stated that “the economy needs to have people back at work," as the lockdown months had led to a "massive shrinking of the economy."

With lockdown measures in the UK having eased to allow for the return to work, there has been a gradual shift of employees back into their previous rhythm. According to an ONS survey focusing on the last week of August, 50% of workers returned to their place of work, up from 30%. The increase in returners is now at its highest since the Government commenced lockdown in March.

This increase has been backed up by UK rail firms, who said anecdotal evidence suggested a slight increase in numbers – though it was too soon for exact figures. Trains in England, Wales and Scotland have been operating up to 90% of normal levels since the start of September, as schools have reopened and people are encouraged to return to work.

While in the short-term this might help avert the economic disaster forecast by PwC, however, in the long-term this could simply be kicking the can down the road. While workers and students across the UK have been gradually returning to ‘normal life,’ the number of UK Covid-19 cases has spiked dramatically. The week following the ONS’ survey has seen the number of new cases reported hover consistently around 3,000 per day. The last time the UK recorded more cases in a day came as an anomaly on May 27th, as the UK’s number of cases trended downward.

The concern now is that the number of new cases has been steadily rising in Britain, suggesting that things are likely to get worse – especially if workers are forced back into the office, with the UK the only major European economy not to have extended its furlough scheme at present. If this drive to push workers back into the office for the sake of economic growth exacerbates what could well be a second wave of the pandemic, the social, political and economic consequences will likely be far more severe than those anticipated if commuters do not resume their regular consumption patterns around the office.