Should we fret about Pret?

The government has launched a drive to encourage more employees to return to city centre workplaces. Media outriders warn of apocalyptic job losses in service industries should the homeworking revolution endure.

Just one in three clerical workers has gone back to work in cities this summer, amid concerns that the ‘whole ecology of city centre businesses may be killed off’. These businesses include hairdressers, dry cleaners, cobblers – and sandwich bars, with Pret A Manger seemingly their totem. London and Manchester – legal powerhouses both – are bottom of the footfall rankings.

This campaign is curiously counter-intuitive. Of course, it is sad when people lose their jobs due to a slump in demand caused by circumstances beyond their control. Yet – and let me blunt – this has never seemed to bother Conservative governments much in the past. Admittedly, state intervention is hardly taboo any more (‘Eat out to help out’ may have been a populist wheeze, but it was a good one). But why interfere with market forces in this instance?

Won’t service jobs displaced from city centres simply rematerialise in the towns and villages from where former commuters used to slog in to work?

Perhaps, but that is beside the point. What is really going on here is nicely explained in a blog published by the website primeeconomics. If large businesses downsize to slash overheads, their debt-financed commercial landlords are suddenly at risk. In an economy geared to asset price inflation, backed by quantitative easing, rising asset values trigger more borrowing and lending. This keeps the plates spinning. Falling commercial property values threaten an entire economic paradigm.

Ministers and landlords have a problem because city-centre employers tend to be in business to make money. If clients can be kept onside, and service levels and productivity maintained, then sharply reducing your ‘trophy’ office space makes solid commercial sense.

Linklaters and JP Morgan have deeply discomfited policymakers by heralding the end of the daily commute. But the home-working genie is out of the bottle. Trying to shove it back in appears a vain endeavour.