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Franchising news this morning


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3 hours ago, 96701 said:

No doubt that there will be enough money swilling around from taxpayers to enable the "management companies" to give the shareholders a dividend.

 

At the risk of becoming too political, why not? Publicly listed private companies are owned by shareholders, such as pension funds and insurance companies, who invest in order to get a return. No business is going to survive if it doesn't make money.

 

So the question is: can private companies offer anything that government owned ones cannot? I suspect that the answer in the case of a management contract micromanaged by DfT the answer may well be no. Whatever is put in place is likely to be a short term measure.

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The suggestion seems to be passenger numbers are 30% what they used to be.

Considering some London peaks were 200% over loaded thats a huge overall drop.

 

Many commuters renew travelcards over christmas to defer the Jan price rises, others renew first week of Jan.

How far & how permanent the drop can then be measured, if they dont come back in January, they are gone forever, and its too late to save the passenger network.

 

if the government wants to save the railways, its best option would be offering a substantial (c50%,not less than 40%) reduction on annual travelcards in December, take the one year hit on revenue... it needs to attract mindsets and turn heads back to travel.. 5-10-20% wont cut it...theyve already gone and thinking of different things. Christmas markets, theatres, shopping in London is already canceled theres nothing for commuters to think about until next year, the commuter is being pushed away from commuting, other cities are doubtless the same.


If people felt that a big, but short term saving was on offer during a limited period, they may go for it as the benefit out weighs the risk, over the long term. Then the railway has a year to rebuild confidence in those travellers. They may steadily increase travel next year because of that flexibility & saving, whilst not being out of pocket on their new expectations of a reduced 1-2 day per week “work from office”.
 

Without it, many commuters may shrug shoulders consolidate.

 

£2-5k annual ticket saving,

£1000 car park saving

£3000 pa. daily coffee, sandwich, after work drinks savings

 

They may put it towards a  home office renovation, new car, 2021 vacation, and they are gone without ever needing to return.

The future Mindset risk is people thinking “Do I really want to spend £20-50 on a trip to the office today, plus that £10 on meals and £5 on parking...or just work from home” becoming the daily / weekly norm, and the railway bleed, becomes terminal.

 

But thats nothing to what the city centre high streets, property values, city low skilled jobs market may be facing if people don't return.

 

You cant force people back, and as long as going to the city is on par with risking life in a war, they simply wont go, but people are easily bribed and convinced over time.

 

 

 

 

Edited by adb968008
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1 minute ago, adb968008 said:

 

But thats nothing to what the city centre high streets may be facing.

 

if the government wants to save the railways, its best option would be offering a substantial reduction on annual travelcards in December, take the one year hit on revenue.
If people felt that saving a big saving was on offer during that time limited period, they may go for it. Then the railway has a year to rebuild confidence in those travellers, who may steadily increase travel because of that flexibility & saving, whilst not being out of pocket on their expectations of a reduced 1-2 day per week “work from office”.
 

 

The question of commuting isn't about the current or prospective price of tickets.  It's a question of the future existence of cities as we know them, especially London, where you can't realistically get to work other than by public transport.  Most commuters resent the time and money spent getting to work.  However they do have to work for a living, so they put up with it.  Some people are able to change what they do to earn a crust, but most people over about 40 would have difficulty finding another job especially in a time of high unemployment.  They are stuck with whatever professions they have experience in, otherwise they face a massive loss in income.  Not everybody is able to work from home, and not all employers are going to accept it as the norm.

 

The Government has to decide whether it wants to keep our cities alive, and if so it will have to support all forms public transport financially.  The economics of running a railway with fewer passengers is an argument for increasing fares, not decreasing them.  But of course the increase needed would be a political non-starter as the cost of commuting would effectively price many jobs out of existence.  The Government isn't going to be able to afford dishing out fare reductions on top of the extra cost it will have to pick up to keep buses and trains running.  There is also the "green politics" angle to consider - if they want to reduce global emissions they need to engineer a reduction in car commuting.  I would be astounded if the next round of fare reviews is anything significantly different from the usual increase justified as being an inflation adjustment  With the best will in the world it will take decades to change the way we all live, where we work and how we get there in an environmentally friendly way.

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14 minutes ago, Michael Hodgson said:

 

The question of commuting isn't about the current or prospective price of tickets.  It's a question of the future existence of cities as we know them, especially London, where you can't realistically get to work other than by public transport.  Most commuters resent the time and money spent getting to work.  However they do have to work for a living, so they put up with it.  Some people are able to change what they do to earn a crust, but most people over about 40 would have difficulty finding another job especially in a time of high unemployment.  They are stuck with whatever professions they have experience in, otherwise they face a massive loss in income.  Not everybody is able to work from home, and not all employers are going to accept it as the norm.

 

The Government has to decide whether it wants to keep our cities alive, and if so it will have to support all forms public transport financially.  The economics of running a railway with fewer passengers is an argument for increasing fares, not decreasing them.  But of course the increase needed would be a political non-starter as the cost of commuting would effectively price many jobs out of existence.  The Government isn't going to be able to afford dishing out fare reductions on top of the extra cost it will have to pick up to keep buses and trains running.  There is also the "green politics" angle to consider - if they want to reduce global emissions they need to engineer a reduction in car commuting.  I would be astounded if the next round of fare reviews is anything significantly different from the usual increase justified as being an inflation adjustment  With the best will in the world it will take decades to change the way we all live, where we work and how we get there in an environmentally friendly way.

Then in your scenario, the only option is for railway to cut cloth to what they can afford.

if there is no incentive to bring people back.. they wont.

Government figures in the link suggest growth has stalled at 30%... thats your..

Quote

Not everybody is able to work from home, and not all employers are going to accept it as the norm.

 

So which 70% of the network are you going to rip up, scrap and dispose of ?

Even if you recover to 50% pre-covid numbers, the disposal, redundancy costs need to be considered.. your at 70% cuts to make it viable...


if the railways of 2010-2030 recreates 1960-1980.. then 

Even with 1970’s style austerity following the 1960’s government investment & subsidy in railways.. your still missing the Beeching element.


Given what i’m hearing, right now you could consolidate demand for Victoria, Waterloo and Bridge into 1 terminal. Perhaps thats what maybe required and have more splitting / joining of units enroute to distant locations in the future... But the 2019 revenue earned was what kept many more northerly regional lines alive... Perhaps HS2 will see off the WCML,ECML and MML to little more than commuter/freight lines ?

 

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6 minutes ago, Michael Hodgson said:

One change that could be made to reflect working from home is to alter season tickets structure to ssuit those who need to go in say once a week to something more like a flexible book of tickets at a discount to the one-off day return alternative.

 

I missed which franchise was involved but BBC Breakfast featured a rep from one of them who said that they are introducing a ten journey multiticket to be used within four weeks.

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1 hour ago, Michael Hodgson said:

One change that could be made to reflect working from home is to alter season tickets structure to ssuit those who need to go in say once a week to something more like a flexible book of tickets at a discount to the one-off day return alternative.

But at what fare / revenue loss ?

 

lets take a simple London zone1 to 6.. (no other reason other than its easy, generic).

£19.10 daily

£66.00 weekly (£13.20 p/5d wk)

£253.00 monthly (£11.24 p/5d wk)

£2640 annually. ( £12.11 p/218 day a year)

 

So youve lost £2640.. its gone... how do you get it back..

 

So joe blow commutes 2 days a week, 45 weeks a year (5 weeks vacation + xmas/ easter).

 

£19.10 * 2 days * 45wks = £1719.

 

book of 10 tickets in 4 weeks.. lets assume thats somewhere around the weekly cost..

£13.20*10..= £132, assume 11 (over a year (44 wks) =  £1452 per year.

 

In these scenarios, the railways have lost between £921 (-34%) and £1188 (-45%) revenue per passenger not renewing a travelcard.

 

Your assumption is every annual card lost will assume to 2 days per week...
I think you will find many will actually revert to 2 days a month... or some even 2 days a quarter.... imho 2 days a week is an assumption at a level way too high..

 

1 day a week is probably a safer measure for those lost annual travel card passengers...

 

Thats £13.20 * 45 = £594.. (78%) revenue loss.

(according to reports, railways are 70% down).
 

A book of tickets is an incentive to existing passengers who have little choice but to travel, but its not going to convince those lost passengers into returning to travel...no one will rush out and buy one “just because”.  Its not going to generate new (recover lost) revenue.

 

railways lose, in any scenario, its how badly they want to lose.

railway travel has now become optional for many. 

 

Your losses fall in a range of £2046-£921 per passenger lost.

Hence if a travelcard was discounted, for 1 month only, for an annual renewal at 50%.. your loss is £1330 per passenger.. right at the lower end of the loss scale, enough to significantly turn heads to those at the extreme 1 day p/wk end, to consider it for the flexibility.

 

At the end of the day, railways will need money, lots of it. Trading a £2640 spend in January, for £13.20 a time isn't going to do it.

 

Sure it will upset those who renew mid-year who miss out, sure some will benefit who had no choice, but it brings certainty to revenue for the railways and sets up a positive potential for mid-late next year and puts flexibility into peoples minds (and as they’ve comitted, to actually use the ticket and thus return to grow confidence in travel).

 

now put numbers behind it... lets say 100 people.. Today its a 70% drop..

 

so as it stands, 30% renew at £2640 = £79,200

incentive at 50% discount.. av Joe needs 100 days a year to make a saving (8 days a month).

Lets say 80% renew at £1320 = £105,600

 

even if the discount was 40% and the volume was 60% renewal.. 

 

its still all relatively on the positive side of cost neutral..

 

but more actual money is in the bag.

more commitment is made by passengers.

its more upfront guaranteed money in the bag over a series of optional 10 ticket carnets.

 

But It crucially also ensures additional footfall & spend in the cities next year, as those who optionally chose to spend, will force themselves to try to use it, and in 2022 are closer to a 2019 mindset, rather than a 2020 one.

 

For sure, Ignoring the problem, and trying to recover the 78% loss with a 78% fare increase isnt going to work... travel is now optional for many, too many people now realise  they dont need the train... i’m not sure that penny has dropped yet in railway management.

 

 

 

 

 

 

 

 

 

 

 

Edited by adb968008
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There's little point in looking at current transport demand whilst we're still required to socially distance. The travel part might be safe, but office capacity is still so reduced by social distancing requirements that it's still impossible for most commuters to travel regularly, if at all.

 

I have no doubt that things will be different to how they were before once we're out the other side of this, but not everyone's situation will be the same.

 

Travel isn't only to and from work, either. Leisure travel is presumably heavily suppressed at present, and that's something that won't be done from home.

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The trains I see just north of Lancaster have less that 10% loadings. Yet surprisingly on the roads we don’t have a morning ‘rush hour’ which does suggest many are staying at home.

 

Plus many folk are expecting a second wave of the virus which is making them very wary of going out. 
 

I suspect we will see as a minimum peak period service reductions, quite likely off-peak cuts too. For example Manchester - Leeds reduced from 6 to 4 longer trains an hour. We could even end up with a reduced timetable that runs 7 days a week.

 

The assumptions behind franchise bids clearly no longer apply and are unlikely to do so for the remainder of the franchise term.  So the structure is going to have to change.

 

The good news should be more paths for freight and far better punctuality.  Not good for open access operators

though.

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Replacement of franchises with service contracts has to be a good thing, and has been an awful long time coming.

 

On the question of post-virus travel: increased WFH could well do to the traditional city centre business district what the internet has done for high-street shopping, which could indeed significantly flatten peak travel demand in/out of cities, London especially, but that might well a good thing in the long term for railways.

 

Capacity, in the form of infrastructure, trains and staffing, to meet steep peaks is a "poor payer" in any business unless it can be charged to the customer at full marginal cost (i.e. whoppingly high peak fares, as in the airline industry). Giving regular peak commuters on railways a discount for bulk purchase was always an economically questionable thing to do, but probably justified by "locking them in".

 

Flattening peaks should allow unit costs across the board to be slightly reduced, by better utilising assets.

 

And, by no means all travel is to/from office work, even at peak times, so even with that reduced, work travel will continue. Construction workers, health workers, shop workers all use trains, especially in and around London.

 

My guess would be that if/when we can travel together again without risk of giving one another a serious illness, leisure travel will surge as pent-up demand works its way through, and that non-routine-work-related travel will also bounce as people renew face-to-face contact and relationships, then settle to people travelling maybe 2:5 days, and not for traditional full office hours. 

 

The overall volume of travel always tracks the economy pretty closely, so as things settle-out how busy overall the railways are will depend upon how bad/good the economy is.

 

Ticketing for non-traditional commutes definitely needs to be sorted by use of something like the capped pay-as-you-go model used in London - the present national railway ticketing/charging regime is as mad as the franchising regime.

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Transport for Wales announced a carnet type system last year, though I don't know if it has started yet. But they were slow. The Cambrian Railways had such a system .You bought 100 miles worth of travel and used it when you wanted, lots of 1 mile tickets I think. Now with card systems such things are easy to implement. That is what has already happened in London. Even before the pandemic there were strong signs of numbers of people not commuting every day.

But in all this discussion please don't just think of office workers. There are an awful lot of other commuters, from shop workers to academics and students, health workers etc. Most of those will not have the option of only going into work occasionally.

Jonathan

 

Edited by corneliuslundie
change £1 to 1 mile
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Great Northern (I think, possibly TL) have had carnet tickets for a few years. Trouble is, they were badly implemented, you had to write the date of use on them, but they were a shiny card that pens didn’t work on.

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I can imagine leisure travel demand bouncing back more quickly than commuter traffic.  On the basis of the only train journey I've made since March, albeit not a short one - York-Kyle of Lochalsh a couple of weeks ago to visit my sister on Skye - ridership seemed quite good really.  Especially Edinburgh-Inverness, in the front coach of a short HST, after Perth passengers were walking through looking for empty seats and turning round and going back again, which to me indicated the train was pretty full, albeit that nobody sat next to me so social distancing was maintained.  Similarly on the way back, a 3-car 170 was pretty full as well.  The 6pm Inverness-Kyle seemed about as busy as usual; about a dozen got off at Kyle which is probably about normal for when I've used that train.  There seemed to be plenty of tourists around generally albeit British ones rather than from abroad, obviously due to the travel restrictions, staycations, etc.

 

I've said elsewhere, if the demand for commuter traffic really does remain suppressed I think the railways might do well to run the Saturday service on Mondays-Fridays.  On a lot of lines the timetable is regular interval throughout on Saturdays, so resources are used fairly efficiently, and services run early and late enough for shift workers, or people with flights to catch etc.  But the expensive resources (staff and rolling stock) that are provided for the extra trains in the M-F peaks wouldn't be needed.

 

Re. flexible season tickets, it does seem as if traditional season tickets are outdated.  Northern had carnet tickets on some routes about 15 years or so ago, including the Harrogate line.  Unfortunately they were sometimes subject to abuse, i.e. some passengers only filled the date in when they saw the guard (i.e me) coming through the train.  But in this day and age it should be possible to offer some kind of discounted stored journeys facility on a smart card similar to the Oyster card system, on lines where stations have barriers and the barrier card reader could 'knock off' a journey when the passenger passes through.  I haven't got the latest Modern Railways to hand at the moment (lent it to someone) but I think there was news in it of at least one TOC planning to introduce flexible season tickets.

 

 

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8 minutes ago, 31A said:

But in this day and age it should be possible to offer some kind of discounted stored journeys facility on a smart card similar to the Oyster card system, on lines where stations have barriers and the barrier card reader could 'knock off' a journey when the passenger passes through.  

I've got one for Oxford buses, which works on both the local "Oxford City" (actually Go Ahead I think) and Stagecoach services. I think it would also work on Thames Travel services, but I've no cause to use them. It's not perfect as both operators have different infrastructures and there's slightly irritating gaps in the functionality as a result, but that wouldn't apply to rail as there's only one infrastructure. Though the carnet system works on a flat fare for a journey basis, oyster shows that it needn't be so.

 

So the technology is out there and operating already, hopefully the powers that be won't decide that what we need is an all new and improved wheel when it comes to this kind of thing.

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3 hours ago, Nearholmer said:

Replacement of franchises with service contracts has to be a good thing, and has been an awful long time coming.

 

On the question of post-virus travel: increased WFH could well do to the traditional city centre business district what the internet has done for high-street shopping, which could indeed significantly flatten peak travel demand in/out of cities, London especially, but that might well a good thing in the long term for railways.

 

Capacity, in the form of infrastructure, trains and staffing, to meet steep peaks is a "poor payer" in any business unless it can be charged to the customer at full marginal cost (i.e. whoppingly high peak fares, as in the airline industry). Giving regular peak commuters on railways a discount for bulk purchase was always an economically questionable thing to do, but probably justified by "locking them in".

 

Flattening peaks should allow unit costs across the board to be slightly reduced, by better utilising assets.

 

And, by no means all travel is to/from office work, even at peak times, so even with that reduced, work travel will continue. Construction workers, health workers, shop workers all use trains, especially in and around London.

 

My guess would be that if/when we can travel together again without risk of giving one another a serious illness, leisure travel will surge as pent-up demand works its way through, and that non-routine-work-related travel will also bounce as people renew face-to-face contact and relationships, then settle to people travelling maybe 2:5 days, and not for traditional full office hours. 

 

The overall volume of travel always tracks the economy pretty closely, so as things settle-out how busy overall the railways are will depend upon how bad/good the economy is.

 

Ticketing for non-traditional commutes definitely needs to be sorted by use of something like the capped pay-as-you-go model used in London - the present national railway ticketing/charging regime is as mad as the franchising regime.

I agree the concession pattern is the way forward. What worries me, and many within the industry, is how it would be implemented. 

 

London Overground is a concession awarded to Arriva Rail London by TfL and it works very well to the benefit of both parties and the customer. However, TfL conduct their side of the contract sensibly, ensuring ARL meet the contractual requirements (with financial penalties if they fail to do so) but otherwise leaving them to, basically, run the business as they see fit.

 

Sadly, that approach would be less likely if the existing franchises were replaced by concessions directly managed by the DfT which has shown itself to be obsessed with interfering in and micro-managing the existing franchises let alone under the present EMA arrangements which in some ways are not dissimilar to the concession model. Basically, the power to make any decisions has been taken away from the TOC managements. The line has been described as: "We (the DfT) are in charge now, do as you are told and don't ask questions". Of course the public don't understand this which suits the DfT just fine. As in all branches of government the aim is to find a quango or private sector organisation to take the flack so civil servants or politicians don't have too.

 

Edited by Mike_Walker
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The working in offices in city centres business model is broken, a lot of companies in the financial, technology and service sectors (who occupy the majority of city centre office space) have now instituted structures and working practices which enable their work force to work effectively from home and any meetings are handled by Zoom and MS Teams.

 

Working from home is the new norm, and a lot of businesses will be terminating office leases and saving on accommodation costs including prohibitive business rates, I know this from first hand experience. This also has a further benefit as the work force is probably happier as they do not have to spend considerable time and money on commuting.

 

Commuting will never recover to anywhere near pre-Covid levels, and the cost of season tickets is not at the centre of the decision.

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28 minutes ago, Mike_Walker said:

London Overground is a concession awarded to Arriva Rail London by TfL and it works very well to the benefit of both parties and the customer. However, TfL conduct their side of the contract sensibly, ensuring ARL meet the contractual requirements (with financial penalties if they fail to do so) but otherwise leaving them to, basically, run the business as they see fit.

 

The key to being the client in any contract is to set clear and reasonable requirements at a sensible level of detail, be as sure as you can be that the supplier knows what they are signing-up to and is capable, then hold the supplier very tightly accountable to meet their obligations, while likewise religiously meeting your own, and to keep well out of the detail of their side of the bargain unless they fail to deliver.

 

TfL know how to be an effective client. I oversaw major engineering contracts while working for them for nearly three decades - we didn't always get it right, but by and large we did. You will notice, for instance, that TfL knows when to "pull the plug" on a contract that is going irredeemably wrong.

 

Like you, I get the jitters about whether DfT know how to do this stuff effectively.

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22 hours ago, 31A said:

I've said elsewhere, if the demand for commuter traffic really does remain suppressed I think the railways might do well to run the Saturday service on Mondays-Fridays.  On a lot of lines the timetable is regular interval throughout on Saturdays, so resources are used fairly efficiently, and services run early and late enough for shift workers, or people with flights to catch etc.  But the expensive resources (staff and rolling stock) that are provided for the extra trains in the M-F peaks wouldn't be needed.

 

 

I agree 100% Steve; And if there are still morning and evening peaks, with MU stock strengthening trains is not difficult. In fact I would like to see the same basic timetable run seven days a week; My local route, for example, has a half hourly service Mon-Fri (peaks excepted), Sat (at the same clockface times) and Sun (at completely different clockface times !). The only differences would be a later start to the service on Sundays, also perhaps Saturdays, and as above longer trains if required at busier times. 

 

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On 14/09/2020 at 14:25, 31A said:

 Northern had carnet tickets on some routes about 15 years or so ago, including the Harrogate line.  Unfortunately they were sometimes subject to abuse, i.e. some passengers only filled the date in when they saw the guard (i.e me) coming through the train.  But in this day and age it should be possible to offer some kind of discounted stored journeys facility on a smart card similar to the Oyster card system, on lines where stations have barriers and the barrier card reader could 'knock off' a journey when the passenger passes through.  I haven't got the latest Modern Railways to hand at the moment (lent it to someone) but I think there was news in it of at least one TOC planning to introduce flexible season tickets.

 

 

Smart Flexi Seasons are now available on the Harrogate - Leeds line ! There is a sort of electronic 'Kerching !' machine on each platform to tap in and out. 

Edited by Wheatley
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On 14/09/2020 at 10:16, steve45 said:

The working in offices in city centres business model is broken, a lot of companies in the financial, technology and service sectors (who occupy the majority of city centre office space) have now instituted structures and working practices which enable their work force to work effectively from home and any meetings are handled by Zoom and MS Teams.

 

Working from home is the new norm, and a lot of businesses will be terminating office leases and saving on accommodation costs including prohibitive business rates, I know this from first hand experience. This also has a further benefit as the work force is probably happier as they do not have to spend considerable time and money on commuting.

 

Commuting will never recover to anywhere near pre-Covid levels, and the cost of season tickets is not at the centre of the decision.

 

We don't know what things will look like post-Covid, and anyone reading various media predictions will quickly realize that 70% or more of them will be false - not the least of which because many of the predictions contradict each other.

 

Yes, we currently see that a lot of stuff can be done from home - at least for a while - and this possibility will likely create a new normal as to how expensive office space can get as the threat to not lease will shift the balance of power.

 

But really we won't know the final outcome for at least 2 years until we find some sort of solution to Covid.

 

Also, people may want to be careful about the secondary effects of a lot of this - for example, the mentioned avoidance of "prohibitive business rates" simply means that those taxes will be shifted onto the home owner / renter who won't get a raise (thus putting further pressure on the personal finances) and the business will pocket the additional profits.

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There is a big can of worms to be opened around WFH once (hopefully) things settle down a bit. How the cost of space*, light, heat, furnishings, IT equipment and services etc is borne is one, but there are other things to think about too, in terms of the employer's liability HS&W, things like display screen equipment, provision and use of work equipment etc.

 

At some point, somebody's home office chair will suffer a sudden and catastrophic failure, depositing them very firmly on top of their labrador, causing it serious injury. Who is liable for the cost of the vet's bill?

 

OK, a probably joke example (I hope for the sake of labradors everywhere), but if the employee fractured their wrist, causing permanent damage that limited their life in a significant way, what then?

 

The Law probably covers all this now, and there are probably firms operating to "best practice", but I'd wager that a great many firms and employees are simply sleepwalking, as is evidenced by photo doing the rounds showing PCs teetering on ironing boards, people using laptops to work from bed (how's that for long-term spinal damage?) etc.

 

And, there is a big issue that will surface about the mental wellbeing of people working isolated from their colleagues - it can cause serious mental helth issues for some people.

 

*Buying a house with an extra study/bedroom to permit dedicated use for WFH is an expensive business, and it can push on into a new council tax band for instance.

Edited by Nearholmer
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