U.K. Domestic Space Re-tooled By Rising Work-From-Home Edicts

Photographer: Chris Ratcliffe/Bloomberg

Online shopping and working from home may give a much-needed jolt to the U.K. economy, boosting productivity that has for decades been stagnant, a Bank of England policy maker said.

Michael Saunders, who sits on the central bank’s rate-setting panel, said the silver lining coming from the pandemic may be in prodding Britain to adopt technologies that will help boost growth. That suggests more room for the economy to expand before inflation becomes a threat.

U.K. has been blighted for years by weakest productivity since the Industrial Revolution, trailing most of the world’s advanced economies and contributing to depressed wages. That held back the economy long before coronavirus struck and left policy makers searching for solutions.

“While this shift to persistently higher remote working may create challenges in how firms enable collaborative working, in my view it also may have positive effects on the future path of potential output in terms of labor supply, labor productivity and a more efficient use of the capital stock compared to the old pre-pandemic model,” Saunders said in a speech webcast on Friday.

Saunders said the recession that came with lockdowns to control the virus slashed output per worker by a fifth and threaten to subdue it even further as restrictions persist. However, the switch to online shopping boosted productivity by 20% in the retail sector in the first three quarters of last year — eclipsing the gains made over the whole of the previous decade.