London‘s productivity growth is faltering as office staff continue to work from home, recent figures from the Office for National Statistics (ONS) reveal. In 2022, productivity in the capital plummeted, marking the lowest output per hour worked since 2009. This decline of the work from home era represents a 2.7% drop in productivity between 2019 and 2022, with Wales being the only other region to experience a fall. Conversely, the North West of England witnessed the most significant growth, with productivity soaring by 7.9% over the same period.
Economists attribute the decline in London’s productivity to the lingering effects of the pandemic and the surge in remote working as the UK emerged as the work from home capitol of Europe. Adrian Pabst, of the National Institute of Economic and Social Research (NIESR), emphasized that few jobs can be performed as effectively from home as they can in an office setting. “Working zero days from the office, which you can see in the Civil Service, is just not working out,” he stated. Pabst highlighted the lack of coordination, interactions, and motivation as critical factors negatively impacting productivity when employees work from home.
London’s higher proportion of office workers has made it particularly vulnerable to the adverse effects of remote working. By late 2022 and early 2023, nearly 60% of London workers were either fully remote or engaged in hybrid working. This figure significantly surpassed the national average, with only 36% of workers in the North West engaging in similar work arrangements.
A 2022 survey by the ONS found that 44% of London businesses planned to adopt greater levels of home working, more than any other region. However, a recent follow-up survey indicated that this percentage had decreased to 29%, still above the national average but showing a trend towards returning to office-based work.
Mr. Pabst predicts that the gradual return of workers to the office will enhance London’s productivity in the coming years. “It took a while for people to see the negative side-effects. They all like the positives – they do not like to commute, they can see more of their families – but people did not see the negatives, and they took a while to become clear,” he explained. He further noted that as London recovers from the impact of COVID-19, productivity growth rates in the capital are expected to outpace those in other parts of the country. Most employees are now adjusting to a hybrid model, working three to four days from the office.
However, London faces additional challenges that hinder productivity growth. The lack of affordable housing is a significant issue, forcing people to endure longer commutes, which are both costly and time-consuming. “The lack of housing in areas where it is required has not helped,” Mr. Pabst remarked. He also pointed out that certain areas of London are not well-served by public transportation, and driving is often not a viable alternative, further complicating the commute for many UK workers.
The Workers Union Says…
“Despite these obstacles, the shift towards more office-based work is a promising sign for London’s economic future. As businesses and employees find a balance between remote and office work, productivity is likely to improve, benefiting the capital and the broader UK economy.”
