Flexible working revolution could transform economy, says Haldane
The economy could be transformed as new ways of working prompt a surge in research and development and investment outside London as flexible working from home takes hold.
It could result in higher productivity, boosting the economy out of the funk which took hold after the financial crisis, according to Andy Haldane, chief economist at the Bank of England.
“Investment spending on R&D, on improving companies’ digital estates, has picked up quite materially and quite unusually for a weak-activity period,” he said, noting that business investment has struggled since the financial crisis.
“That may provide some clues to productivity doing a bit better than we might otherwise have thought, certainly if those trends in digital spend, in R&D, were to persist ... that would potentially provide some pickup in productivity.”
The big shift to working from home could also lead to more permanent flexible labour, shaking up the traditional working week, boosting productivity and opening up employment to people who might not have been able to commute five days a week in the past.
“The same might also be true when it comes to worker productivity,” said Mr Haldane.
“It looks likely more workers will spend at least some of their working week at home, and there is some evidence that could offer some benefits from a productivity perspective as well.”
As well as boosting the economy overall by driving up productivity and so lifting living standards, it could also reshape the nation.
Even if the country as a whole rebounds, it may be that big cities, led by London, may struggle to recover fully.
“The big open question is whether this experience will prompt many more people to decide they don’t need to be located in or close to city centres and they can work virtually, and remotely,” said Mr Haldane, who is leaving the Bank later this year to head the Royal Society for Arts, Manufactures and Commerce.
“How big that potential migration might be is unclear as things stand. It is certainly possible we might see a somewhat different geographic distribution of economic activity post-Covid rather than pre-Covid. That strikes me as likely.
“Whether it is on the scale that helps achieve levelling up objectives is a much more open question.”
So far evidence includes a rise in demand for housing and commercial property outside big cities, focusing instead in smaller cities and towns, he said.
