What next? Business and leisure in a post-Covid world

There was a point in mid-November when it seemed possible that we had almost won the battle against Covid. New vaccines were popping up and the second wave seemed to lack the virulence of the first. Even if it wasn’t going to be “all over by Christmas”, it looked as if early in the New Year restrictions would be lifted and we would soon be getting back to normal.

The rapid spread of a new virus variant slammed the brakes on all that. But the UK’s vaccination programme is going well. Well enough, perhaps, to start seriously considering the question – when “normality” eventually re-emerges, how different will life be?

First, work. Working from home will probably fade away and many people will drift back into their offices for at least a few days a week. But the entangling of work and home life will probably continue and the previous scale of commuting seems unlikely to return. Business travel is likely to be especially hard hit. It was always less fun and more exhausting than it looked and the acceptance that a meeting can be virtual will diminish its scale. My colleagues at the Centre for Economics and Business Research (Cebr) expect a reduction of at least a half.

Social distancing and the increasing scale of virtual meetings may change the shape of the office, too. Most offices don’t have enough cubicles where people can conduct an online meeting without disturbing others. Alternatively, headphones will become the norm.

Households have built up more than £200 billion of savings over lockdown and the notoriously spendthrift British consumer will be tempted to have a blowout. Particularly after being deprived of drinks, clubbing, restaurant meals, live entertainment, travel and holidays. There may be an initial tension between people wanting to travel and continuing restrictions on international trips. Domestic tourism will have to take up the slack, at least for part of 2021. It wouldn’t be surprising if later this year it becomes difficult to get a booking in popular hotels, bars and restaurants.

Travel and tourism account for a full tenth of world GDP and the hit to the sector makes up a good chunk of the 4 per cent drop in world GDP last year. The non-business element should recover but one suspects that there may be a move towards higher quality and prices.

Looking at business more generally, onshoring, a shift from hardware to software and a more environmentally sustainable economy all look to be emerging themes. We are quite likely to see more manufacturing as a share of value added but the advance of robotics means that this could well combine with a smaller share of jobs.

Instead the jobs may well move to the service sector. Interestingly, a study which my colleagues completed just before Christmas showed that the classic and historic car sector, with its focus on reusability and repair, now accounts for as much as 11 per cent of the jobs in the UK car industry. As car manufacturing becomes less labour intensive and the classic car movement grows, this share is likely to rise.

And the Flat White Economy, a term which I launched in the eponymous book to describe the merge of the creative sector and the tech sector that started near Cebr’s office by Old Street roundabout, is going strong and on the latest figures has reached 12 per cent of UK GDP.

Ideas are the raw material of this sector and derive from the country’s tradition of argument and debate. Britain’s cosmopolitan labour force is also an advantage. People who have left the comfort zone of their home country tend not only to add creativity but also to stimulate creativity in others.

London is the fastest growing of the four cities that dominate tech (the others are New York, Beijing and San Francisco) and the move to purchasing online and the growth in fintech should support this position. High profile flotations planned for this year, like Deliveroo and Moonpig, will draw attention to London as a tech hub.

As we adjust to the challenge of Brexit, not all the cards in the UK’s hand are aces. But our service sector strength will help the economy win more than a few tricks in the race to play a leading part in the post-Covid economy.