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News

A wake-up call

30/09/2020 by Andy Winterburgh

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We’re all enjoying the benefits of WFH and during the crisis it has proven essential, but will it change our way of working for good?

A wake-up call

It was hard to read Luke Johnsons Sunday Times article this week as anything other than a wake-up call for the City.  Scrub that, it was just hard to read Luke Johnson’s Sunday Times article this week. 

He spells out very clearly, the dire future the City is seemingly sleep-walking into.  “If London is a ghost town, the City is facing oblivion. It is primarily composed of offices, which are under threat from the working-from-home movement. The commute into this tightly-packed area is miserable for many, so it’s not surprising that lots of employees of banks, brokers, fund managers, law firms, accountants, insurers and other companies are keen for their head offices to close. If this was to happen on a large scale, the Square Mile would die.”

 

In The Long Term Working From Home Is Unsustainable

While working from home (WFH) has had huge benefits during the crisis, helping keep Financial Services firms operating amazingly effectively, it is not a sustainable long-term operating model for their employees or the communities in which they operate, even if their employees can’t see the dangers for themselves as yet.

Of course, the idea of not having to commute is attractive.  Quite apart from the time spent on the commute itself, there are significant savings to be made on travel, shop-bought lunches and property by being able to live in lower-cost areas away from the centre. Or even, as we’ve heard stories of some traders doing in the summer, relocating to their houses in the South of France.

But beware, Johnson goes on to say that “If a critical mass of key City workers stays put in the leafy outskirts of London, probably the international firms that employ them will realise that their offices could be based in other, lower-cost locations instead.”

In a series of lockdown webinars that I’ve been hosting with senior leaders from the major Investment Banks, Asset Managers and Retail Banks, the key messages that have coming out have been:

  • Most people have enjoyed the benefits WFH brings
  • Operationally it has been effective

But many people are also saying that the benefits come at the cost of:

  • Collaboration/creativity
  • Relationships
  • Zoom fatigue/mental health
  • Learning and development

Learning and development, especially for people in their early careers, is a significant issue.  What has historically made London one of two truly international headquarters for FS firms is access to a large pool of highly skilled workers. 

Formal training has its place, but it simply cannot replace being around more experienced people.  I picked up far more in the early years of my career on the floor than in the classroom.  I most probably would have given up on recruitment in my first year had I not had some words of encouragement from a supportive manager, over a post-work pint.

Without real-time opportunities for interaction, relationship building and learning we risk a generation of talent becoming at best less effective and at worst lost. 

Europe is Open for Business

According to analysis from US bank Morgan Stanley’s research unit AlphaWise, only 34% of UK white-collar employees are commuting again, compared to 68% of their European counterparts and 83% in France.  So this is a uniquely UK phenomenon, while the City remains closed, other cities are back to work and “open for business.”

While we become less effective, conversely the Europeans are in the office, becoming better trained, better able to collaborate and better placed to build relationships.  Combine that with the opportunity to locate them in low cost Warsaw rather than London, how long will the City remain the leading international Financial Centre?

Even if you take the most optimistic view of Brexit, it is already leading firms to quietly replace UK headcount with hires in Dublin, Warsaw, Luxembourg, Frankfurt and Paris.

These job losses, compounded by City workers becoming less able than their European equivalents, looks like a catastrophic double blow. 

Broader Societal Impact

If the City employs fewer people what will that mean for the nation’s finances?  Johnson contends that “if the Square Mile withers, the damage to the country’s finances will be devastating. Long term, killing the City would do the opposite of protecting the NHS — it would starve it of funding. London’s 87,000 highest-paid earners mostly work in the City and pay more than £20bn a year in income tax. London generates as much tax as the next 37 largest cities combined.”

What about the swathes of empty office blocks owned by us all through our pension funds?  Without the footfall of City workers, how will the ancillary business that services them survive?  Should we care?  I think we should, but even if you do not, you may find you care about the lost taxes and business rates than they would otherwise have contributed to the country’s coffers.

Leadership

I’ve been recruiting into London Financial services since 1996 so I’ve seen all the ups and downs since The Asian Crisis in ’97, but I’ve seen nothing like this.  As well as the tragic human cost, if the WFH movement wins we will end up poorer and more isolated.  By staying at home we all risk finding ourselves transitioning from WFH to simply Being At Home – BAH!

But the Morgan Stanley research suggests that there is little appetite to return with only 16 per cent of those WFH wanting to get back to the office full time.   We need The Mayor of London, Sadiq Khan, the Business Secretary, Alok Sharma, and the lord mayor, William Russell to show leadership and promote the physical importance of the Square Mile and argue against the mass WFH movement.

As leaders, we too have a vital part to play in our own firms.  We need to do three things:

1. Make sure that the risks to the international standing of the City and the knock-on effects to employment, the economy and the NHS are understood by the people making the calls on whether to reduce corporate real estate costs.

2.Explain to people in early-stage careers that the development opportunities they are missing out on and the impact on their job security is more significant than avoiding a commute.

3.Motivate established employees, who may not see the benefit to themselves of passing on their knowledge to the next generation, to come into the office.