Aquanomics: New research from GHD reveals nearly $153 billion water risk to UK GDP over next 28 years

Droughts, floods, and storms could result in a total loss of $153 billion to GDP in the United Kingdom between 2022 and 2050, an average annual GDP loss of 0.1%, according to new research, launched by global professional services company GHD.

The GHD study, Aquanomics: The economics of water risk and future resilience, projects the future economic impact of water risk in a diverse range of climates: the UK, Australia, Canada, China, the Philippines, the UAE, and the US. While the economic shock of water risk will accelerate throughout the century, it is a pressing concern this decade; between now and 2030, water risk could cost these key economies an estimated GDP loss of $1.3 trillion, rising to $5.6 trillion by 2050.

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 also highlights how increasingly frequent and severe water-related events not only pose a grave threat to global economies, but to the communities and natural ecosystems that rely on a balanced water cycle for survival.

Aquanomics reveals that water risk will not be spread evenly across countries. In terms of total water related GDP losses between 2022 and 2050, it is estimated that the US will be hit hardest, with projected losses of $3.7 trillion. The study has 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.

However, as identified recently with the prominence of water risk in UK news, pockets of the country are disproportionately affected, with water shortages in the South East and, often sporadic, major flooding threatening communities across the UK.

The study also presents the potential future impact on five critical economic sectors: agriculture; banking, banking, and insurance; energy and utilities; fast-moving consumer goods (FMCG) and retail; and manufacturing, and distributions. The Aquanomics model predicts that in the UK, the manufacturing and distribution sector will be the most heavily affected by increasing water risk – facing total output losses of $89billion by 2050 due to impacts such as restricted production processes, damaged assets, and disrupted distribution. Despite the industry being heavily water dependent, the agriculture sector in the UK is estimated to be the least affected of those studies, with an annual output gain of +0.5%.

Regarding the study, John Hensman, UK Water Market Leader at GHD, said: “The UK population is forecast to reach 75 million by 2050, which will only increase pressure on areas experiencing water stress. Building resilience and adaptability into our systems that collect, treat, store, and distribute water must be addressed now.

“Effective infrastructure is critical for sustained economic growth and adequate well-being, but current investment levels are insufficient to repair our ageing water systems, accommodate current and future urban growth, meet stricter environmental regulations, or adequately adapt to climate change.

“Strategic water planning that ensures affordability, resilience and sustainability for the public, industry and the natural environment is urgently needed, but the scale and complexity present a real challenge for government, regulators, water companies and water intensive sectors such as energy, agriculture, and manufacturing. It is critical that these industries come together to collaborate with other water stakeholders to enable a sustainable, vibrant and resilient environment in the UK that can respond to the major impacts that climate change is having.

“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.”

Read more about the Aquanomics research here

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