For Stephen Blackman, head of strategic research at NatWest, the pandemic has both caused and accelerated a set of seismic changes that are spread out in various levels of intensity across different geographies, demographics and commercial sectors. And underpinning much of these changes is a growing role of technology in our lives. Blackman was presenting his take on some of the key themes as part of the bank’s most recent banking brief session.
“As an economist, I see it like this: the old world has gone. There is a new world, and we don’t know exactly what it will be like. And we also don’t know if it will produce more economic value or not. If it does then it’ll be bigger; but it might not – we might see less spending, more saving for instance. In which case there are some fundamental political and economic questions to be faced.”
Fuelling change
“Technology drives so much of this,” said Blackman. Indeed, recent McKinsey research showed a massively increased rate of change across a range of digital technologies. Since March, the number of customer interactions that have been digitised has accelerated by three years; meanwhile the proportion of products and services that have been at least partially digitised has been accelerated by seven years in a matter of months. Finally, the amount we’re spending online now – already a strong trend – has been accelerated by five years.
Many of these themes were already in existence, but Covid has put a rocket underneath them and accelerated their adoption in a range of ways that we weren’t truly prepared for. “The economic and social dislocation that many of us are now experiencing is us adjusting to what is a new economic and social reality,” Blackman explained.
We’re working out how our interaction with technology is changing and how it can benefit us, how we use these tools and when, according to Blackman. “And that involves a real shift in understanding about what is best got out of the physical world and what is best experienced digitally.
“That will continue to be a complicated and interesting journey.”
“Ultimately, we are looking at a more blended model. Work will be a place where we go to talk about work rather than do it. The production part will be more local; and it will be a more social place, focused on ideation and planning”
Stephen Blackman, head of strategic research, NatWest
Silver linings
And while there’s no doubt a pandemic that presses pause on global activity – political, economic, social and so on – is a once-in-a-lifetime occurrence, Blackman said there are some upsides to such a disruptive and dislocating event. “Certainly we may see a reordering in how we run governments by and for the people – the introduction of universal basic income, for instance – but whatever form it takes, innovation will occur.
“Indeed, innovation accelerates in times of existential crises. It’s almost like you need that to break through boundaries.”
Regional variations apply
But of course many of these trends are not felt evenly. And variations across different demographic, geographical and commercial sectors are an undeniable feature of Covid’s impact so far.
For instance, the correlation between roles that are suitable for homeworking and the average salary attached to them is clear: many higher skilled jobs may remain home-based. “That will have a broader impact,” said Blackman, pointing to a greater number of affluent professionals working at home, driving changes to local town centres that will likely see more demand for co-working spaces and boosting the fortunes of some businesses (and hitting others hard).
And there are geographic trends too. Blackman believes the impact of Covid will only serve to further define the shape of the UK’s knowledge economy, which was already taking form in certain areas. “We get the double impact effect here, as high-skilled jobs suitable for homeworking – that were already doing well – are clustered around the primary cities that are serving as engines of growth. Other areas may be impacted differently.”
And finally the sectoral differences are coming into better focus. “These centre around the demographic that you serve and how that relates to where you cluster your businesses,” Blackman said.
So while all ‘lunchtime’ businesses have suffered, Greggs has held up better, in part because it tends to serve a demographic – those working in trade and in the physical realm around residential areas – who remain working outside. Pret A Manger, by contrast, has suffered thanks to its presence in areas where there are more offices and now, thanks to Covid, far fewer commuters.
A bigger picture
Understanding the micro trends has become a key priority for commercial businesses as well as those working in government, both of whom are charged with making long-term decisions to support the beneficial changes in our working lives, and to mitigate the potentially damaging ones. They all add up to four key themes that Blackman believes will serve as the drivers of a new normal.
“The first centres around resetting relationships. I think this is a great opportunity for businesses, government and individuals to fundamentally reset relationships we have, based around the fact that, increasingly, people want longer-lasting relational experiences through multiple channels. So bonding becomes important, as does the need to share data.
“We’re also repurposing place,” he continued. “The advent of homeworking is leading to greater focus on localism: people spending more time and money in and around where they live.” That will have both commercial and political implications, Blackman said, as more men in particular become less focused on working in separate spheres.
The third megatrend will lead to a reassessment of value and values. “What do people want from society? People are increasingly focused on societal value as well as economic value,” Blackman explained, adding that the pandemic had brought into sharp focus the need for organisations to understand how their customers view them and their actions.
“And the final theme centres around building resilience, whether that’s financial assets or our own personal lives. Fundamentally, it means repurposing the assets we have – including ourselves – to make sure they’re built up to maximize their value, and reducing waste.”
“Ultimately, we are looking at a more blended model,” Blackman concluded. “Work will be a place where we go to talk about work rather than do it. The production part will be more local; and it will be a more social place, focused on ideation and planning.
“I’m hopeful that the new world, one in which we have a more balanced view of where we live, work and use digital technology and experience the physical world, is just different. And hopefully it’ll be the same size – and this is just a transition pain while we get there.”