London dragging down UK productivity as office staff work from home

London

London is dragging down Britain’s productivity growth as office staff continue to work from home, new figures show.

Productivity in the capital tumbled in 2022, according to the Office for National Statistics, taking output per hour worked – a key tool to measure each employee’s efforts – to its lowest level since 2009.

London’s productivity dropped by 2.7pc between 2019 and 2022, the ONS said, with Wales the only other region to fall.

The strongest growth came in the North West of England, where productivity jumped by 7.9pc over the same period.

Dwindling productivity in the capital is a hangover from the pandemic, according to economists, as they said remote working has harmed growth.

Adrian Pabst at the National Institute of Economic and Social Research (NIESR) said: “There are very few jobs which can be done as well at home as they can be at the office.

“Working zero days from the office, which you can see in the Civil Service, is just not working out.

“There is not the same coordination, not the same interactions and people do not feel as motivated. There are all sorts of things that do not happen when you are in the office.”

London has been more affected by remote working than other parts of the country because it has a large proportion of office workers.

In late 2022 and early 2023, almost 60pc of all London workers were either entirely at home or hybrid working.

That was far greater than in any other part of the nation, and compared to as little as 36pc in the North West.

In 2022, a survey from the Office for National Statistics revealed that 44pc of businesses in London intended to embed greater levels of home working – which was again more than in any other region.

However, a follow-up to that questionnaire this month showed the share had fallen to 29pc.

That is still above other parts of the UK but suggests that many companies are moving away from remote working.

Mr Pabst said the return of workers to the office was expected to boost the capital’s productivity in the years to come.

He said: “It took a while for people to see the negative side-effects. They all like the positives – they do not like to commute, they can see more of their families – but people did not see the negatives, and they took a while to become clear.

“London took longer to recover from Covid. It is picking up again, and we are now projecting higher productivity growth rates in London than in other parts of the country. Most people have readjusted and are doing three to four days from the office.”

However, London is still struggling with other problems that pull down productivity, Mr Pabst said: “The lack of affordable housing means productivity growth is struggling. People have to commute for a lot longer. It costs money, it takes time and energy. The lack of housing in areas where it is required has not helped.

“There are still areas of London which are not well-served by trains or tubes or buses and people find that driving isn’t easy either. Transport connectivity is a question as well.”

Play The Telegraph’s brilliant range of Puzzles - and feel brighter every day. Train your brain and boost your mood with PlusWord, the Mini Crossword, the fearsome Killer Sudoku and even the classic Cryptic Crossword.