An Overheating Economy -

England has just recorded its driest July since records began in 1836, part of a summer on track to be the hottest in British history, with droughts declared across two-thirds of England and the whole of Wales. Research from the think tank Verdant puts the direct economic toll so far at £4.4 billion in lost output, a figure that could reach £25.6 billion by 2030 if heatwaves keep intensifying at their current pace.

That number tends to dominate the headlines, but it misses what actually matters. A hot summer is temporary. What this one has done is put pressure on three systems that were already fragile, each failing in its own way. Farmers have discovered how little protection exists when a harvest goes wrong. Water companies and government have been reminded, for the third time in five years, that Britain has not built enough capacity to store water for dry years. And workers have found out there is no legal limit on how hot a workplace can get. None of these gaps are new. The heat has simply made them impossible to ignore.

The uninsured harvest

British farming has had an unusually early and unusually painful summer. Slightly over half of the UK wheat crop had already been brought in by the end of July, along with 95% of the winter barley harvest, both well ahead of schedule because the dry conditions left farmers with little choice but to harvest early rather than risk further losses. The Energy and Climate Intelligence Unit, a climate-focused think tank, estimates that the drought could wipe as much as £390 million off the usual turnover of arable farmers this year, cutting total yield by roughly 2.5 million tonnes. Vegetable growers who rely on irrigation have struggled too, and potatoes have been particularly exposed, since they need moist soil at the point of harvest to avoid bruising and other damage that makes them unsellable.

What makes this more than a bad year for farmers is what happens next if a season like this one repeats. The UK has no comprehensive national crop insurance scheme, unlike many of its European neighbours. Roughly 80% of the financial risk from events like this drought is currently uninsured, which means it falls directly on the people growing the food rather than being spread across an insurance market or absorbed by government support. A single poor harvest is survivable for most farms. Three droughts in five years, which is the pattern Britain is now looking at, is a different proposition entirely, and it starts to look less like bad luck and more like a business model that no longer works reliably.

The government’s response so far has been to loosen some of the rules around environmental subsidy schemes, allowing farmers to use protected grassland as animal feed without losing their payments, and to put £65 million towards helping farms build their own reservoirs and access water more easily during shortages. It is a genuinely useful step, and it comes directly from the existing budget of the Department for Environment, Food and Rural Affairs rather than new money. Whether it goes far enough is a fair question. The National Farmers’ Union has been pushing for a more structural response, essentially a proper mechanism for sharing this kind of climate risk rather than leaving individual farms to absorb it alone. There is a reasonable counter-argument too, one that has been made more explicitly in France, where the agriculture ministry has resisted treating drought as an emergency deserving of crisis funding and instead favours subsidised insurance and long-term climate adaptation spending. Both positions accept that the current setup is not working. They disagree on whether the fix is a safety net or a change in how farms are built to cope with dry years from the outset.

For readers who are not farmers, this still matters at the till. When yields fall and costs rise on the farm, that pressure moves down the supply chain, and it tends to arrive in supermarkets months after the harvest itself rather than immediately. Food and drink manufacturers have already absorbed a 39% rise in input costs since 2020, and industry figures have said plainly that they expect the effects of this year’s reduced crops to show up in retail prices into next year rather than right away. A dry July in a field in Cambridgeshire is, in a fairly direct way, a preview of next spring’s shopping bill.

The water system

The second gap this summer has exposed sits with water itself, and it is arguably the more fundamental of the two. England is now in its third drought in five years, and this is the second consecutive year in which one has been formally declared. Reservoir levels currently stand at 69%, which is 11.6% below what would be normal for this point in the year, and they are still falling. That is the context behind the water restrictions now affecting more than 27 million people across the country.

The temptation is to treat this as simply a story about rainfall, but that framing misses the more uncomfortable point being made by the National Farmers’ Union and others close to the issue. Britain gets plenty of rain across a typical year. The problem is that too little of it is being captured and held in reserve for the periods when it does not fall, which means the country ends up exposed every time a dry spell runs longer than a few weeks. This is not really a weather problem so much as an infrastructure one, and infrastructure problems do not fix themselves between one drought and the next.

Solving it properly means building and expanding reservoirs, improving how water companies manage leakage, and investing in storage at a scale well beyond a single farm’s own reservoir. That is expensive, and it takes years rather than months to deliver, which raises the obvious question of who pays for it. Higher water bills are one route, general taxation is another, and requiring water companies to fund it from their own capital investment is a third, each with a different set of winners and losers and a different timeline before anyone sees the benefit. None of those options are especially popular, which is presumably part of why successive governments have found it easier to respond to each individual drought as it happens rather than fund the underlying fix. The risk in continuing that approach is fairly obvious. If droughts keep arriving roughly once every eighteen months, treating each one as a one-off emergency starts to look like a permanent policy rather than a temporary response.

The workplace

The third gap is the one most directly felt by ordinary workers, and it concerns something that might surprise people who assume it was already covered by law. There is currently no maximum legal temperature for a UK workplace. Researchers from the London School of Economics surveyed close to 2,000 UK adults about the June heatwave, when temperatures in London reached 36 degrees, and found that the average worker lost nearly half an hour of working time that week because of the heat. Just over 3.6% of those surveyed did not work at all that week, which across the country adds up to around 24 million lost working hours and an estimated £1.15 billion in cost.

The Trades Union Congress has been pushing for years for a clear legal threshold, one that would require employers to take action once workplace temperatures pass 24 degrees and stop work entirely at 30 degrees, or 27 degrees for jobs involving heavy physical effort. A Green Party MP has now said she plans to introduce legislation along similar lines, arguing that the scientific link between climate change and the severity of heatwaves like this one strengthens the case for a legal standard rather than leaving it to individual employers’ discretion.

The case against a hard threshold is not simply employers being difficult about it, and it is worth taking seriously. Fixed temperature rules are far easier to apply in an office with air conditioning than on a building site, a warehouse floor, or a small shop with no cooling system and no realistic option to send staff home without losing a day’s revenue. Smaller businesses in particular have limited room to absorb either the cost of retrofitting cooling systems or the lost output from stopping work altogether during a heatwave. What is missing from the debate at the moment is any real middle ground, some kind of graduated response that protects workers without simply imposing a single national cut-off that suits large employers far more easily than small ones.

Where this leaves Britain

None of the three gaps covered here were created by this summer. Farming has been underinsured against weather risk for years, reservoir capacity has been falling behind demand for longer still, and workplace heat protection has simply never existed in UK law. What this year did was apply enough pressure, all at once, to make each weakness impossible to argue around. The government’s response so far has largely taken the form of smaller, faster fixes, subsidy flexibility for farmers and one-off funding for reservoirs, with no legislation yet on workplace temperature. Whether that matches the scale of the problem is something readers can judge for themselves.

With the autumn Budget approaching and climate-driven weather events becoming a near annual feature rather than a rare shock, it is worth asking which of these three gaps the government is most exposed on. Is it farming and food security, water infrastructure, or protection for workers? Where would you put the pressure first?

💼 Unpacked

Crop insurance gap — The difference between the financial losses farmers actually face from events like drought and the amount of that risk currently covered by any form of insurance. In the UK, most of this gap is uninsured and sits directly with the farmer.

Reservoir capacity — The total amount of water a reservoir can hold in reserve for use during dry periods. When capacity has not kept pace with population growth or more frequent droughts, water restrictions become more likely even in a country that receives substantial rainfall overall.

Heat-health productivity threshold — The temperature point above which people become measurably slower or less able to work safely. Research on European economies suggests output per hour drops by around 3% for each additional degree once temperatures pass roughly 30 degrees.

Statutory maximum workplace temperature — A legally binding upper limit on how hot an indoor or outdoor workplace can be before employers are required to act, ranging from providing cooling and rest breaks through to stopping work entirely. No such limit currently exists in UK law.

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LinkedIn: Vinay Meisuria