The City’s competitiveness after the pandemic

While the working from home experiment of the past 12 months was hailed by many as a success, the long-term impact on innovation, collaboration and productivity, if not addressed, could cost the City of London dear.

Much has been written about how the pandemic has revolutionised the way we work. As one of UK’s fastest growing technology businesses, with focus on one of UK’s most competitive sectors, we have benefited from the acceleration of the adoption of technology and digitisation in financial markets seen during the pandemic.

As an entrepreneur, however, who moved to the City of London from New Zealand 15 years ago, with the drive and ambition to build a business alongside the best and the brightest talent in the world, I have deep concerns about the long-term damage that a prolonged remote working experiment will inflict on the City’s competitiveness.

If not addressed, the resulting lack of innovation, shrinking networks and the ‘wrong’ kind of productivity will vastly reduce the City’s ability to continue to charge a premium for the services it offers on a global stage.

Stasis stifles innovation

People develop networks within and outside their organisations because of the projects they have worked on together. These networks, in turn, lead to a cross-fertilisation of ideas and innovation. What has happened over the past nine months is the exact opposite. For the first few months of the pandemic, people traded on the emotional connections and the relationships that predated the pandemic. This gave them a sense of safety and security – a shared journey. But as months passed, the shared journey gave way to more transactional behaviour; new high performing teams were less likely to be established as they lacked the shared experiences, the ability to be vulnerable with and trust one another.

This, in turn, gave way to stasis. Established relationships remained in place because it was harder to find new business partners or suppliers; those same partners and suppliers struggled to build new relationships, so they farmed existing relationships rather than hunting for new opportunities, thus reducing their drive and ability to innovate.

Diminished network effects

A key aspect of the City’s competitiveness is the quality of talent. Unlike other financial centres in Europe, the City has a culture of people regularly moving between different organisations, creating those highly valuable network effects. It is this concentration of talent and proximity which is key to the City’s competitiveness. The less time people spend in the office, the more transactional they become, losing that innovative edge which allows the City to create superior value and charge higher fees. With forces such as Brexit at play, and the inevitable market fragmentation which they bring, a permanent shift in the way we work could make matters worse for the City of London.

Diminished network effects can also have a negative impact on social mobility – the office is a great leveller, but the pandemic has exposed a solipsistic behaviour by a managerial class who has neglected to understand that part of what the company pays them for is to mentor and pass on their knowledge to the junior staff and not just for their individual contributions.

Wrong type of productivity

For proponents of remote working, increased productivity is another benefit worth retaining. While people have inevitably been working longer hours, for technology businesses in particular, software development without proximity to the business generally delivers the wrong outcomes. This is one of the reasons why outsourced tech centres cannot charge the same premium as those within the City of London.

The City should place higher value on the ancillary softer skills which explain the context (the why) as well as the solution (the what). In my company’s case, the domain understanding and experience in financial markets, the knowledge of the history of trading platforms and innovation, is not something that can be replicated overnight. Without this knowledge we will become less valuable and lose market share to other financial centres.

Can the City innovate again?

While a full-time return to the office becomes less likely the longer this experiment goes on for, embracing new ways of working without seeking new ways to improve our competitiveness would be disastrous for the City of London.

The emergence of new hybrid working models – distributed workforce, mandatory working from home or full flexibility – will present their own challenges. The City needs to come up with new ways of knowledge sharing and collaboration to lower its costs and focus on innovation. This will require an honest look at the areas where individual market participants are spending vast resources to simply replicate the same solution as their competitors. Being more collaborative around technology implementation to help build scale, for example, would be more beneficial and allow more room for innovation. This innovation could, and should, focus on improving competitiveness, via differentiation.

If remote working is here to stay, then we need strategies to make it more productive. Businesses are already bringing forward investments in electronification and digitisation by five years. This will change the nature of investments over the next year and what is deemed possible. The pandemic exposed that many of the barriers to using new technologies were artificial and not grounded in any reality. We need more yeses from compliance teams to promote and embrace innovation and experimentation.

In a post-Brexit, post-pandemic world, we need to maintain proximity, collaboration and network effects – be it physically or virtually – and push the boundaries of what looked like constraints. If we do this right, the City’s future will be more secure.