Back in May I wrote a blog, Beyond COVID, discussing the changes we may see in the UK after the lockdown. With restrictions now lifting (or maybe not lifting), it seems to be a good time to revisit my thoughts and look ahead to the future.
Unsurprisingly, the UK economy was hit hard with a record GDP fall of over 20% in April. Subsequent growth of around 10% still leaves the country in the midst of a major recession, but government initiatives including furlough and mortgage holidays mean we may not yet have seen the full impact on our economic outlook or employment.
As I predicted, the government has also been keen to protect the housing sector. Before COVID, sales agreed in March were up by just under 18% year-on-year, with asking prices up by around 3.5%. Mortgage approvals before the pandemic were around 65,000 per month but drastically dropped in May to just over 9,200. As one way of tackling this, the waiver of stamp duty on property under £500,000, designed to re-stimulate the market, appears to be showing some signs of success.
Interestingly, as remote working has become the norm, searches for houses in Cornwall, Dorset and Torquay skyrocketed compared to May 2019. Is this a portent for the future? Will we see an exodus to the countryside as people enjoy their new-found freedom from the manacles of the office? Although 200 years too late, William Wordsworth would surely be delighted.
It seems that the most contentious part of my original blog was my view that people will flock back to the high street when lockdown ends. I had numerous comments suggesting I was wrong, and I was therefore delighted to see pictures of huge queues outside Primark on its reopening. Sadly, my joy was short-lived.
Now it appears that central shopping areas are quickly becoming ghost towns. As we remain remote from our offices and avoid public transport, we have turned to our PCs and enjoyed shopping locally. Our appreciation for small businesses that are easily accessible has grown, with 70% of us saying we will continue to shop locally post-lockdown.
My view that the high street would emerge unscathed was clearly fanciful, as redundancies and closures are announced on a daily basis. Marks & Spencers recorded online sales rising by a third, which may explain why it’s predicted that 12,000 jobs will be lost on the high street. Like many of our big high street names, M&S is scrambling to reduce costs as sales in stores have fallen over the last few months. Our consumer behaviours have been shifting for a while, but COVID has quickened the process of moving online.
Also on the high street, banks have held a cultural and historical value; however, COVID forced many to temporarily shut their doors. We saw a focus on ‘flagship’ branches, while smaller, more local ones closed. It seemed inevitable that banking would eventually move to digital, but COVID has definitely accelerated this.
Our banks need to prepare for a digital future – the online advisory channel should finally come to fruition, where customer needs will be dealt with remotely. We at Scott Logic were delighted to be part of the successful launch of the Newcastle Building Society’s Online Savings App; already in development, this had an accelerated launch to provide customers with a convenient and comprehensive digital service through lockdown.
Physical banking will always remain for those who primarily deal with cash transactions or those who are unable to go completely digital. The best approach may be a hybrid as banks need to safeguard trust in banking, and that the same services can be provided digitally to all consumers. Lloyds Bank and many others announced branch closures, which were quickly postponed. COVID forced us to go digital, but banks may involuntarily lag as their continued local physical presence on the high street still holds value for communities across the UK.
It remains to be seen whether our big commercial hubs such as London will be affected in the same way as the rest of the high streets across the UK. We have around a million jobs within the square mile of the City of London alone, with five million tube users everyday. One in three jobs created in the last decade have been in London. Even in the event of a large majority of us continuing to work from home,I still find it inconceivable that London will not quickly bounce back.
The birth of Teams and the death of the office?
COVID-19 has completely revolutionised the way we work, and almost every industry has had to adapt to working from home. Despite the internet and technological advances, the basis of office work through to February 2020 remained almost identical to its factory work origins – is it a change in the way we work that was long overdue?
Familiar to many of us, Microsoft Teams now has more than 75 million daily active users, tripling over the last two months. With only 20-30% of offices in the UK reopened, and many large firms having no plans to return at all, working from home may just be the ‘new normal’.
The contention between conferencing systems, schooling and entertainment has pushed the UK’s internet service providers to the limit with a number of major outages early in lockdown. As a nation, we are completely dependent on connectivity and it was therefore good to see the government offering cash incentives for remote communities to improve their bandwidth.
Given our new love of remote conferencing, it remains to be seen if we will travel as much in the future. As I said in my last blog, I’m looking forward to spending more time at home with my family, and less time on the road and in the air. In this context, I wonder if HS2 is needed any more. Should we be redirecting some of the £60bn projected cost of HS2 (£1,000 for every man, woman and child in Britain) towards rolling out full fibre broadband instead? Only 4% of households in the UK have access to a superfast connection currently, compared to 71% in Italy and 89% in Portugal.
Despite the benefits working from home brings, I have spent a number of days in the Scott Logic office, and have begun to truly recognise the importance of face-to-face relationships. Teams may be useful but there is no substitute for getting together and enjoying natural, regular conversations. I’ve also noticed that I tend to be more operational and less strategic when drowning in the relentless wave of conference calls. I for one will therefore continue to embrace the return to work – restrictions permitting.
So what now?
Unfortunately, it’s clear that COVID is far from over. The recent news of 3,000 new infections per day is worrying, and today’s announcement of a new tightening of restrictions perhaps gives us a taste of the winter months ahead. Despite what our politicians like to tell us about an imminent vaccine, I’m happier to trust the scientists who suggest an initial vaccine will have limited success.
This isn’t great for the economy and it will be interesting to see how the government reacts, particularly with Brexit talks again seemingly locked and no sign of a deal in sight. It now feels inevitable that the recession will continue, jobs will be lost and city centre high streets will take further hits, but this may benefit local shopping areas and communities as a whole in the long-term. Our major hubs eventually will bounce back, but it may take many years.
To coin a phrase: We live in unprecedented times.