Whilst remote working only accounted for around 8% of total hours worked in 2019, this increased sharply during the pandemic, reaching 43% in 2021 Q1. Moreover, firms expected remote working to persist into 2022 and beyond, with around 20% of hours expected to be worked from home. 1  5  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  5  has been a negative impact on productivity resulting from measures taken to contain Covid. Firms in the DMP estimated that Covid has increased average unit costs by around 7% in the second and third quarters of last year. They expected this impact to reduce to 5% by the second quarter of this year, with a more persistent negative impact of 2%. All of this reflects new costs – for PPE, screens etc., and the impact on costs from social distancing reducing capacity. However, this negative effect from higher unit costs was offset for DMP members by what is often called a batting average effect – namely that the impact of Covid has shifted the composition of activity towards higher productivity firms. But this means that Covid has seen lower total output and higher average labour productivity. This is consistent with the greater than normal supply side impact of the Covid shock. But this is not creative destruction in a Schumpeterian sense; in other words that raises output through competition and innovation. Rather, this is a form of destruction that lowers total output and welfare.
Thank you  9  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  9  Annex Chart 1: Level of GDP and potential output(a) Index 1997Q1 = 100 160 150 140 130 120 110  Potential output GDP  100 1997  2000  2003  2006  2009  2012  2015  2018  (a) Potential output is defined as the level of GDP achievable if all factors of production were utilised at their long-run equilibrium levels. Its projection is a matter of judgement for the Monetary Policy Committee, consistent with the Committee’s forecast for the output gap. The historic path therefore reflects, in part, a sequence of judgements by current and past MPCs rather than the output of any one model. Source: Office for National Statistics and Bank calculations Chart 2: Impact of Covid-19 pandemic on labour productivity as estimated from Decision Maker Panel (b) Percentage impact of Covid-19 on labour productivity per hour 12 10 Between-firm Within-firm  8 DMP Labour Productivity (private sector)  6 4 2 0 Feb MPR Labour Productivity -2 (whole economy)  DMP TFP (private sector)  -4 -6  2020 Q1  2020 Q2  2020 Q3  2020 Q4  2021 Q1  2021 Q2  2022+  (b) See Bloom et al (2020) for details. The impact of Covid-19 in the February 2021 MPR forecast is estimated as the difference between the February 2020 and February 2021 forecasts.