This week’s topics:
100 days of working from home - an update from the UK Chairman
The reopening of pubs and restaurants, and lessons from the opening of non-essential retail
The UK housing market - we expect a gradual recovery
Building back better - how regional rebalancing will be key to recovery
100 days of working from home - how the firm is faring and what the return to the office looks like:
Kevin Ellis, PwC UK Chairman and Senior Partner, said:
Some 22,000 members of staff have been able to work from home effectively over the past 100 days, alongside our 27,000 clients.
During this time, we’ve adapted how we work and virtually onboarded 200 new graduates by safely couriering laptops and equipment to them at their homes.
While working from home has been effective, bringing people together safely is important for teams, good for communities and good for the economy. There is also a mental health benefit for many. Office life can be balanced with working from home and the safety of our people is key.
Currently we have six offices open across the UK, with a few hundred of our 22,000 people working there at the moment.
From 6 July, we are opening all of our offices and expect that we will have up to 15% of our people initially who have a business or personal need to work in the office. We have systems in place to make sure our people are safe and we are providing clear advice to those returning. For example, there are markers in the lifts to ensure social distancing and sensors that allocate desks for people to sit at. I see value in people being back in the office, so we're continually reviewing and adapting our plans as lockdown eases
If it's safe to do so I would hope that our offices are operating at more than 50% of their usual capacity by the end of September, giving many more of our colleagues the opportunity to spend some of their time in an office environment, connecting with colleagues, sharing ideas and driving our business forward.
Following the reopening of non-essential retail, what did we learn?
Lisa Hooker, head of consumer markets at PwC, said:
Whilst footfall was up 40% on the Monday, across the week it was 57% down on prior year with retail parks performing the worst at -63% and at their the best at -26%. Retail parks have the benefit of having quite a bit of non essential retail space and the ability to park which is often not the case for shopping centres.
If we look at Europe as a leading indicator, it took 14 -17 days to get to -50% footfall overall.
Although footfall was disappointing, on the positive, conversion and basket sizes were much better, so when people did shop it was less about browsing and more about buying and online continued showing strong growth of around 15 to 20%.
Also retailers held their nerve with promotional activity staying similar to the prior week following the peak seen over bank holiday May weekend.
Areas that sold well were the home - DIY and furniture, health and wellbeing, kids and value - boasted by a number of value operators not having online operations and offering value for money in these uncertain times.
On the reopening of pubs and restaurants:
Lisa Hooker, continued:
Plans to allow most of the UK’s pubs, restaurants and cinemas to reopen on 4 July and social distancing to reduce from 2 to 1 meters is likely to give a further boost to footfall in July as enjoying a drink or bite to eat are often an essential part of our shopping experience. Also working with the constraints of 1 not 2 meters will allow more leisure operators to open.
Our consumer confidence survey indicates that shoppers have money in their pocket but need more reasons such as the reopening of leisure or confidence over safety to start getting closer to normal levels of footfall.
Expect gradual recovery of the UK housing market and a long-term shift out of major cities
Jamie Durham, PwC economist, said:
It’s good news that estate agents and property websites have reported a significant increase in enquiries since restrictions on the housing market were lifted, due to the pent up demand. However, with considerable uncertainty in the economy, we still expect many people to put off making any major financial decisions until the outlook is clearer. This is likely to dampen the number of transactions that take place over the coming months, meaning a swift bounceback of the housing market is unlikely.
Also, in addition to the wave of uncertainty caused by COVID-19, Brexit is still on the horizon and a 'no deal' may put further downward pressure on house prices, both before and after the transition period ends on 31st December.
Looking ahead, rising unemployment and the risk of redundancies is likely to have a negative impact on the housing market over the coming months. The impact on the housing market is likely to be felt disproportionately in areas with large hospitality and tourism sectors, which have been most affected by the virus. The housing market in London may be more affected due to high prices relative to wages, with properties in the capital typically requiring a larger mortgage which involves a greater degree of risk.
There may be a move out of central locations in major cities in the medium-to long-term. While offices are reopening, working from home is likely to be more common than it was pre-pandemic. If there is no need to commute on a daily basis, it's possible people will start to look to live further outside of cities, where they can get more space for a more reasonable price. There may also be a rebalancing across cities in the UK, as businesses reconsider their footprint and people look to take advantage of lower living costs in cities like Birmingham and Manchester.
Regional growth and levelling up will be central to the UK’s post-COVID recovery
Karen Finlayson, PwC Regions Lead for Government and Health Industries, said:
The widening gap between towns and cities has been an ongoing issue in the UK for some time - this will be compounded by the pandemic, so it’s crucial that redressing regional disparities is at the heart of any recovery plan.
As businesses seek to shorten their supply chains to improve resilience, there’s an opportunity to stimulate recovery so the economy is less skewed towards London and the South East. This can be achieved through a set of incentives and support initiatives, including local infrastructure improvements and re-skilling.
Businesses also need to take an active role in working with national and local governments to tackle the opportunity gap and create and fill jobs locally.
The pandemic has increased local footfall - so ensuring people continue to spend locally will help ensure jobs and skills are retained regionally.
Our research highlights that attractive town centres, open green spaces and community facilities are almost as important to people as jobs and income. Regional cities and towns have a big opportunity to play to such strengths - prioritising environmental qualities and maximising digital connectivity so that people can work from home efficiently. Lockdown has shown us that you don’t need to work from a city hub to maximise your career or work effectively.
In places seen to be ‘left behind’, the approach needs to focus on supporting education, infrastructure and technology.
Something to watch:
Watch our webcast on the role of technology in returning to the workplace with Julie Leonard, Strategy& Director at PwC UK.“Technology is part of the solution but understanding what is right for your organisation is critical.”
Something to listen to:
Listen here to Rob McCargow, Director of AI at PwC UK, speak to Tech Talks about Responsible AI, Diversity and Inclusion, and Upskilling in advance of the WeAreTheCity DisruptInnovateLead conference on 26 June.
Something to read:
Read the learnings from other economic downturns and from recent store reopenings in other countries we’ve collated for retailers to help with their own lockdown recovery after a significant week for retail in England.