From
https://www.telegraph.co.uk/business/2021/02/05/london-no-longer-calling-population-shock-takes-hold/

Even when the last Covid restrictions are lifted from London, there may be
a little less bustle on its streets and elbow-jostling at its drinking
dens.

One startling estimate that has caught the eye of economists warned the
capital’s population may have plunged by 700,000 during the pandemic. That
would equate to an 8pc drop and be the first slump in London’s population
in more than 30 years.

The capital has been the victim of decades-long migration trends suddenly
reversing. But will that spell trouble for its economy?

London’s population has been hit by a double whammy of both native and
foreign-born workers moving out as office work has shifted online and
industries have been temporarily shuttered.

The home working revolution has tempted office workers out of London with
many seeking cheaper rents.

Meanwhile, some foreign-born workers that are vital for industries shut
down by the pandemic, such as hospitality and tourism, are believed to have
moved back to their countries of birth. There are signs that populations in
Eastern European countries, such as Romania and Bulgaria, have risen
markedly during the crisis as their brain drains reverse.

…

Paradigm shift

A prolonged decline would not be unprecedented for the city. The last major
population drop suffered by London was in the decades after the Second
World War, driven by old industries falling away and government policy. Its
population slid by a fifth, sinking almost 2 million by the end of the
1980s before the city enjoyed a renaissance led by booming financial
services.

O’Connor says the difference this time is the immediacy of the population
shock: “You don't often get a shock, which is sudden and causes some sort
of paradigm shift in business and employee behaviour.”

Economists are still unsure how many workers will flood back to London once
the pandemic has been brought under control. Demand for labour will rise
sharply if the economy comes roaring back this year as expected.

“My assumption would be that I would expect to see quite a strong bounce
back,” says Paul Swinney, director of policy at Centre for Cities.

He expects that London’s amenities will soon be “a big pull for people the
way it was pre-Covid as well” after the pandemic dampened the benefits of
living in a large city, such as nightlife, shopping and a shorter commute.

Many of the capital’s foreign-born workers have retained the right to work
in the UK, even if they temporarily moved away.

Any shortfalls in the workforce may be easily filled initially,
particularly given London has the highest unemployment rate in the UK at
7pc. But the new points-based immigration system makes it more difficult
for low-paid and low-skilled workers new to the UK entering the jobs market
after Brexit.

However, Douglas McWilliams, deputy chairman of the Centre for Economics
and Business Research, says it is unlikely that any low-skilled worker
shortages will hold back the capital’s post-pandemic recovery.

“Normally you can substitute low-skilled labour in some way… It will get
sorted in one way or the other, or just simply get sorted by high
productivity.”

Longer-term remote working trends could prove a bigger threat to the
capital than short-term shifts among foreign workers. Many companies with
expensive office space in the capital have been surprised by the ease of
the remote working shift.

"It's not quite clear whether people are going to be working as much in
London,” says McWilliams. “If they're not working as much in London,
there'll be a knock-on effect on the supply of the restaurants, the bars,
the clubs and they will lose a degree of critical mass.”

A sustained decline would dent demand for services in the city but could
also ease pressure on transport and housing.

“The real long-term shift is fewer people will be looking to work in
London, there'll be less demand for their services so one would expect
fewer to come back in the future,” says O’Connor.

That could lead to “some sort of downward spiral” as fewer office workers
feed through to lower demand for the sandwich shops and pubs, he warns.
Swinney adds property prices could "at least moderate if not fall, if you
see population declines” but better affordability could in turn persuade
more to move to the capital.

Even once the pandemic has ended for the capital, London's population bust
may be one of the longest lasting legacies from the crisis.