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New analysis suggests that the most highly prized property asset of the last 10 years could also be the most vulnerable to climate change: warehouses.
As floods devastate Pakistan, and drought grips most of England and Wales, research by specialist consultant GHD suggested droughts, floods and storms could mean a total loss to UK GDP of £130B over the next 28 years.
That translates into an average of £4.7B a year of lost productivity, representing about 0.1% of annual GDP. However, for the distribution, warehousing and industrial sector the loss is likely to be closer to 0.5% of GDP each year.
For context, that is about one-quarter the impact of the pandemic, or one-eighth that of Brexit.
The GHD study, Aquanomics: The economics of water risk and future resilience, predicted that in the UK, the manufacturing and distribution sector will be the most heavily affected by increasing water risk — facing total accumulated output losses of £76B by 2050 due to impacts such as restricted production processes, damaged assets and disrupted distribution.
Damage to logistics and manufacturing is many times greater than that predicted for other vulnerable sectors. The finance sector will see a 0.1% output loss, barely a fifth of that to be endured by factories and warehouses. Retail also loses 0.1%, while energy and utilities drop 0.5%. The agricultural sector sees GDP growth.
“The UK population is forecast to reach 75 million by 2050, which will only increase pressure on areas experiencing water stress,” GHD UK Water Market Leader John Hensman said.
“Circular economy approaches are now in the spotlight to help, but it is abundantly clear that the urgency to adapt and transform in the face of immediate and future challenges has intensified to a new level.”
The study is the first to calculate the impact of water risk on GDP across the UK economy as a whole and at a sector level. The research combines insurance data with econometric modelling to demonstrate the wider economic impact of increased future water risk.
The study found that with a temperate climate, high resilience and widespread insurance protection, the UK faces relatively low levels of water risk to GDP, with projected annual losses of 0.1%, the lowest economic impact relative to other nations in the study.
Between 2022 and 2050 the loss in the U.S. is likely to amount to 0.5% average annual GDP.
However, pockets of the UK are disproportionately affected, with water shortages in the south east and often sporadic, major flooding threatening communities across the UK.
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