UK economy set to lose £3bn due to COVID-19 work changes

UK economy
© istock/ffikretow

Novel research has estimated that the UK economy will lose around £3bn in the coming year due to changes in working behaviours.

A new study conducted by the University of Sheffield has revealed the substantial long term impacts of COVID-19 on the UK economy, calculating that the shift to working from moves businesses to suburban areas, resulting in city centres being estimated to lose £3bn in 2022.

The investigation, led by Dr Jesse Matheson from the University of Sheffield’s Department of Economics, collaborated with researchers from the universities of Nottingham and Birmingham to evaluate the frequency that people will be working from home in the coming year compared to before the COVID-19 pandemic. The study’s main aim was to identify how this shift away from working in city centres will affect the UK economy.

Stay at home, save money

The team determined that, on average, people will be working an additional one day more a week at home than before the pandemic, which may have significant long-term impacts on the UK economy due to reduced business for retail and hospitality industries. These industries have been greatly affected over the last 18 months, and the researchers believe their declining income will likely continue, as the extra day at home will be a permanent shift in how many people work moving forward.

As people spend more time at home, they will not be contributing the economic benefits to city centres that office workers previously would; for example, going to coffee shops, buying lunch, or shopping after work. This may potentially result in dire consequences for the 77,000 people who work in these industries, as they could be forced to relocate to jobs in the suburbs or even lose their job entirely.

Beyond the UK economy

In addition to tens of thousands of low-income workers losing their means of employment, it could also further exacerbate the inequalities between rich and poor areas. The study found that people who are more affluent are more likely to be able to work from home, meaning the money lost by city-centre shops may be recuperated in higher-income suburbs.

Dr Matheson said: “We estimate that about £3bn in annual spending will leave city centres as a result of working from home. This decrease will be concentrated in a few very dense centres; for example, the City of London will experience a spending decrease of 31.6%, and central Birmingham will experience a decrease of 8%.

“Some of this spending will be realised in the residential areas where these workers live, but some may be lost altogether. As suburban neighbourhoods lack the density of city centres, many retail and hospitality businesses will find it is not profitable to relocate. Workers in retail and hospitality may also find that demand has shifted to locations to which commuting is too difficult, which means that supply may not be able to keep up with demand.”

The team recommends that city centres evolve to stay relevant, becoming more residential than retail-focused. The study follows previous research by Dr Matheson that assessed how quickly houses and businesses recover from the COVID-19 pandemic based on location and what they do. The team are now working to elucidate if this lost money to the UK economy will be recuperated elsewhere.

Dr Matheson said: “This money may be recuperated in the higher-income suburbs, but in a lot of places working from home means people are more spread out, which isn’t good business for a retail business like coffee shops, which require high-density areas for business. So there is a risk this revenue could be lost from the hospitality and retail sectors forever.”


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