It’s already been a long and challenging 2020 but staying on top of the constantly changing circumstances remains as fraught as ever.
Yes, global economies seem to be stabilising, whether here in the UK, the US or Europe. Yet employees still aren’t rushing back to work in the office. Why? Is it still too early? Has the post summer holidays return to work been deferred to later in the year? Is there a structural change occurring, and if there is, what does this mean for the economy?
COVID-19 remains a concern globally. The UK government announced on Sunday an increase of 2,988 new cases, which represents the highest figure since mid-May. The USA continues to be the worst affected country whilst India has now overtaken Brazil and reports the second-highest number of COVID-19 cases. Europe is also reporting significant increases – Spain and France have reported new daily cases of 4,503 (Friday) and 7,071 (Sunday) respectively. All numbers will also likely continue to rise.
Reports summise that the rise in cases have been driven by a reduction in social distancing and by the younger generations. Faced with these headwinds, new cases are only likely to increase as students continue to head back to primary, secondary, university education or as workers head back to the workplace. This is the headwinds that employers face as they recall workers back to the workplace, back into the office.
Whatever the cause of the increase in new cases, employers are already concluding that some employees should spend less time in the office. PriceWaterhouseCoopers, Schroders and Aviva are just some of the employers that are committing to providing their staff with greater flexibility, including flexible hours and continuing to work from home (even after COVID-19 has passed).
COVID-19 does seem to be changing the way we work, but what happens to overall demand? Take consumption as an example. Is it likely that employees will reduce consumption or will consumption merely shift in nature? Does working from home mean a change in our pattern of purchasing from the local coffee shop to preparing food at home; or will we see an increase in demand for delivery services such as UberEats.
Companies that are embracing technology, and have the ability to manage a greater proportion of their workforce working from home, are likely to require less office space. Equally, their workforce will reclaim time usually spent commuting in and out of work and may consider living further away from the office. Here we could see a shift in the geographical diversity of the workforce, perhaps leading to a rebalancing of national living standards, the spread of household incomes and hopefully a reduction in the gap between the richest and poorest regions.
The resurgence in COVID-19 cases is a reminder that this crisis is far from over. However, the economy’s longer term challenge could very well be employment; the shift in jobs from more challenged parts of the economy to those areas likely to benefit from a structural shift. How wealth is spread across the various parts of any country may also change and along with it the respective implications.
Here is to hoping that policymakers both recognise these changes and aide in their transition.
Michael Zacharia
Investment Director
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