Coronavirus: How will London's economy look after lockdown?

By Raphael Sheridan
BBC London News

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Image caption, The City of London has been much quieter since the lockdown began

Coronavirus is changing London. Some of it may be temporary, as the capital adjusts to the presence of an invisible killer, some of it will be more permanent.

It is more than 100 days since the prime minister ordered the nation to stay at home and the country is experiencing a severe recession "the likes of which we've not seen", according to Chancellor Rishi Sunak.

Some restrictions are now being lifted but no one quite knows how London will recover and how coronavirus will alter the way we live and work.

And quite how the city recovers depends in part on how it can navigate the shorter-term crises that are hurtling towards it.

Transport for London (TfL), who runs the capital's transport network, received a £1.6bn government bailout in May after its fares income fell dramatically but that will only keep the wheels greased until September, when a second bailout looks inevitable.

Likewise restaurants, hotels and bars have quarterly rents and it's feared few have the means to cough up. The new "one metre plus" rule has given them a fighting chance of survival but many businesses are living hand-to-mouth.

London's economy is staggeringly large: its economic output is measured in hundreds of billions of pounds. But strip away its institutions, markets and buildings and you are left with ordinary people, whose behaviour has changed - whether voluntarily or not - because of coronavirus.

And when London's citizens change their behaviour in sufficient numbers, the city changes too.

The worker

Image source, PA Media

Becca, 33, charity worker

Before coronavirus I'd be up at 6am or even earlier at times, to commute to The City from Hackney. Ninety per cent of the time I'd cycle in to avoid the Overground and Victoria Line as it's always packed but cycling on London's roads isn't fun. It's busy and stressful. I remember getting to the end of the week and being absolutely exhausted.

Now I'm working from home I feel I have so much more life. I genuinely feel like I have more space and time than there ever was before.

I'd be keen to do it a little bit more just to cut out the tiredness that comes with the commute.

But I also think it depends on your personality - some people have enjoyed aspects of it, but others haven't. It's a mixed bag. Particularly when you lead a team, which I do, it's hard to bring a group of people with you when you're not there in person.

It should be stressed that many Londoners do not have the luxury of working from home, who do not work in offices, and who may have no choice but to travel on the Underground and bus network.

But the decision of those to stay away from their workplace more often, will have far-reaching economic consequences.

The think tank Centre for Cities has carried out studies into how many people could potentially work from home. Chief executive Andrew Carter said they found "in London about 40% of the workplace could work from home".

That equates to over two million people.

Image caption, Fewer people are using public transport with Tube's running much emptier

This will mean the ways by which we travel will be radically affected. About half of TfL's money comes from fares.

"If you assume the numbers of journeys are going down, then you have to increase fares," Mr Carter said.

That is already scheduled for January as part of TfL's bailout but any rise will affect Londoners whose jobs cannot be done from home.

"It's a social justice issue too, because poorer people don't have cars and they're going to end up paying more. It affects poorer people because they're more reliant on it," he said.

Many of these people work in the section of the economy that supports the more office-based sector - such as chefs, baristas, taxi drivers, retail workers.

To earn their living, they rely on an army of commuters crushing together like battery chickens on the morning Tubes and buses, to spend money throughout the day.

But as some businesses close and others decide a large headquarters are unnecessary when its staff can work from home, it could mean the centre of London becomes hollowed out in the coming months.

The business

Image source, Ben Carter/City Pantry

Ben Carter, managing director of City Pantry (owned by Just Eat)

Our business model is very simple: to deliver food from restaurants to offices. That includes breakfasts, lunches, catering for big meetings, hospitality and events. We were feeding hundreds of thousands of people on a monthly basis.

Suddenly, overnight we were all working from home and we were seeing order after order cancelled. Ninety percent of the offices were shut down and London is our biggest customer base. We had to get on the front foot and future-proof the business because social distancing is here to stay.

Business has fundamentally changed and once we came out of that first week of shock we absolutely wanted to carry on and do everything we could to support our restaurant partners. Obviously it's a full-on job, it's all about a team effort.

We're all working from home - we've had to adapt and support people with kids and those who don't want to stare at a screen all day.

It's a concern but the reality is that restaurants come and go all the time, it's a fluid sector, but we're doing all we can to support the industry. We wouldn't be here without them.

We've been resilient, we'll keep moving to adapt. I'm optimistic about the future but I'm mindful that everything can unwind very easily.

Inner London is famed for its restaurants, bars and hotels. Kate Nicholls, as the chief executive of lobby group UKHospitality, has the unenviable task of navigating the sector through the crisis.

There are problems everywhere:

  • How can restaurants survive with social distancing measures? Something Ms Nicholls describes as "the million dollar question"
  • How can businesses loaded with debt plough on? She believes "the only solution is to take on more debt"

But a problem further down the road, is if City workers decide that a 04:30 alarm is a little too early to begin the commute into town and opt instead to work from the kitchen table.

"It's those who work in The City offices - it's the lawyers, the financiers, those are the people who spend in hospitality. They spend a lot and spend regularly.

"The people who can afford to work at home for longer are more cautious about their health and even if they go back, the business lunch isn't going to be happening, not any time soon," she said.

In this delicate ecosystem, high-end restaurants seem particularly vulnerable.

Image caption, Restaurants shut when the lockdown began in March

But has the lockdown forced a more permanent change in people's behaviour?

"That's a very difficult question," says Dr Sander van der Linden, a social psychologist at the University of Cambridge. "Some people will fairly quickly return to normal - lots of people are eager to return to normal."

He stresses he does not want to crystal ball gaze but thinks social distancing might be a difficult behaviour to change because people have been exposed to it long enough to "internalise" it.

"You know you're going to catch the virus from other people, so as soon as you realise you're in a crowded space people might feel odd about it," he explains.

He doesn't think rigorous hand-washing and face masks will become permanent features of life but some people will be reluctant, for a time at least, to get back on the Tube "even when the risk is reduced".

Image caption, Some businesses have adapted during the lockdown such as offering a takeout service

So with a more cautious population, how might the restaurant industry survive?

Andrew Carter thinks Londoners might see pop-up restaurants and more street-markets as the food scene attempts to adapt. A similar trial has been conducted in Lithuania's capital Vilnius.

Kate Nicholls is not as confident. Her view is that Londoners will have fewer places to choose from, with higher prices and any measures to help will not work unless people feel confident travelling into the city centre.

It is by no means certain that inner London will become hollowed out. Like many others, Richard Brown, deputy director of Centre for London, told the BBC: "What I wouldn't give to be able to go into the office."

But if fewer people work or play in the centre of town then in the medium or long term land prices might drop and commercial rents decrease.

Some offices might, for a time, remain empty before new companies move in or their uses will simply change.

Mr Carter likens it to a kind of "reverse Shoreditch", the area around Brick Lane was inhabited in the late 1980s by artists and creative types because it was cheap and ideally located.

They were soon replaced by financial services firms. So put that in reverse and he thinks Canary Wharf, the bastion of the financial services sector, could become more mixed as new businesses take advantage.

Image source, Reuters
Image caption, Could Canary Wharf become filled with a greater mix of companies?

And fewer people in inner London could mean the capital's suburbs doing comparatively well.

"You might see services springing up and doing better in outer London town centres," Mr Brown explains. "City centre shops have seen a huge fall-off and local shops have done well."

A similar phenomenon has been observed in Sweden's capital, Stockholm. The mayor, Anna König Jerlmyr, told the BBC in April "local centres are flourishing, when people are not going into cities."

That might be good news for London town centres like Stratford and Croydon, although how they will cope with the looming recession is a different question.

As the city grapples with the pandemic, London's businesses must work out how to exist with coronavirus. If shops or places of work must be emptier for public health reasons, how do they continue to function?

Image caption, Carnaby Street would normally be bustling on a summer's evening

Mr Carter thinks one option will be for the capital to become a 24-hour economy.

"You'd expect businesses to be thinking very clearly and making arguments that we have to be a 24-hour city, not because it's the nice thing to do but it's the only way to have a business community," he said.

Mr Brown thinks it "may be one of those things where a trend has just been accelerated slightly".

And the acceleration of existing trends is probably how coronavirus will change the city: fewer people than expected using public transport, more people working from home, more people cycling, more people shopping online and all to the detriment of physical stores across the capital.

Over the coming months, the lives of London's citizens will change. Some people reading this article will lose their livelihoods and others will prosper.

Image source, PA Media
Image caption, The capital's tourist trade has been particularly hit by the pandemic

But Mark Kleinman, professor of public policy at King's College London, thinks the city itself will weather the storm.

"Cities are very complex things. London does have a lot of assets in terms of its brand and the reputation of its institutions means it's still seen as a successful, global city," he explains.

Mr Brown believes something similar. "After 9/11 there were people saying that no-one will go to cities anymore," he said.

"I know people after 7/7 who said they'd never take the Tube but a few years later they did. So people do revert. I think London will be relatively resilient."

Mr Kleinman points to the rapid way that London changes. How just 60 years ago, if you stood by the Thames in east London, you would hear the voices of dockers, the industrial whirr of cranes and the unloading of cargo from across the world.

"It used to be a manufacturing and goods city, it had the largest docks in the world. And over a relatively short period it's changed from a successful manufacturing city, to a successful services-based city. So cities do adapt," he said.

Image source, Getty Images
Image caption, Some believe people will work from home more regularly instead of going into an office

It is impossible to know for certain the extent to which the pandemic will permanently alter the lives of Londoners and, by deduction, its economy.

The capital must first experience, then recover from, a severe economic recession. A vaccine or drug treatment may be found, or it may not.

"This is probably the most significant thing that's happened in our lifetime," says Mr Brown.

But if one walks around the City of London and remembers what those ancient streets have seen - plague, fire, the Blitz, Spanish influenza - then it seems that the capital will, as a metropolis, find a way through this 21st century crisis.

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