As entire city centres risk turning into ghost towns, the government has to rethink how to protect jobs

The wave of job losses is hitting the shore. Marks & Spencer’s announcement of a further 7,000 redundancies is a huge blow, compounded by the other troubling news from the retail sector. In the past couple of days, Debenhams, struggling to survive, has said it will shed 2,500 jobs; Dixons Carphone is losing 800; Selfridges, another 450.

Yet, and this may surprise, by June UK retail sales were already very close to pre-Covid levels in real terms and were up in money terms. While we don’t yet have official July figures, it looks as though retailing as a sector will now be running up on this time last year. The reason, of course, is the shift to online, which now accounts for more than 30 per cent of all retail sales, excluding fuel, up from 20 per cent pre-Covid. There are huge beneficiaries. Amazon is hiring some 15,000 more people. Ocado, which recently signed an agreement with M&S to launch its online services, is now worth £18bn. M&S shares have fallen so far that the group is worth little more than £2bn.

Whenever there is a huge structural change in the way we work and live there are winners and losers. What is different here from anything that has happened before is the pace of change. Online sales had been rising at about one percentage point a year: that move from zero to 20 per cent had taken 20 years. Now we have had 10 years of change crammed into three or four months. It seems – and this is all so new that the data are not yet available – that online retailing is inherently more efficient than in-store retailing. It uses fewer people and probably less energy.

It probably also has a gender impact: online means more computer geeks and more delivery drivers, who statistically are more likely to be men, whereas stores tend to employ more women.

All this is massively disruptive. It is disruptive at a human level and that is miserable for those thousands of people who are about to lose their jobs. It is also disruptive at a wider structural level in that the physical layout of our towns and cities is being transformed. Even before Covid struck our high streets were being hit by the shift to online. Now the blow has been doubled. If the shift to online retailing is matched by the shift to working from home, then it will not just be the high streets that have to find a new role. It will be entire downtown city centres.

We can glimpse new activities for unwanted retail space. John Lewis is thinking of converting some of the stores it is closing into housing. It is impossible to have any feeling from what will happen to currently vacated office blocks, because we simply do not know to what extent the jobs will return. Working from home may turn out to be less successful than it currently appears. Quality of output may drop. It may be impossible to build team spirit. People around the entire world are clustering more and more into giant cities. There must be an economic reason for that. But we don’t know.

What will happen to cities?

There was another story yesterday that gives a clue. The Financial Times reported that Merck, the US pharmaceutical giant that uses the name of MSD in Europe, is planning to expand its UK research activities in a £1bn hub near King’s Cross in London. This will employ some 700 people. That may not sound much when set alongside the job losses, particularly when many of those jobs are being transferred from smaller offices elsewhere in the UK. But note that Google is going ahead with its new office, also at King’s Cross, which will house up to 7,000 people. It has said its staff can work from home until the summer of next year, but it clearly also thinks being in offices does work.

The Merck decision suggests the same: a belief that if you get people together, they find it easier to be creative. We have to be in the same space at least part of the time to be truly cooperative. Imagine scientists trying to develop a new vaccine while sitting at home on Zoom calls. Look at the way the UK passport service has deteriorated because many of the staff are still working from home.

So what should governments do in the face of such uncertainties?

There are three long-established guidelines.

One is that they should protect jobs wherever possible. Every time a job goes, that has a knock-on effect on others. This is something the UK government at least has not had to think about since the 2008-9 recession, for since then employment growth has been strong. The furlough scheme, the VAT cuts, the special boost for eating out, and so on – all these ideas have been welcome. As they are wound down, the government has to look at ways of making sure that people who are displaced can get back into the workforce as swiftly and smoothly as possible.

The second follows on. It is to accept that while we cannot know where the new jobs will come from, it is always right to educate and train people in new skills. Those M&S workers will be useful to other employers, but they may need help to find them.

And the third is to clear the path for any business looking to boost employment. If Merck needs fast-track planning to get its new HQ built, this is not the time to stand in its way.