The economic costs of UK heatwaves and their impact on businesses and growth

Britain is grappling with the repercussions of its third heatwave within a month. Following a wet winter, this summer’s scorching temperatures are taking a significant toll on sectors across the economy. For Rob Davies, a third-generation farmer in Herefordshire, grass and maize yields have halved, reducing output and slashing profits. “Grass is a very important crop for us, and our grass yields currently are down by about 50 per cent,” he says. Lower yields also mean contractors face less work, further straining local economies.

Retailers are also feeling the heat. Visits to shops fell by 1.8 per cent last month with Helen Dickinson, chief executive of the British Retail Consortium, attributing the drop to “extreme weather [that] meant shoppers stayed away from their local stores.” This comes as England recorded its warmest June since records began. High temperatures are creating new challenges for growth in Britain’s already fragile economy. Houses and transport systems in the UK are ill-equipped to handle Mediterranean-like heat, making it harder for workers to remain productive. Many struggle to sleep at night, while commuting becomes a challenge as trains are delayed or cancelled and roads buckle in the heat.

The Office for National Statistics estimates that hot weather has cost the British economy an average of £1.2 billion annually between 1998 and 2021. James Porter, a senior lecturer at King’s College London, warns that losses from heatwaves are rising as temperatures increase. Outdoor workers face risky conditions under the blazing sun, leading to longer breaks and delayed projects. Heat damage to infrastructure such as roads and railway lines further exacerbates logistical issues and costs.

Beyond transport and construction, heatwaves are reshaping consumer behaviour. When UK temperatures hit 40 degrees for the first time in 2022, footfall in shops dropped by 25 per cent within a month. Retailers like Greggs and Doc Martens have faced profit warnings linked to reduced demand during unseasonably warm weather. Greggs shares plunged 15 per cent when lower demand led to disappointing sales. While larger firms might endure such setbacks, independent businesses face greater difficulties. For example, Practical Plants—a Norfolk-Suffolk border nursery—has seen turnover drop by 30 per cent and 10 per cent of its stock destroyed by heat. The owner, Phil Rusted, says, “We’ve had to lay off staff just to survive.”

Small business owners like Charlotte Giddings, who runs online bakery Brownie and the Bean, are facing similar challenges. “When it’s this hot as it is today, the last thing that people are thinking about is chocolate and cake,” she explains. Giddings estimates a 30 per cent hit to her turnover and is cutting staff hours in response. The Met Office predicts that 40-degree temperatures could become the norm within the next decade, complicating recovery efforts for businesses reliant on traditional seasonal cycles.

Economists have suggested that frequent heatwaves will not only hinder growth but also stoke inflation, particularly through food prices. In the summer of 2022, food inflation rose by as much as 0.9 percentage points across Europe as a direct result of intense heat. The European Central Bank has warned of long-term consequences for economic stability if extreme weather events persist. Back in Herefordshire, farmer Rob Davies reflects on the unpredictable climate, saying, “When it starts to rain, it seems to forget how to stop, and when it stops raining, it seems to forget how to start.”

The economic and social costs of adapting to a hotter UK will require urgent attention as businesses, consumers, and policymakers confront the realities of climate change.