Business and industry

Recent empirical evidence highlights the growing impact that climate risks have on business and industry in the UK. Flooding and extreme weather events which damage assets and disrupt business operations pose the greatest risk now and in the future.

The level of disruption to business operations will depend, in part, on the resilience of local infrastructure including energy, transportation and telecoms. The knock-on impacts of severe weather include disruptions to supply chains and distribution channels, and impacts on staff, leading to lost business and reputational damage. These can be as damaging particularly for small businesses as the direct impacts of severe weather.

  • Currently, the risk to businesses from flooding is high in many parts of the UK. Local levels of risk will vary in terms of exposure and as a result of existing protection measures at a community or site level. Whilst managing flood risks will be possible and affordable in some areas in others risks are expected to rise. Businesses therefore need to understand their exposure and not assume that authorities will manage risks on their behalf.
  • Severe flooding and coastal erosion can lead to loss of coastal business locations and the infrastructure they rely on. This may affect sectors dependent on the cultural value of these locations, such as tourism, and those reliant on vulnerable infrastructure for example to provide access, power and communications.
  • With the exception of only the northernmost catchments of Scotland and some central and western central catchments in England, projections suggest larger routine deficits in the availability of water for abstraction, constituting a risk especially to water-intense industries.
  • Through their international supply chains, distribution networks and global markets, UK businesses are exposed to the risks of extreme weather around the world. Climate change is expected to increase the risk of weather-related disruptions, particularly for supply chains and distribution networks that involve more vulnerable countries, such as in south and south-east Asia, and in sub-Saharan Africa.

Climate change will provide both risks and opportunities to business through changes in demand for existing and new products and services.

Government has a role in enabling, facilitating and supporting private sector adaptation through policies, regulation, and measures such as information sharing and raising awareness.

 

Business and industry - Infographic 1

 


Lead contributor: Swenja Surminski (London School of Economics)

Contributing authors: Alastair Baglee (Acclimatise), Catherine Cameron (Agulhas: Applied Knowledge and University of Essex), Richenda Connell (Acclimatise), Kat Deyes (Frontier Economics), Anna Haworth (Acclimatise), Bingunath Ingirige (University of Huddersfield), Robert Muir-Wood (Risk Management Solutions), David Proverbs (Birmingham City University) and Paul Watkiss (Paul Watkiss Associates)

Additional contributors: Lyn Sze Goh (Government Economic Service summer intern at the Adaptation Sub-Committee Secretariat)

ASC contributors: David Style, Manuela DiMauro and Alex Townsend

This chapter at a glance

Risks and opportunities

More action needed (research priority in Northern Ireland, Scotland & Wales)

More effort is needed in England to address flood risks and inform businesses of their current and future exposure and what steps they might take to limit impacts.

More research needed elsewhere in the UK to understand uptake of flood protection measures by businesses and how spending plans on defences and other measures may or may not protect individual businesses.

Research priority

More research needed on costs and benefits of adaptation options for different coastal areas.

Sustain current action

Sustain current actions to create more flexible abstraction regimes and promote water efficiency among businesses.

Watching brief

Monitor and research action by regulators, banks and insurance firms, and information disclosures by UK companies.

Research priority

More research needed on disruption to ICT, power and transport infrastructure which prevents workers accessing premises or working remotely, and on impacts of higher temperatures on employee safety and productivity.

Sustain current action

Sustain and monitor the uptake of existing guidance which helps businesses improve the resilience of supply chains and distribution networks, particularly at the international level.

Watching brief

Monitor sales of adaptation goods and services within the UK, and by UK companies.