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Western Europe / UK

What is slowing the UK’s hybrid work revolution?

Demand for local workspaces across the UK is hot, both from workers and companies, but critics such as IWG's Mark Dixon claim that planning restrictions are holding back this revolution.

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The Covid-19 pandemic saw London’s once bustling streets empty as employees worked from home. The question is, will they return in sufficient numbers? (Photo by Vuk Valcic/SOPA Images/LightRocket via Getty Images)

The Covid-19 pandemic has fundamentally changed how and where people work. Almost all the evidence suggests that, for most countries and many sectors across the globe, a return to pre-Covid office life is either impossible, undesirable or unnecessary. 

Some of the world’s largest corporations have already set the tone for the new normal, with Twitter CEO Jack Dorsey saying that its enormous workforce can work from home “forever”. UK-headquartered insurance company Aviva says that 95% of its employees want to spend time working flexibly and remotely, while global advertising giant WPP has stated that, with its employees working remotely for up to four days a week, the company probably needs 20% less office space. 

London has been decimated, and that is an understatement. Mark Dixon, IWG

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“Offices will be more local, digitised, customer-friendly and flexible places to work,” Mark Dixon, CEO and founder of IWG, told an auditorium in Cannes during the recent MIPIM conference, one of the world’s largest annual gatherings for the real estate sector. This year has seen evermore companies investigating or contracting for hybrid work programmes. IWG, the pioneer and global leader in flexible workspaces, has more than 3,300 offices in over 1,000 towns and cities across some 110 countries. 

“Like many other countries, work in the future will be happening almost everywhere in the UK,” Dixon tells Investment Monitor. “It is beginning right now, [which is why IWG and others] are constructing even more local workspaces outside of [traditional city centres or locations].

“I might not be sitting here with a job if more than two-thirds of our locations were not in London. London has been decimated, and that is an understatement,” he adds. 

These shifting opportunities across the sector (and country) explain why, despite the economic impact of Covid and Brexit, real estate remains one of the most important industries for investment in the UK. In total, between £50bn and £55bn-worth of property is expected to change hands over the next few years, according to UK Minister of Investment Gerry Grimstone, who joined Dixon for the MIPIM panel. 

People, planet and profit are driving hybrid work

The Covid-19 pandemic has accelerated the three forces that are leading the global shift in office work: people, planet and profit. 

On the first point: people are very vocal in demanding new ways to work. The past 18 months has proved that employees can be productive from home, so it comes as little surprise that 85% of employees that worked from home during the pandemic would now prefer to work hybrid (between a traditional, home or co-working office), according to the UK’s Office for National Statistics. 

Stay-at-home parents can’t commute, but if you can provide a local or home workplace, there is underutilised talent all over the UK that you can unlock. Mark Dixon

“People don’t want to be forced to commute long distances, whether that is a regional city or the capital,” said Dixon. “They want to be able to work some or all of the time at home, but a lot of people want to work locally and then occasionally go to the main office to meet colleagues, collaborate and so on.” 

Before Covid, the average commute to work for a Londoner was 47 minutes, one way, according to Israel-based mobility-as-a-service provider Moovit. However, now only one in five are willing to commute for 30 minutes or longer, according to data presented by IWG, while for 77% of employees, a place to work closer to home is a must-have for their next job move. At this point, many workers would quit their job if asked to return to the office five days a week.

“Hybrid working is also being driven by environmental, social and corporate governance and sustainability,” said Dixon. “Commuting and underused office buildings are a huge polluter. You only have to go into any big city on Friday to see many underutilised buildings which are heated or cooled and maintained, despite not being used.” 

Transportation is indeed one of the largest sources of carbon emissions, globally. In the UK, the vast majority of journeys to the office, before Covid, were made by car – the equivalent to a carbon footprint of 3.2 tonnes of carbon dioxide per person per year, according to data presented by IWG. 

Finally, the switch to hybrid work means more profits for companies. Businesses can save $11,000 per employee in the hybrid model, according to research from EY, while 63% of organisations with high-growth characteristics have ‘productivity anywhere’ workforce models, and 69% of negative or no-growth companies are still focused on where people are going to work, rather than what they are actually doing, finds Accenture

“You are going to have a lot more people in the workforce if you allow homeworking,” said Dixon. “Stay-at-home parents can’t commute, but if you can provide a local or home workplace, there is underutilised talent all over the UK that you can unlock.”  

Will governments help bring about a ‘local’ revolution?

IWG, like many leading corporations, believes that the future of work will revolve around the 15-minute city – a place where work, home, shops, entertainment, education and healthcare are all available by foot or bicycle within the same time a commuter might once have waited on a train platform.

As such, the presence of local workspaces is as important as a local school, a local post office or whatever other amenities are required in the community.

Beyond quality of life, more localised economies will benefit from an uptick in employment and the retention of employee salaries within the community, according to IWG. In fact, research from the group, alongside Arup, has shown that in the UK alone an extra $451m (£327m) will be spent in local communities as a result of hybrid working by 2030.

London needs to become more like Copenhagen and other cities that have thought about people first. Mark Dixon

The technologies that allow for this are ready and forging new possibilities. “I was on a call with Eric Yuan of Zoom the other day,” Dixon told the audience at MIPIM. “There is a massive amount of new tech coming from Zoom and Microsoft Teams. What we have all been using so far has really been quite basic stuff compared with what we will be using in a couple of years’ time.”

On the other hand, national digital infrastructures are lagging behind in many countries across the world. 

“Governments that are going to be successful have to embrace full digital access for the entire population,” said Dixon. “High bandwidth has to be available to every household in the country… [This is key] to ‘levelling up’ the UK. 

“Everything must now be built around the digital platform, as opposed to being built around the roads and accessibility to transport, as was done in the past. Just look at South Korea, which is years ahead. It changes how and where you build buildings. Offices are becoming more like products that create a wonderful user experience.” 

UK government policy around planning rules is also part of the problem. By contrast, Dixon praised the French government’s programme of sponsoring local mayors (who have a mandate to create local workplaces for the population).

“You need to have a strong local government, combined with longer term funding from the national government,” said Dixon. “What they are doing in France is intervening to provide the bottom level of financing to projects. If government policy gets behind things, you can do wonderful things, delivered locally.

“In the UK it is slightly harder to find the real estate IWG needs in the smaller towns. There are too many poor-quality buildings, because no one has invested in them due to all the jobs being in the city centre, especially with regards to London. So IWG has to work on the new construction of fully carbon-neutral buildings from day one. The problem is the planning. It is a very slow system.” 

As well as sound digital infrastructure and local workspaces, cities across the UK need more affordable housing to create 15-minute cities. Lack of affordable housing is London’s biggest problem (by a factor of ten to one), according to Dixon. In fact, he goes as far as to say that London is the world city that has the most pressing need to reinvent itself. 

“It needs to become more like Copenhagen and other cities that have thought about people first. Everything follows that,” Dixon tells Investment Monitor.

While Covid-19 has caused untold human tragedy, it has accelerated the digital revolution, which in turn is providing cities and towns with stronger communities. As they redesign themselves accordingly, the implications for people’s well-being and investors’ wallets are enormous. 

Sebastian Shehadi

Sebastian Shehadi

Political editor

Sebastian Shehadi is political editor and senior editor at Investment Monitor and a contributing writer for the New Statesman.