LONDON: The Bank of England said Wednesday there are perfectly understandable reasons why the majority of office workers have yet to return to their pre-lockdown workplaces despite new coronavirus guidance from the British government.
Alex Brazier, the Bank of Englands executive director for financial stability strategy and risk, told lawmakers on the Treasury Select Committee of Parliament that the need for virus-safe environments and the related issue of trains packed with commuters means office workers cannot return en masse to city centers.
I dont think we can expect a sudden and sharp return of people to the very dense office environments that we were used to, Brazier said. We should expect a more phased return, depending on the public health outcomes we see in coming weeks and months.
In recent weeks, Prime Minister Boris Johnson sought to encourage office workers back, partly because the U.K.’s city centers are suffering from the lack of foot traffic. Many shops remain shuttered while traditionally busy sandwich bars are closing early.
Meanwhile, Bank of England Governor Andrew Bailey said he understands why the government is ending a salary support initiative that has kept a lid on unemployment during the coronavirus pandemic.
He said the Coronavirus Job Retention Scheme, which has seen the government pay the bulk of the salaries of workers who were retained rather than fired during the U.K.’s virus lockdown, had been designed very sensibly for a situation where 30% of the workforce couldn’t work.
The government is ceasing the salary support at the end of October, a cutoff that has raised fears of a huge spike in unemployment from the current rate of 3.9% as firms decide they cannot retain workers who have effectively been idle since March.
The central bank has grown less pessimistic about the scale of the potential job losses after recent moves to ease the lockdown shops and the hospitality sector, such as bars and restaurants, were allowed to reopen during the summer, for example. In its last set of forecasts last month, the bank forecast unemployment rising less, to around 7.5%.
Bailey said there has been a sharp reduction in the number of firms utilizing the furlough program but that the rate of decline is flattening. He said around 13-14% of the U.K.’s labor force are in furlough, many within the arts and and entertainment sectors still facing rigid lockdown restrictions.
The change in the nature of the issue requires a sort of change in the nature of thinking of what the right policy mix is,” he said.
The British economy, which shrank about 20% in the first half of the year, is recovering, though not uniformly. While household spending is near pre-pandemic levels and the housing market is soaring, the outlook for business investment and social spending, such as dining out, is murky.
Bailey said the British economy as a whole will likely be permanently “scarred” as a result of the pandemic to the tune of 1.5% of its annual GDP. He stressed that all forecasts are clouded with huge uncertainty and that the bank has room for further stimulus measures.
As well as uncertainties related to the virus, the British economy also has a lack of clarity over the U.K.’s future trading relationship with the European Union. Following its departure from the bloc earlier this year. the U.K. remains within the EU’s tariff-free economic orbit until Dec. 31.
Negotiations about future trade ties are deadlocked. If there is no deal, tariffs and other impediments to trade will be imposed, which most economists think would cause relatively more damage to the U.K.
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