Climate Change – Which UK businesses and sectors are most likely to be affected?

Julie Palmer

Regional Managing Partner

3 minutes to read

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Climate Change – Which UK businesses and sectors are most likely to be affected?

What are the threats of climate change and how could these affect businesses?

UK business as a whole will be affected by climate change in the future, but certain sectors could experience problems sooner than others. Extreme weather events, such as flooding and prolonged heat waves, are likely to disrupt supply chains and hamper imports and exports on a wide scale.

Flooding has already become a particular issue for businesses in parts of the UK, causing considerable disruption in day-to-day operations. As a result, some business premises may have become uninsurable against flooding. Flood insurance premiums could also become prohibitive on cost grounds for struggling businesses.

It’s important for business owners to be aware of the possible effects of climate change on various aspects of trading, and be able to adapt and mitigate some of the risks. The fact remains, however, that although some effects of global warning are well known, we don’t yet know all the risks involved with climate change.

For this reason, businesses could become exposed to a new regulatory environment where red tape becomes oppressive and compliance costly.

A defined target to ease the effects of climate change

In 2019, Theresa May’s government set a target in the UK to achieve a minimum reduction in greenhouse gas emissions of 100% (compared with emissions in 1990) by 2050 – an ambitious goal also known as a net zero target.

So what are some of the main threats and challenges businesses are facing as a result of climate change?

Climate change threats

Flooding

Flooding poses a serious risk for businesses in many parts of the UK. Although some local authorities are planning or have installed flood defences, business owners should also plan for flood-related disruption. This might include making contingency plans for alternative working arrangements/locations, for example, and taking out business interruption insurance.

Extreme temperatures

Extreme summer and winter temperatures, along with heavy rainfall, have a damaging effect on our transport infrastructure, causing congestion and disrupting the movement of goods. The damage can also impact staffing levels as employees struggle to attend work due to heavy snow, or flooding in their area.

Water restrictions

The Climate Change Committee’s 2017 risk assessment contained alarming information on the possibility of water scarcity in the future, stating that, “By the 2050s, the demand for water will exceed the available supply by more than 50% in many places around the UK.”¹ This could mean severe water restrictions for businesses and individual households.

So which UK businesses and sectors might be impacted sooner than others by climate change?

"Extreme weather events, such as flooding and prolonged heat waves, are likely to disrupt supply chains and hamper imports and exports on a wide scale."

Transport and logistics

Transport and logistics businesses are likely to be severely affected by climate change, given the effects of global warming on our transport infrastructure. Extreme weather events, and intense rainfall and summer heat, damages roads and bridges, disrupts supply chains, and could delay order fulfilment for companies reliant on the timely delivery of their products.

Agriculture

According to the European Environment Agency (EEA), “Agriculture accounted for 10% of the EU’s total greenhouse-gas emissions in 2012.”² Increased customer awareness of this issue in conjunction with a growing interest in plant-based diets, as well as social pressure to reduce meat consumption, could result in a fall in demand for UK meat and dairy producers.

Tourism and hospitality

Although the tourist industry may be positively affected by higher temperatures as the UK experiences longer and hotter summers, factors such as coastal erosion could see tourists unable to visit areas where the economy relies on them – visiting sites of national importance, for example, or historic buildings. This would also negatively affect hospitality businesses in these areas.

Energy

The energy industry is directly impacted by climate change, and a huge challenge exists for energy businesses trying to mitigate future risks from weather related events. Wind power, for example, is affected by the terrain conditions, which are susceptible to ongoing change as the climate also changes. Facilities that convert energy resources to provide consumer and business supplies can also be directly affected by weather-related issues.

Is there anything businesses can do to deal with the effects of climate change?

Climate change presents significant challenges to UK businesses, and contingency planning is essential for the sectors likely to be affected sooner than others. You may need to change your working practices, for example, make alterations to premises to prevent catastrophic disruption from extreme weather, or strengthen your supply chain.

The 2050 net zero target is a challenging one, but if UK businesses are aware of potential issues and ready to act on climate change, the impact on operations could be mitigated and disruption minimised.

If your business is affected by climate change, or you fear it may be in the future, Real Business Rescue can help. We’re a major part of Begbies Traynor Group, the UK’s leading business rescue and recovery specialist, and offer specialist advisory services.

Our partner-led team can guide you on how climate change might affect your business, and help you plan for the future. Please contact one of the team to arrange a free same-day consultation – we operate an extensive network of offices around the UK.