Last week I gave my first in-the-flesh presentation since March. I was introduced as the country’s most entertaining economist. I thanked my hosts, but pointed out that it wasn’t exactly a crowded field.
They laughed, but there weren’t many laughs after that – and understandably. We were, after all, considering the future of cities in the wake of the changes wrought by coronavirus.
You will be familiar with the argument that big cities face a fundamental threat. What the coronavirus crisis has revealed is that with modern technology, working from home (WFH) is now perfectly viable, helped by virtual conference facilities such as Zoom. This leads to the possibility that we are facing “the death of the office”.
Interestingly, before the Industrial Revolution, work was largely based in the home or in the surrounding fields. After the Industrial Revolution, the economies of scale in both power generation and manufacturing meant that work had to be concentrated in large units away from the home.
The modern office is quite simply the modern equivalent of those Dark Satanic Mills, requiring people to work together in some central location, and living some way from it, thereby requiring the daily commute. “The death of the office” would see this locational shift reversed.
Of course, not all workers, even in large cities, work in offices. But a huge chunk of them do. What’s more, they generate the demand for other services delivered in the city: sandwich bars, pubs, shops and commuting facilities. If office workers stopped going into big cities for work then you could reasonably expect those cities to contract.
But this is not bound to happen. Since the first lockdown in March, we have been through a cycle with regard to WFH. First came enthusiasm after we realised the technology worked well and we could avoid the daily commute. Subsequently, however, came a realisation that the office brings certain benefits that cannot easily be replicated at home. I am not the only person suffering from Zoom-fatigue.
When you have a workforce of dedicated professionals who have previously worked together, it may be relatively easy to get them working productively from home. But after a while, how do you generate the same spark? How do you train new workers who have not had that experience of working together? And what do you do if your workforce does not wholly consist of dedicated professionals? How do you make sure that people aren’t slacking?
The upshot is that once this wretched coronavirus is over, the office won’t quite die. At Capital Economics, we recently conducted a survey of what our employees in London thought about WFH. The replies divided into three groups: a third never wanted to see the office ever again; a third never wanted to see their one bedroom flat in Balham ever again (at least in daylight); and a third were happy with a mixed working regime where they worked from home one or two days a week.
I suspect this is roughly how things will pan out. Even so, on any one day there may be 20pc fewer office employees coming into big cities, and that would translate into a corresponding drop in the demand for the ancillary services mentioned above. Is that enough to deal a mortal blow?
I have been looking for historical parallels. I was tempted to think that really great cities like London never lose their mojo. But then I remembered Vienna. On the eve of the First World War, it was the cultural and intellectual centre of Europe, if not the world. But after the war, Vienna’s hinterland shrank from a huge empire to a pretty small nation state. Then came Nazism, which led to the departure or wiping out of so many of the most vibrant of Vienna’s population.
Today, wonderful city though Vienna still is, it is a shadow of its former self. Similarly, although over recent years Berlin has bounced back culturally, its population is lower today than it was in 1939.
But there are more encouraging examples. As I travelled to my speaking event, I passed the Monument, a large column in the City of London commemorating the Great Fire of 1666 that destroyed so many of the capital’s buildings and quite a few people. What’s more, that fire occurred just one year after the Great Plague of 1665, which wiped out about a third of London’s population. Still, the capital not only survived but was rebuilt and expanded. Indeed, its glory days were still ahead of it.
More recent examples include the devastation of London during the Second World War and its loss of status during the UK’s long drawn-out period of relative economic decline afterwards, followed by its glorious revival, starting in the Eighties. This resulted in London becoming something like the capital of the world. Similarly, many analysts and commentators wrote off New York after the terrorist attacks of September 2001. But the city bounced back strongly.
Nevertheless, if the number of people coming into cities like London falls by 20pc or more, what can take up this slack? I think it is likely to be more people living in city centres and more people enjoying their leisure time there.
"Leisure from home" has its place, but whether it is eating and drinking, enjoying the theatre or concerts, or even a sporting event or some self-improvement activity, on the whole, we much prefer to do it along with other people. It is no accident that great cultural and entertainment facilities tend to be in the middle of large cities.
The current shutdown of much of the entertainment industry is far worse than a short-term tragedy. If our great cities are to survive and prosper, then these activities will be at the centre of the revival. This means that we must do all that we can to preserve them, ready for the time when cities can bounce back.
Roger Bootle is chairman of Capital Economics