The economic impact of returning to the office

Almost overnight, coronavirus (COVID-19) transformed the working patterns of UK workers, with almost half of all people in employment in the UK doing some work from home in April 2020. The service sector, which accounts for approximately 80% of UK GDP, had to suddenly adapt to empty offices with nearly four out of five employees working from home in powerhouse sectors, such as professional services.

As offices are now gradually re-opening, workers, employers and policymakers are considering what the benefits are of returning to the office.

We’ve conducted a new piece of research to assess the impact to the UK economy of office workers continuing to work from home, versus if they were to return to their pre-COVID-19 offices for their regular working hours. This report was prepared by our UK Economics practice which forms part of Strategy&, PwC’s global strategy house. 

Key findings 

  • Compared to a scenario in which office-based workers eventually return to working in the office, a scenario in which they continue to be universally advised to work from home could see the UK’s GDP being £15.3bn lower per year. This could be attributed to: 

    • Lower spending on goods and services when working from home both directly, through supply chains (“indirect impact”) and through lower incomes for workers in affected sectors (“induced impact”); and

    • Loss of clustering benefits between businesses and between workers. 

  • We also estimate that the negative impact on hours worked is equivalent to 250,000 jobs per year in full time equivalent terms.

  • However, the shift to working from home could have positive implications for labour productivity and the “levelling up” agenda. Workers who used to work in inner-city offices can bring more economic activities to the suburbs and rural areas. Cities that heavily rely on office workers may need to diversify and adapt.

  • Flexible working is important. Existing research suggests that workers and firms are most productive when they are given flexibility to choose the most suitable working style based on their individual needs and critical factors such as home-working environment, children, privacy, age and job seniority. Flexible working can also open the labour market to more people.

     

Lower consumer spending and a decrease in economic clustering could reduce UK GDP by £15.3bn every year if pandemic levels of home working persist

Lower consumer spending and a decrease in economic clustering could reduce UK GDP by £15.3bn every year if pandemic levels of home working persist

While COVID-19 has ushered in new and permanent ways of working, capitalising on the benefits of any shift to working from home will involve putting employees at the heart of business plans. Understanding the benefits of both home and office working will allow policymakers and businesses to make informed decisions about the future of work. 

 

Contact us

Jonathan Gillham

Jonathan Gillham

Director of Econometrics and Economic Modelling, PwC United Kingdom

Tel: +44 (0)7714 567297

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