Don’t expect economy to bounce back

2m furloughed workers could lose jobs and recovery make take FOUR YEARS, say experts

‘Improvements and relapses’

HOPES of a rapid ‘Vshaped’ recovery from the coronavirus crisis faded yesterday as ministers were warned the economy could take years to recover.

The economy grew just 1.8 per cent in May, following a record decline of 20.3 per cent in April.

economists had expected GDP would bounce back by more than 5 per cent in May as the lockdown eased.

The grim reality emerged as the Treasury watchdog, the Office for Budget Responsibility, admitted that hopes of a V- shaped recovery have receded rapidly and that up to two million furloughed workers could lose their jobs.

It predicted the economy may not recover to pre-crisis levels until 2024, even if a vaccine is found next year.

In its ‘central scenario’ it said GDP would shrink 12.4 per cent this year before bouncing back 8.7 per cent next year – less than half as quickly as it had predicted in April. It warned that the UK is ‘on track to record the largest decline in annual GDP for 300 years’ with the economy set to shrink by more than 10 per cent in even its most upbeat scenario.

But in the worst- case scenario, the OBR warned the unemployment rate could hit 13 per cent in the first three months of next year – with more than three million people thrown out of work.

experts warned Britain may be facing a W- shaped recovery, amid fears that a second wave of the virus could lead to another lockdown.

Tom Stevenson, of fund manager Fidelity International, said: ‘hopes of a Vshaped recovery are fading fast, and I suspect we’re looking at something resembling far more of a “W” – a series of improvements and relapses, before a proper recovery takes hold.’ James Smith, research director at the Resolution Foundation, said: ‘With unemployment projected to match – or even surpass – its 1980s peak, the Chancellor has taken a significant gamble in not setting out more support for demand and employment in the hardest-hit sectors of the economy.

‘The risk of so many furloughed workers moving straight into unemployment should prompt him to consider further action on jobs.’

Thomas Pugh, UK economist at Capital economics, stressed the UK should have recovered significantly in June as non- essential shops and car showrooms reopened.

The OBR also predicted that borrowing is set to hit a record £ 370billion this year once Chancellor Rishi Sunak’s £30billion jobs stimulus package is included. This would equate to 19 per cent of the size of the economy, the highest recorded in peacetime. It warned that the public finances were on an ‘unsustainable path’ and that ministers will have to impose tax rises, spending cuts, or both at some point to get the situation under control.

Mr Sunak last week promised to put the public finances ‘back on a sustainable footing’ but has stressed the need to focus in the shorter term on protecting shops and trying to stimulate economic recovery.

But business groups suggested the disappointing economic data suggests he may have to unleash even more emergency measures before his autumn budget.

Tej Parikh, of the Institute of Directors, said: ‘There is a big question mark around how fast we can rebound back to pre-pandemic levels. Broader measures to lower employment costs and support business investment will be vital to help the economy jump out of this crisis.’

When the Government imposed a three- day working week during the 1973 oil crisis, it feared a productivity drop of at least 40 per cent.

That didn’t happen. In the end, even though people spent less time in their workplace, they made up for it by working more efficiently and at home.

Fast-forward almost 50 years and the coronavirus pandemic — ‘the Great Pause’, as it has been dubbed — has triggered an equally huge adjustment in work patterns worldwide.

Before lockdown was introduced in March, millions of workers would have laughed in disbelief if you told them that, 16 weeks later, they would be working from the confines of their home.

And yet here we are, with 49 per cent of the workforce doing just that in some form, according to the Office for national Statistics (OnS).

Staggering

When you factor in Britain’s 9.1 million furloughed workers — who are excluded from the data — that figure is even more staggering.

So it’s hardly surprising that when Boris Johnson suggested last week that ‘ people should start to think about getting back to work’, his comment was met with a collective groan.

According to a survey carried out for the Business Clean Air Taskforce, nine out of ten Britons who’ve worked from home would like to continue to do so to some degree after restrictions are fully lifted.

even business behemoths such as Barclays — which, in the words of CeO Jes Staley, has been run ‘ by people in their own kitchen’ during lockdown — are now evaluating the need for a 7,000 capacity office, while Whitehall is manned by only a skeleton staff of civil servants in situ.

Twitter staff worldwide have been told they can work remotely indefinitely and Mark Zuckerberg has suggested that half of Facebook’s 45,000 employees will work from home within a decade. Many companies are already sniffing out the huge financial savings to be made on reducing leased office space. After all, a single desk in some prime London locations can cost up to £60,000 a year.

That may explain why Workspace Group, the biggest provider of serviced office space in London, expects ‘like-forlike occupancy’ to fall by anywhere between 3 per cent to 90 per cent in this quarter

This will, of course, have huge ramifications for those dependent on a thriving office community in our cities. Sandwich delis remain shut, coffee shops are closed and entire business hubs now resemble desolate ghost towns.

Meanwhile, with trains and buses still empty, revenue gained from our transport infrastructure has all but ground to a halt.

It was hardly surprising the OnS reported the UK economy had dropped by a quarter since February before the lockdown and grew by only 1.8 per cent in May.

It’s clear that any hope of a so-called ‘V-shaped’ recovery depends on Britain getting back to work immediately.

But the economic devastation of working from home (WFh) is only one aspect of its concerning impact on society. Indeed, as well as being bad for the economy, I fear that, rather than liberating us, it is also making us more miserable and enslaved to our work lives than ever.

And ultimately that is why our workforce must return to the office as soon as it can.

Of course, that isn’t to say that working from home doesn’t have its advantages.

The pandemic has given many people much-needed time to consider the real purpose of work.

Before Covid-19 came along, analytics firm Gallup found 87 per cent of workers in the UK felt disengaged in their job. But now that these workers are no longer confined to the office, how many are discovering how little they actually do on a day-to-day basis — and that it can be done at home in half the time?

Certainly there is a ruthless efficiency about working from home: without a daily commute, you can be at your desk earlier and plough on later, all with less distraction.

But these benefits come with a heavy price: the end of the work–life balance.

no longer able to end their work day by leaving the office, I suspect many employees now working remotely find it increasingly hard to ‘clock off’ when their normal working day ends — according to one survey 44 percent say they ‘struggle to switch off’.

And even with the best intentions, on a physical level the boundaries between your office and living space soon become blurred — all it takes is a phone call or online message for you to be dragged back to your virtual desk.

Insidious

In fact, the erosion of the traditional work–life balance has been a long time coming and has, for the most part, been insidious.

Similar to how a casino is designed to keep out daylight, today’s offices — with their break- out zones, free breakfast bars, gyms and, in some cases, even sleep pods — are engineered to keep employees there for as long as possible.

Work benefits also reflect these priorities. Tech companies such as Facebook have introduced an egg-freezing service for women employees concerned about fertility, and investment banks such as Goldman Sachs, have a ‘breast milk courier system’ for mothers returning to work.

Work has seeped into our weekends, our social events and into our homes. And that was before coronavirus made WFh the norm.

Some bosses are already thinking ahead about the dramatic change in how and where we work.

Just last month, Arjun Kaicker, head of analytics and insights at the multi-national firm Zaha hadid Architects, suggested offices may soon ‘evolve into something much more [like] a clubhouse’.

‘A lot of companies have a great staff gym or have fantastic subsidised or free food and they’ll have come for that and not necessarily to even work,’ he said.

Isolation

If true, and workers do one day go ‘into the office’ not to do any work at all, but with the sole purpose of pursuing leisure and socialising, the destruction of our work–life balance will be complete.

That need for social interaction should not be underestimated. Around half of lockdown homeworkers report feeling more isolated.

Some companies are trying to tackle the problem by experimenting with all sorts of virtual bonding from cocktail lessons to quiz nights. But is this really comparable to grabbing a lunchtime sandwich in a cafe with a colleague or quick drink before the commuter train home?

It is becoming clear WFh may only be the start of even more drastic changes. Take one study by Imperial College London, which suggested companies should now operate on a model of four days in work, ten days at home.

But such a regime would totally destroy the concept of the ‘week–weekend’ model which is ingrained in us as much as the seasons.

And so before we all rip off our lanyards in liberation, before we decide the great WFh debate is already settled, we must beware that we could end up working harder, longer, more often — and feeling ever more isolated.

In such a scenario we risk losing the very things that make us human.