On a cold, wet morning on 5 March 2020 around 100 equity research analysts were ushered down a fire escape at HSBC’s Canary Wharf headquarters after receiving the news every City firm had been dreading for weeks — one of their team had tested positive for Covid-19.
This was the first case of the virus confirmed at a major financial institution in London, revealed by Financial News, and followed months of banks gradually shifting staff to back up sites in unglamourous locations like Croydon, Lewisham or Basingstoke in anticipation of a Covid infection that would force them to shutter trading floors.
There had been just 25 confirmed Covid cases in London at the time and, as the virus raged in other European countries, it was by no means certain that the UK would fall to the same fate.
But the case at HSBC — which followed two false alarms at the bank’s 8 Canada Square headquarters — was a sign of what was to come. In tracing the infected analyst’s moves, it was found that he made a client visit to S&P Global, sources told FN. It reacted by immediately sending 1,200 employees to work from home.
While life in Canary Wharf continued as normal, bankers told FN that London’s financial districts were “sleepwalking into an outbreak”. Inevitably, more cases emerged in the following days. Barclays, Citigroup and Deutsche Bank also unveiled infections among their City staff, closing floors and rolling out ‘deep clean’ protocols.
Over the past year there have been over 4 million Covid-19 infections in the UK and more than 122,000 deaths, one of the worst records against the virus globally. The government has unveiled successive lockdowns, turning London’s financial districts — typically home to over 500,000 workers across Canary Wharf and the City — into ghost towns.
Has the pandemic changed the City forever?
Covid-19 forced the world’s biggest investment banks to send tens of thousands of people to work from their kitchen tables in an unprecedented move. It grounded high-flying dealmakers who nonetheless managed to bring in record-breaking fees in 2020, smashed industry myths that flexible working is a soft option and had bank executives asking if the office would survive at all. As Prime Minister Boris Johnson lays out plans to “cautiously but irreversibly” lift the UK out of lockdown, bankers are now questioning whether the City of London will change forever.
But in the early days of the pandemic banks had yet to confront the massive upheaval the crisis would bring, and were simply trying to avoid the hammer blow of shuttering their offices. Citigroup had “pink and blue” teams split between its Canary Wharf headquarters and a disaster recovery site in Lewisham. Goldman Sachs, meanwhile, divided its workforce into “blue and white” teams, rotating between its Plumtree Court HQ, a back-up site in Croydon and home.
Philip Drury, head of banking, capital markets and advisory for Europe, the Middle East and Africa at Citi, admits that there was a certain amount of naivety in the early days of the crisis. Its European executives were speaking to colleagues in Asia about what to expect.
“We talked about keeping employees engaged, the need to split teams, but it was not the baseline expectation to have most of our staff out of the office for a year,” he said.
Christophe Lattuada, group country head for the UK at Societe Generale, said they didn’t see the “full magnitude of it, particularly the scale and length of lockdown”.
Epidemiology experts made a blunt assessment of banks’ early Covid-19 plans — they wouldn’t work. Designed for major events like a power cut, natural disaster or terrorist attack, they were simply not set up for dealing with a virus outbreak.
Throughout the pandemic, City firms have toed the line they are simply following government guidelines. As late as 12 March 2020, UK government spokespeople were still talking about ‘herd immunity’, essentially letting the virus go unchecked through the population on the assumption most would have mild symptoms and the country would build up resistance, a theory that was already facing backlash.
In a huge U-turn, by 16 March Johnson said people should work from home if they can and avoid non-essential travel. Seven days later, as Covid-19 related deaths spiralled, the UK went into its first nationwide lockdown, initially for three weeks, but restrictions would last until July.
Banks responded by sending all but “business critical” staff home, as the Financial Conduct Authority set new rules — including the need to monitor phone calls — allowing for the first time traders to swap football field sized trading floors for their spare rooms. Meanwhile, there were signs of the bumper year to come for large investment banks, with trading volumes surging by 30% in the first quarter as Covid-19 spurred huge market volatility.
“It would have previously been impossible to stress-test working from home at scale in the way that we have been forced to in the past year,” said Vis Raghavan, chief executive of Emea at JPMorgan.
“What we learnt is that we really can manage extraordinarily high trading volumes while working remotely from each other, that our developers can quickly respond to changing technology needs in the process, and that remote working doesn’t mean that client service has to suffer,” he added.
Before the pandemic, WFH was perceived a ‘day at the golf course’
The success of the City’s mass working from home move is all the more remarkable because of pre-pandemic attitudes. A prime example was at BNY Mellon, which in 2019 was forced to backtrack on a ban on flexible working after then chief executive Charles Scharf — who now runs Wells Fargo — said employees needed to be at their desk.
“The fact is that we never practiced what we preached,” said one bank executive. “We had flexible working arrangements, but they were bullsh*t. Everyone still thought working from home meant a day at the golf course.”
In the first few weeks of lockdown, debt bankers handled record volumes of transactions from home as firms tapped capital markets to secure vital liquidity to ride out the crisis. M&A dealmakers refined their bookcases for virtual pitches and traders turned to Instagram to boast about stacks of monitors known as ‘rona rigs’.
The working from home movement was so successful that by April senior bankers — including Barclays boss Jes Staley — were already calling time on vast City offices that house thousands of staff, and banks like JPMorgan and Deutsche Bank were mulling shrinking their real estate footprints.
But cracks were beginning to show. Unable to switch off, bankers worked even longer hours, stress increased and working parents — forced to balance huge workloads with homebound children — were feeling the strain.
Stress in the City
Stress and mental health is an increasing concern as the pandemic has worn on. In a February survey of senior finance executives by FN, 60% said Covid has made their lives more stressful, while 42% said the crisis, as well as Brexit, has made them reconsider their careers. Junior bankers, often holed up in cramped apartments working 80-hour weeks, have particularly struggled, FN has reported.
“The boundary between work and home has become increasingly blurred,” said Drury. “That inability to know when to stop, or when to draw the line between time with family and work has been challenging for people.”
One senior City dealmaker said his “meeting count is up 100%” as all client interactions have moved online. “People don’t understand how stressful it is,” he said. “You’re expected to be more on the ball than ever, and your preparation time has disappeared.”
By July 2020, the UK government eased restrictions, reopened pubs and restaurants and encouraged a gradual return to work while pointing to a return to normality by Christmas. Skeleton crews in City offices, which had hovered at less than 10% of the population, were quickly filling up again, despite reticence from the majority of banking professionals polled by FN who feared a second wave of the virus and were reluctant to squash into a packed tube during the commute.
Rolling out perks
Banks rolled out the perks to lure staff back. Goldman Sachs and Barclays offered free food, taxis and parking spots were made available to avoid public transport and Swiss bank UBS even bought a fleet of Brompton bikes to ferry bankers between meetings.
The pent up demand to get back into the office was more evident at US banks, with Goldman Sachs, JPMorgan and Citi among others upping staff numbers to around 30-35% over the summer. European banks including UBS, Credit Suisse and HSBC have kept office-based staff in the City at around 10% throughout the pandemic.
JPMorgan transformed its Canary Wharf office by installing 31,000 stickers telling staff where to stand and how to travel around the building safely. Bankers coming back to the City were greeted with temperature checks, and company-branded masks to wear whenever they weren’t at their desks.
But banks’ attempts to return to the office have been a series of false starts. In September, both JPMorgan and Goldman were aiming for up to 50% of front line staff back in their UK headquarters, but a second wave of the Covid-19 virus in the winter and renewed national lockdowns have forced all but essential staff back home.
For the small number still trudging into the office, life has changed. Bank of America is offering the 10% or so of its UK employees coming into the office weekly Covid-19 tests, while Credit Suisse offers tests twice a week. JPMorgan, Goldman and Deutsche all have tests available to employees who need them, according to people familiar with the matter. Senior bankers coming into the office told FN it allows them to escape the chaos of home life, but there are few other benefits as their teams remain homebound.
Under the government’s new roadmap to lift Covid restrictions, unveiled on 22 February, mass remote working will be in place until at least June. But City firms will remain cautious about a return.
A big bang office return is unlikely
“A big bang office return is unlikely, and as last summer showed rushing people back to the office when they are not ready can come back to bite,” said Simon Clarke, an expert in cellular microbiology at the University of Reading.
“The aim has to be that we unlock sensibly so that when we gradually open up our offices, they stay open permanently,” added JPMorgan’s Raghavan.
Executives are divided on the longer lasting impacts of Covid-19. Barclays’ Staley said on 18 February that working from home was “getting old” and that most of its London staff would return this year, while Goldman boss David Solomon said WFH was an “aberration” and it would return to normal as soon as possible. HSBC chief executive Noel Quinn, however, said that there would be a “very different style of work post Covid” and that the bank was making permanent changes.
HSBC is cutting 40% of its office space, and considering consolidating its London offices into its Canary Wharf headquarters. Deutsche Bank is also upping its plans to cut real estate by at least 25% as the pandemic has reshaped the way its staff work, and Lloyds Banking group is reducing office space by 20%.
The nature of the office will also change, with power shifting to employees. Simon Cunliffe, founder of tenant advisory firm TA Real Estate told FN previously that offices will become “culture centres”, set up to maximise interaction through creating a “city within a building” with gyms, cafes and sometimes even bars.
Goldman’s brand new £1bn Plumtree Court HQ already boasts an in-house nursery, huge conference centre and artisan coffee shops on every floor. Citigroup, which bought its 45-floor Canary Wharf building in 2019 for £1bn, is redesigning its office, with Drury saying the emphasis will be on more collaborative spaces and more of a “campus” feel.
Meanwhile, Standard Chartered has offered up to 80,000 employees the option of working flexibly permanently, while SocGen has said that its UK staff could spend up to 90% of their time away from the office. Deutsche Bank expects 80% of UK employees to be able work from home for up to two days a week.
But overhauling the workforce in the wake of the pandemic is fraught with complications. Of the finance professionals polled by FN, 63% said they wanted flexible working to remain in place after the pandemic, with most hoping for at least two days a week at home.
However, some respondents feared a “token gesture” for flexible working arrangements when the pandemic goes into reverse, which would create an uneven playing field.
Some City workers flagged that those who choose to spend more time out of the office than others after the pandemic could be overlooked for promotions, bonuses and pay rises as they miss out on subtle office-based relationships.
Bank executives are considering asking teams to be in the office on the same days to avoid this and increase interaction, according to people familiar with the matter. Meanwhile, juniors have missed months of vital training and on-the-job mentoring, and banks are keen to bring them back to the office as soon as possible.
Raghavan said that “some degree of flexibility” is here to stay, but it needs to be done in a “structured way”.
“It needs to make sense for both the team and the business that you work in, and companies need to be careful that they don’t accidentally introduce new inequalities from how they roll it out,” he said.
The top 12 investment banks brought in $194bn last year, according to data provider Coalition, a 29% surge on 2019 and the best 12 months for a decade. Dealmakers handled record volumes while barely stepping foot on a plane, which has saved them millions and bolstered environmental credentials as more large banks target carbon neutrality in their operations.
HSBC saved $600m on travel and related expenses last year, while Deutsche CEO Christian Sewing heralded new cost-cutting measures brought about by the Covid crisis that were here to stay.
“In the past 12 months we’ve kept our revenues, but drastically reduced the costs of operating,” said Guy Hayward-Cole, head of Emea advisory at Nomura. “So the profitability of M&A teams across the City should be well up compared to pre-Covid.”
Bankers are reluctant to give up the jet-setting lifestyle entirely though. Gatherings for due diligence on a deal, investor roadshows and internal bank management meetings that consume huge amounts of time and money will be shifted online, say senior bankers. Pitching for new business and managing relationships will still mean hopping on a plane.
“But for less transactional businesses, where strategic advisory discussion is required, we will look to travel in the post-Covid world. There needs to be a balance,” said Drury.
“We’ve managed to adapt throughout the crisis thanks to the capital of relationships formed over the past 10 or 20 years,” added Lattuada. “Over time, with no new interactions, this could disappear, so we need to maintain some quality face to face interactions, both in the office with our staff and with our clients.”
To contact the author of this story with feedback or news, email Paul Clarke