HSBC: Assessing the fallout for businesses of working from home

Published by

Tim Wickham

HSBC has outlined how the trend of working from home is impacting businesses in its latest economic commentary. As the UK gears up for another return to work, the bank noted how attitudes were changing.

HSBC UK’s Mark Berrisford-Smith, Head of Economics, Commercial Banking, noted: “It’s striking that during the four months immediately before the Omicron wave of Covid-19, when most restrictions had been lifted, the return to office-based working was only partial, suggesting that there has been a permanent increase in the amount of work being done from home.”

The bank pointed out that during the weeks before Omicron arrived in the UK, when there were few restrictions in place, the appetite of people to return to their places of work was lukewarm. For example, footfall at UK office locations never exceeded 75% of pre-pandemic levels.

This response, together with recent survey findings, points to a substantial and permanent increase in the proportion of work being done from home, believes HSBC. Even when the pandemic is over, workplace footfall is unlikely to rise much above where it was last autumn. This will have implications for transport operators, road usage, the demand for office space, and on retail and hospitality spending in city centres.

The bargaining power currently being enjoyed by employees, in the context of a very tight labour market, may not endure. Concerns about rising wages and productivity are likely to prompt many employers to increase investment in automation and digitisation.

Berrisford-Smith concluded: “For the time being, employees appear to have the upper hand in determining the extent to which they can work remotely. This is true in many advanced economies, but especially in the UK where labour market conditions have become very tight.

"But employees shouldn’t take their new-found bargaining power for granted: the combination of tight labour supply, rising wages, and concerns about productivity will inevitably induce employers to put more effort into automating and digitising more of their processes."

He said:

"The next few years will bring a messy process of establishing a new equilibrium between working in offices and working from home (or from other places). It will make a considerable difference whether a few years from now the average office worker is spending 1-2 days at home or 2-3 days."

Tim Wickham