As the UK navigates out of the pandemic, it appears that the economy has received a welcomed boost, as confidence increases amongst those in business, and sales seem to be on the rise.
However, there still remains some worry over inflation, tax, and the rising costs due to the energy crisis. What’s more, businesses and employees alike are having to adapt to a new hybrid way of working — an outcome that looks like it’s here to stay after the COVID-19 restrictions and lockdowns.
For those engaging in foreign exchange (forex) trading, a fundamental factor such as this, which can have a huge impact on the economy, will certainly be on the radar. Monitoring the nuisances of businesses and the economy will be essential to making any informed decisions when it comes to a position on the forex market.
With this in mind, let us explore further how an increase in employees working from home can have an effect on the UK economy, and in turn the value of the British pound.
Less money spent
One of the main effects of a hybrid way of working is the significant impact on the consumption and spending on the areas surrounding city offices. Shops, cafes, and cultural amenities have all seen a drop in footfall, as more employees choose to work from home. In recent months, the average weekly spend of an office worker has dropped from £416 (as of February 2021) to £404.
This creates somewhat of a snowball effect on the wider economy. Those who work in the relevant industries and rely on office workers, therefore are presented with a reduced income and are in turn decreasing their own spending. Likewise, employment in these areas has been knocked, with employment rates decreasing and job vacancies rising.
In fact, research from the multinational network of firms, PricewaterhouseCoopers (PwC), calculates that as a result of more people working from home, and thus less spending, there could be a negative impact of around £12 billion on the UK economy.
As a forex trader, the strength of a nation’s economy and macroeconomic data can have a substantial effect on the valuation of its currency. If the shift towards working from home results in lower inflation and interest rates in the UK, the market could see a depreciating pound.
Rural vs cities
The rise in working from home and its detrimental effect on spending has created conflict between different areas of the UK. Few people are being drawn to work in the offices in big cities, especially if hybrid working is not a viable option.
As a result, there has been an increase in people taking less well-paid jobs outside of major cities. Although this could help improve smaller cities and rural areas, the impact will be felt by those working in lower-paid jobs in bigger cities (as previously mentioned).
This has already been seen in smaller cities like Wigan, Bradford, and Blackpool, which have benefited from the rise in working from home. Whilst places like Liverpool, Manchester, Sheffield, and Leeds, on the other hand, have been suffering from the shift in working and spending habits.
As previously explored, the change in the way people work, and in particular office workers of big cities, are impacting other forms of employment in these areas. At the time of writing, the UK has seen a record-high number of job vacancies. The most affected being the retail sector, as well as accommodation, food services, and hospitality also seeing large numbers of vacancies.
Interestingly, it appears that the industries that may not be able to offer a form of hybrid working are seeing less interest in their opportunities, as attitudes towards working are continuously changing.
This sharp increase of vacancies in the UK suggests some doubt in the recovery of the economy post-pandemic, as employers struggle to find the right skills to fit the job they are advertising.