The economic impact on businesses switching to a remote working business model - By Michael Mc Camley
This blog will investigate the impact working from home will have on business, it will investigate the direct and indirect impacts remote working will have for businesses going forward.
Another boost for online and tech based companies?
In a survey titled ‘Business impact of COVID-19’ carried out by the ONS, various businesses across many sectors were posed the question, “Why do you intend to use increased homeworking as a permanent business model going forward?” Business centred in information and communication were seen to be incredibly capable of adapting to remote working practices and figure 1. shows us how they responded to the question. Reduced overheads are stated as the main reason why a business would intend to use increased homeworking in the future with increased productivity coming in second.
Facebook as a working example
CEO of Facebook Mark Zuckerberg has already stated that employees who work remotely will be paid in line with the location they are working from (Financial Times, 2020). For big tech companies such as Facebook this could lead to a major reduction in wages as employees who may have commuted long distances to their workplace in expensive cities such as, Paris, Copenhagen, and San Fransisco will now be working from areas close to these cities where the median salary is lower. A survey carried out by French jobs website RegionsJob revealed that 76% of Parisians and those living in the Paris region would be willing to take a pay cut to avoid the hassle of their daily commute (The Local fr, 2018).
As a major communication based company this data shows us that remote working will massively benefit Facebook in terms of cost reduction with regards to wages. Productivity at home may also increase as Figure 1 suggests. Zuckerberg has also stated that Facebook is just as productive with employees working from home and some have reported to being even more productive (Al Jazeera, 2020).
Although major tech based companies may be able to thrive through working from home will others suffer as a consequence?
The hospitality sector has been hit with an unprecedented challenge (Gursoy & G. Chi, 2020) and has been affected the most from the current pandemic. Across Europe the hospitality sector is one of the key drivers to the European economy, it is the 3rd largest socio-economic activity in the EU and as of 2016 nearly 12 million people were employed in this sector (Hospitality Europe, 2017). The effects of localised lockdowns has already been felt in Belfast with Commercial Court Inns, stating that the Duke of York and the Harp bar will be making up to 100 staff redundant and will be closing for the foreseeable future (BBC News 2020).
Will reduced footfall in cities and towns due to WFH also lead to loss of income for businesses?
With less people traveling into cities to work a plethora of shops have suffered as they rely heavily on footfall traffic. We can view this as a business losing income indirectly due to the increase in remote working. Even though many business are still able to operate albeit at reduced hours and staff levels, the knock on effect of less people travelling into cities means there is a reduced number of potential customers who will enter their shop. UK sandwich chain Pret A Manger has had to cut 2,890 jobs due to the decline in commuter trade. London is said to be the worst hit area with many still declining to use its vast network of tube services. Trade in their stores has been up to 60% less than this time last year and in June they were only able to pay 30% of their rent bills. (Financial Times, 2020). Pret A Manger is just one of many business who have felt the effect of the current pandemic.
Conclusion
Some businesses may benefit from the new working practices while others will not be able to sustain themselves in this new environment. The prospect of working from home for some industries is a near impossibility and could lead to mass closures and a rise in unemployment. Loss of employment in the hospitality sector has only just begun in the UK. With N.I. on the path to another four week lockdown starting on 15/10/20 I believe we will be seeing a lot more bars and restaurants closing down if they are not helped with financial backing from the government. Contrastingly, industries that have heavy foundations in technology find themselves in a much more lucrative position within the marketplace. We have found that these industries will be able to save vast sums of money on overheads while simultaneously maintaining their productivity levels.
Remote working may not be the answer for every business but it certainly looks like major technology industries will be using it to their own advantage. Although they may benefit financially themselves will the indirect knock on effect of other business failing change our way of life for some time to come?
Bibliography
Office for National Statistics (2020). ‘Business Impact of COVID-19 Survey (BICS) results’
Available at: https://www.ons.gov.uk/economy/economicoutputandproductivity/output/datasets/businessimpactofcovid19surveybicsresults Accessed: 12th October
Financial Times (2020). Will Facebook’s salary-by-location move set precedent for tech? Available at: https://www.ft.com/content/1c52a7a2-aa65-11ea-abfc-5d8dc4dd86f9. Accessed: 13th October
The local fr (2018). Parisians so fed up with commuting they'd rather take a pay cut. Available at: https://www.thelocal.fr/20180312/most-parisians-would-take-pay-cut-to-shorten-their-commute. Accessed: 13th October
Al Jazeera (2020). Working from home forever: Facebook to begin remote hiring. Available at: https://www.aljazeera.com/economy/2020/05/21/working-from-home-forever-facebook-to-begin-remote-hiring/?gb=true. Accessed: 13th October
Gursoy, D and G. Chi, C (2020). ‘Effects of COVID-19 pandemic on hospitality industry: review of the current situations and a research agenda’, Journal of Hospitality Marketing & Management, volume 29, no.5, pp. 527-529
Hospitality Europe (2017). “The hospitality industry’s contributions to European economy society”. Available at: www.hotrec.eu/facts-figures-2/. Accessed: 10 October 2020
BBC News (2020). Belfast: Up to 100 jobs at risk at Duke of York and Harp Bar. Available at: https://www.bbc.co.uk/news/uk-northern-ireland-54441774 Accessed: 15th October 2020
Financial Times (2020). Pret A Manger slashes third of its workforce. Available at: https://www.ft.com/content/47ee3232-d1dc-48b0-b377-a80e1e8cae3b Accessed: 13th October
Comments
Post a Comment