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1.1 million may not return to physical work as firms reduce office space


A recent article from the BBC reports that an estimated 1.1 million individuals will potentially begin to permanently work from home as their employers begin to cut back on office space.


The BBC reported that 43 of the 50 firms which the news publisher interviewed stated that they will have staff going into full-time work from home sometime in the near future.


86% of these employers have stated that they plan on working with a mixed system which has employees working from home on some days and in-office on others, with staff being encouraged to work for two to three days at home a week.


This hybrid method of work may be better for the workers as some during the COVID-19 lockdown have experienced a sort of “lockdown depression,” - in other words, workers may be less productive working from home.


So, a hybrid method of working will help employees rest as they can take it easy when working from home and will also enable them to stay focused at their physical workspace after potentially feeling rejuvenated from their home days.


Additionally, this hybrid system will decrease the chance that workers will develop psychological and mental health issues associated with staying at home without physical human contact for extended periods of time.


So, despite the government lifting lockdown restrictions, which will end in June, the way we conduct business and go to work may change forever as more and more businesses head online.


Chief executive of the advertising firm WPP, Mark Read stated “We're never going to go back to working the way we used to work.”


He added in his statement that about 20% less office space/workspace is required for firms if they adopt a style of work that includes employees working from home.


And this is the reason why firms such as large financial institutions, i.e. JP Morgan, are so eager on reducing office space, it cuts down costs.


Offices are expensive for these firms, and, reducing the number of offices which you have to rent and lease reduces your fixed costs. This leads to a potential reduction in total costs if the output of workers is not severely decreased due to working from home, thus making businesses such as JP Morgan much more profits.


However, this of course does depend on the mental effects of working from home, if workers become lonely, this policy will likely have a negative impact on the firm as a whole as the relative productivity of the worker’s decreases.


To combat this, some companies are employing a ‘smart working’ system, which will allow workers to come into the workplace whenever they want, or, to work from home whenever they want.


This will let workers have much more autonomy over themselves as they decide what they can do which may lead to higher employee satisfaction as workers have more freedom and feel more valued.


So, if working from home is a success, the potential increase in profits or revenue which firms will see can be used to organically expand, better innovation, or to pay shareholders larger dividends.


Other firms such as Aviva, an insurance giant, have stated that they would prefer on having 95% of their 16,000 employees working flexibly from home and within their offices.


Recruitment firm, Adecco has also revealed a similar view stating that 80% of their 34,000 employees will work remotely.


However, although these decisions to cut back on office space may lead to better business performance and employee satisfaction, they may have an adverse effect on firms stationed around said businesses.


We’re of course talking about the high street. Industries tend to clump together, cafe’s typically pop up next to offices as bankers and lawyers need their coffee and vice versa. This means that if office spaces were to decrease, there will be less demand for the services of these other businesses.


For this reason, there is a big concern around the potential survival of the high street, if consumers leave as they are working from home, footfall levels fall, and the loss of demand will lead to loss of industry.


This will then lead to structural unemployment which will be painful for those working in these cafe’s, coffee shops etc. as the large supply of labour within these industries causes wages to be low meaning these individuals may not have a lot of financial savings.


Therefore, because structural unemployment has occurred, and, because the work is low skill, it is unlikely that these individuals will be able to find work once they lose their jobs as for one, the industry they used to work in is gone, and for two, they don’t have the skills necessary to go to another industry.


This will worsen the unemployment rate within the UK quite significantly, and, unemployment will be an issue for the government as it is long-term, thus meaning the UK gov will be forced to allocate more toward schemes such as Job Seekers Allowance.


Additionally, the wasted resources which will come as a result of the cutting back of office spaces is immense.


The first wasted resource that increase will be labour as unemployment rises, however, although this is an issue, it can be fixed in the long-term through training and education schemes.


However, there is a much more significant resource which will be wasted and that is capital, offices are no longer needed, consequently, shops will close and there will be a large number of vacant stores and office spaces within the high-street area, with the main problem being that we have no current use for these areas.


So, although the reduction of office spaces will have positive effects on the businesses cutting back on costs, the economic downsides are much more painful, hence, the UK government may have to do some form of intervention to either keep the high street alive or to upskill the current lowly skilled workers in an effort to avoid long-term unemployment within the UK economy, we must also hope that new innovation will occur to bring life back to the potential derelict stores and office spaces which would come as a result of a collapsing high-street.

 

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Written by Hubert Kucharski

Research compiled by Jonas Theaker

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