Cities and businesses face mixed post-pandemic fortunes - report

As businesses in some sectors prepare for employees to spend two to three days a week working from home on a permanent basis, existing office space capacity could potentially increase by as much as 40%, according to a new report by KPMG.

The increased availability of office space in major business hubs is expected to attract businesses from smaller areas to fill up the vacant space, with cities like Manchester, Bristol, Glasgow, Leeds and Birmingham set to see employment rise by 5-10% as a result.

The research – which appears in KPMG’s publication New working patterns and the transformation of UK business landscape – shows that areas in central London are also expected to benefit, as well as smaller towns and cities with a large proportion of the workforce working partially from home. But less dense business areas could see a decline in employment and may need to be transformed into more residential, leisure, retail and other uses.

As the business landscape consolidates, KPMG analysis also found the change could boost overall UK labour productivity by 0.5% thanks to businesses being able to tap into a larger pool of workers, suppliers, and clients. Yael Selfin, chief economist at KPMG UK, said: “As we emerge from the pandemic, businesses need to adapt to the new environment they will be facing. Some may choose to relocate to larger business hubs to boost profitability, while others in less central areas could see their local customer base profile change. While the overall impact on the UK economy is expected to be positive, the changes ahead could prove challenging for those businesses already saddled by the pandemic.”

The report examines how local high streets in residential towns and neighbourhoods are expected to reap the benefits of greater homeworking through increased demand by residents during the week. But the impact on high streets across the UK is unlikely to be uniform. Some places may be hit relatively hard by the loss of office workers due to their proximity to a larger business hub, which may be compounded by the loss of commuter footfall among remaining employees due to the prevalence of working from home.

Chris Hearld, head of regions at KPMG UK, said: “Over time, a shift in business location could support the rise of several major business hubs across the UK. An increase in the concentration of businesses and workers has the potential to make those businesses located there more productive and enable these areas to serve as the engines of economic growth.

“Cities like Manchester, Leeds, Birmingham, and Newcastle stand to benefit from such a consolidation of business locations. For this to happen they will need government to work closely with local leaders to ensure the transition is smooth and any barriers to growth are quickly ironed out.”

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