Download Climate Change Risk Assessment for the Business, Industry and

(Defra Project Code GA0204)
Climate Change Risk Assessment
for the Business, Industry and
Services Sector
January 2012
1
Baglee, A., 1Haworth, A. and 2Anastasi, S.
Contractors:
HR Wallingford
1
Acclimatise
2
AMEC Environment & Infrastructure UK Ltd
(formerly Entec UK Ltd)
The Met Office
Collingwood Environmental Planning
Alexander Ballard Ltd
Paul Watkiss Associates
Metroeconomica
Statement of use
See full statement of use on Page v
Keywords:
Climate, risks, business, tourism, financial services, industry
Research contractor:
HR Wallingford
Howbery Park, Wallingford, Oxon, OX10 8BA
Tel: +44 (0)1491 835381
(For contractor quality control purposes this report is also numbered EX 6433)
Defra project officer:
Dominic Rowland
Defra contact details:
Adapting to Climate Change Programme,
Department for Environment, Food and Rural Affairs (Defra)
Area 3A
Nobel House
17 Smith Square
London
SW1P 3JR
Tel: 020 7238 3000
www.defra.gov.uk/adaptation
Document History:
Date
07/10/10
11/11/10
Release
0.1
0.2
Prepared
Entec UK Ltd
Entec UK Ltd
22/11/10
1.0
HR Wallingford / Entec UK Ltd
24/11/10
1.1
01/02/11
2.0
HR Wallingford / Entec UK Ltd.
Acclimatise
HR Wallingford / Acclimatise
31/03/11
3.0
HR Wallingford / Acclimatise
13/05/11
3.0A
HR Wallingford
High-level concerns identified by
Government Departments added (to
be addressed in Release 4).
14/06/11
3.0A2
HR Wallingford
Minor amendments
12/08/11
4.0
Acclimatise / HR Wallingford
Major re-write: draft for external
publication
21/10/11
4A
Acclimatise / HR Wallingford
Updated draft in response to
comments
05/12/11
5
Acclimatise / HR Wallingford
Updated draft in response to
comments
13/01/12
6
Acclimatise / HR Wallingford
Updated with final edits.
ii
Notes
Review copy for project team only
Revised review copy for project
team only
Draft for review
Draft for peer review
Updated in response to peer review
and Government Department review
comments
Additional work added and updated
in response to further review
comments
Business, Industry and Services
© Crown copyright 2012
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Business, Industry and Services
iii
iv
Business, Industry and Services
Statement of use
This report presents the research completed as part of the UK Climate Change Risk
Assessment (CCRA) for a selected group of risks in the Business, Industry and
Services sector. Whilst some broader context is provided, it is not intended to be a
definitive or comprehensive analysis of the sector.
Before reading this report it is important to understand the process of evidence
gathering for the CCRA.
The CCRA methodology is novel in that it has compared over 100 risks (prioritised from
an initial list of over 700) from a number of disparate sectors based on the magnitude
of the consequences and confidence in the evidence base. A key strength of the
analysis is the use of a consistent method and set of climate projections to look at
current and future threats and opportunities.
The CCRA methodology has been developed through a number of stages involving
expert peer review. The approach developed is a tractable, repeatable methodology
that is not dependent on changes in long term plans between the 5 year cycles of the
CCRA.
The results, with the exception of population growth where this is relevant, do not
include societal change in assessing future risks, either from non-climate related
change, for example economic growth, or developments in new technologies; or
future responses to climate risks such as future Government policies or private
adaptation investment plans.
Excluding these factors from the analysis provides a more robust ‘baseline’ against
which the effects of different plans and policies can be more easily assessed.
However, when utilising the outputs of the CCRA, it is essential to consider that
Government and key organisations are already taking action in many areas to minimise
climate change risks and these interventions need to be considered when assessing
where further action may be best directed or needed.
Initially, eleven ‘sectors’ were chosen from which to gather evidence: Agriculture;
Biodiversity & Ecosystem Services; Built Environment; Business, Industry & Services;
Energy; Forestry; Floods & Coastal Erosion; Health; Marine & Fisheries; Transport; and
Water.
A review was undertaken to identify the range of climate risks within each sector. The
review was followed by a selection process that included sector workshops to identify
the most important risks (threats or opportunities) within the sector. Approximately
10% of the total number of risks across all sectors was selected for more detailed
consideration and analysis.
The risk assessment used UKCP09 climate projections to assess future changes to
sector risks. Impacts were normally analysed using single climate variables, for
example temperature.
A final Evidence Report draws together information from the 11 sectors (as well as
other evidence streams) to provide an overview of risk from climate change to the UK.
Neither this report nor the Evidence Report aims to provide an in depth, quantitative
analysis of risk within any particular ‘sector’. Where detailed analysis is presented
using large national or regional datasets, the objective is solely to build a consistent
picture of risk for the UK and allow for some comparison between disparate risks and
regional/national differences.
Business, Industry and Services
v
This is a UK risk assessment with some national and regional comparisons. The results
presented here should not be used by the reader for re-analysis or interpretation at a
local or site-specific scale.
In addition, as most impacts were analysed using single climate variables, the analysis
may be over-simplified in cases where the consequence of climate change is caused
by more than one climate variable (for example, higher summer temperatures
combined with reduced summer precipitation).
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Business, Industry and Services
Executive Summary
This report for the Business, Industry and Services sector of the UK Climate Change
Risk Assessment (CCRA) has used available evidence and expert opinion to consider
the effects of climate change for this sector. The aim of the CCRA is to help the UK and
devolved Governments identify priorities for action and implement necessary
adaptation measures. The CCRA focuses on 11 sectors deemed as fundamental to the
social, environmental and economic value in the UK, including the Business, Industry
and Services sector. This assessment utilised the following sub-sectors as illustrative
examples to highlight the range of climate-related issues and challenges the sector as
a whole faces: financial services; tourism; food and beverage manufacturing; primary
extractives (oil, gas and mining); and chemical manufacturing. Selection of these subsectors was effectively a sector based case study approach to illustrate the key
business issues and provide a wide variety of characteristics that can be used as
proxies for other sub-sectors.
Climate change is expected to be a key challenge for the Business, Industry and
Services sector, both today and in the future. Failure to consider climate risk and
adaptation into decision-making processes could have severe consequences for this
sector with further impacts felt across all other sectors. Climate change does not
necessarily create ‘new’ risks for the Business, Industry and Services sector. Climate
change typically represents a change to existing risk profiles – in other words they are
already issues facing business and industry on a daily basis. For example, stormrelated impacts to transport infrastructure, on which business heavily relies, have
already been experienced. Climate change simply represents a potential change in the
duration and/ or frequency of occurrence of these impacts, and their subsequent
effects on business operations.
Key messages
 Climate change represents a challenge for the Business, Industry and
Services sector, with both tangible and intangible asset value potentially
affected. However, for those businesses that take on this challenge, there
are potentially significant commercial and competitive advantages to be
gained.
 The Business, Industry and Services sector is vulnerable to climate change
due to the combination of the sector’s climate sensitivity and adaptive
capacity. Although the majority of the risks identified in this risk assessment
fall into the category of climate sensitivity, a number of risks to the sector
are the result of low adaptive capacity, and in particular, a low recognition
of the need to act on climate change. This crucially needs addressing in
order to minimise the potential risks and seize opportunities.
 The Business, Industry and Services sector does not operate in a void; this
report has highlighted the inter-connectivity between business and industry,
national infrastructure provision and the natural environment. Any
adaptation actions need to remain cognisant of these important interconnections, considering any possible feedbacks and knock-on
consequences.
 The Business, Industry and Services sector is influenced to a very large
degree by international issues including investments, supply of products
and materials and international markets. Many of these are influenced by
present-day climate and may be influenced by future climate change to
Business, Industry and Services
vii
some degree. These externalities (whether in the UK or overseas) are
vitally important for business continuity and growth and need to be fully
explored and mapped.
Vulnerability of the sector to climate change
The Business, Industry and Services sector is highly vulnerable to a changing climate,
both extreme (acute) events and incremental (chronic) climate change. The impacts
are likely to be felt across the spectrum of sub-sectors and from Small and Medium
Enterprises (SMEs) to large multi-national corporations. The degree to which individual
organisations are vulnerable to climate change depends on their level of sensitivity and
adaptive capacity (both these elements are discussed in more detail below). Across the
sector, current vulnerability to climate-related impacts can be divided into the following
common themes:
 Assets: Fixed and workforce (e.g. infrastructure damage, workforce
exposure to health and safety risks).
 Operations: Supply of services, customer demand and regulatory
environment (e.g. financial performance, markets shift due to change in
public attitudes and / or legislation).
 Procurement: Raw materials, supply chain and logistics (e.g. supply of
water, energy and materials, reliance on vulnerable transport networks).
 Environment: Natural and built, plus local community (e.g. climatesensitive resources and conflict over their use).
These impacts have the potential to create the following consequences for individual
businesses and collective sub-sectors within the Business, Industry and Services
sector:
 Financial performance (revenue loss / gain)
 Additional costs (capital expenditure (capex) and operational expenditure
(opex))
 Operational disruption
 Loss of staff work hours
 Corporate reputation
 Elevated stakeholder interest
 Additional regulatory requirements
 Contractual issues
 Litigation
 New market opportunities and product diversification.
Climate change risks and opportunities for the sector
The initial scoping of climate-related impacts to the Business, Industry and Services
sector (termed the ‘Tier 1 analysis’) identified more than 120 risks. These risks were
subsequently scored, based on the magnitude of consequence for economic,
environmental and social categories, together with the likelihood of the consequence
viii
Business, Industry and Services
occurring, and the highest scoring or ‘key’ risks were selected for more detailed
analysis (termed the ‘Tier 2 analysis’). This report presents the findings of the Tier 2
analysis. The key risks identified for the Business, Industry and Services sector were:
1. Reduced returns for UK financial institutions’ investments due to the
absence of mainstreaming climate risk and adaptation into decisionmaking processes (BU1).
2. An increase in monetary losses as a result of an increasing proportion of
UK tourist assets (natural and built) at risk from flooding (BU2).
3. A decrease in water (groundwater and surface water) availability for
industrial usage (BU3).
4. An increase in monetary losses as a result of interruption to business from
flooding (BU4).
5. A decrease in productivity and revenues due to ICT loss/ disruption (BU5)
6. Increased exposure for mortgage lenders (BU6).
7. An increase in insurance industry exposure due to flooding (BU7).
8. An expansion of new or existing tourist destinations in the UK (BU8).
9. A decrease in output for UK businesses due to an increase in supply chain
disruption as a result of extreme events (BU9).
10. Loss of staff hours due to high internal building temperatures (BU10).
The assessment team believes that these risks, identified as a result of the scoring
methodology, are consistent with those typically expected for Business, Industry and
Services. They are also consistent with comments made by stakeholders on their
perception of the ‘top’ risks to this sector in the UK, albeit without consideration of the
wider international perspective (e.g. global supply chains).
Sensitivity
Knowledge of the sensitivity of both the sector as a whole and the assessment endpoint risks to particular climate variables is of enormous value in determining the likely
future response under a changing climate. The five sub-sectors of Business, Industry
and Services sector that this report focuses on are highlighted as having a number of
features that make them particularly sensitive to the physical effects of climate change.
These include reliance on:
 Large fixed assets (e.g. chemical manufacturing near large main rivers or
coastline)
 Complex supply chains (e.g. food and beverages)
 Natural assets (e.g. tourism).
It is important to stress that it should not be assumed that these sub-sectors would
bear the majority of the risks from climate change.
The climate sensitivities of the key risks identified for the Business, Industry and
Services sector are summarised in the table below. The table also shows whether the
risks are direct or indirect result of climate change.
Business, Industry and Services
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Risk
Sensitivity to climate change
Reduced returns and/or increased risks
of UK financial institutions’ investments
due to the absence of mainstreaming
climate risk and adaptation into
decision-making processes (BU1).
Indirect impact
At the moment, there is limited substantive evidence of the
consequences of changes in climate on UK financial
institutions. It is difficult to establish a clear and direct link
between climate-related impacts and financial institution
performance. Research strongly shows, however, that the
sector faces considerable risks that could potentially be
material to investment return and/or risk. Further, there is
recognition by researchers, stakeholders and financial
institutions themselves that sensitivity to some of the risks of
climate change could be high in the short term. It is the case of
the reputational implications of a changing climate, as well as
the investor pressures for climate change adaptation disclosure
and mainstreaming. As such, the exposure of financial
institutions to climate change is known, but uncertainties are
too high and available information too limited to quantify risks.
An increase in monetary losses as a
result of an increasing proportion of UK
tourist assets (natural and built) at risk
from flooding (BU2).
Indirect impact
The financial implications for the tourism industry are directly
linked to the number of tourist assets at risk of flooding. This
risk is relatively sensitive to climate change, and in particular,
‘extreme events’ in the short term. Over a long time period,
incremental sea level rise may exacerbate this issue further
and thus the risk may become more frequent and less
associated with ‘extreme’ events. Some amelioration of the risk
may be afforded, however, through insurance and other risk
transfer methods.
A decrease in water (groundwater and
surface water) availability for industrial
usage (BU3).
Direct impact
There is a strong and obvious link between water resources
availability and precipitation. However, this ought to be put
within the context of Public Water Supply (PWS) abstraction,
which constitutes the vast majority of the water abstracted in
the UK. As such, the availability of water for industrial
applications may be more a function of the effectiveness of
water resource management for PWS in making efficiency
savings that allow for industrial abstractors to maintain
operations.
An increase in monetary losses as a
result of interruption to business from
flooding (BU4).
Indirect impact
Like tourism assets, the risk of fluvial and tidal flooding is
relatively sensitive to climate change, and in particular,
‘extreme events’. Over a long time period, incremental sea level
rise and projected increases in rainfall may exacerbate this
issue further and thus the risk may become more frequent and
less associated with ‘extreme’ events.
A decrease in productivity and revenues
due to ICT loss/ disruption (BU5).
Indirect impact
Both incremental and extreme events may play a part in the
loss of ICT productivity. Although the majority of ICT equipment
will operate well within the projected climatic ranges for
temperature and humidity, it is recognised in this assessment
that the risks for remote rural workers are most pronounced
where there is greatest reliance on single electricity and
telecommunications connections. Moreover, this risk is
relatively sensitive to climate change, and in particular,
‘extreme events’ such as flooding.
Increased exposure for mortgage
lenders (BU6).
Indirect impact
This risk is relatively insensitive to climate change due to the
fact that there is not a direct link between a changing climate
and the provision of mortgages. The availability of insurance
cover is an important ‘middle-step’ and this will be subject to
economic forces and risk management practices within the
insurance sector. As such, any effect on mortgage lending will
be the result of a complex interaction of physical climatic
effects, incidents of flooding and an economic and societal
response.
An increase in insurance industry
exposure due to flooding (BU7).
Indirect impact
As per the risk above, this risk is also relatively insensitive to
direct climate change effects as this will be the result of a
complex interaction of physical climatic effects, incidents of
flooding and an economic (insurance) and societal response.
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Business, Industry and Services
Risk
Sensitivity to climate change
An expansion of new or existing tourist
destinations in the UK (BU8).
Indirect impact
With its close connections to the environment and climate itself,
tourism is considered to be highly sensitive to climate. This is
especially the case for this opportunity, because an increase in
the attractiveness of the UK as a “sun, sea and sand” tourism
destination is dependent on ameliorating climatic conditions
(increased temperature and decreased precipitation).
A decrease in output for UK businesses
due to an increase in supply chain
disruption as a result of extreme events
(BU9).
Indirect impact
Because supply chains are complex and dependent on a
network of interconnected, yet independent, elements, it is not
possible to develop a clear and direct causal link between
climate change and supply chain disruption. Many climatic
factors (e.g. heat, precipitation, melting, flooding) can break
supply chains, making a single response function too simplistic.
Loss of staff hours due to high internal
building temperatures (BU10).
Direct impact
High temperatures in the workplace have shown to affect
productivity. There is a clear link with temperature, although
other parameters such as humidity and ventilation are also
important. As such, there is a high degree of sensitivity to
climate change and the ability to adapt is likely to vary across
the business and industry sector.
A high-level summary of the numerical results and associated costs for each risk
analysed in this assessment are presented in the table below.
Risk
Numerical results and costs
Reduced returns and/or increased risks
of UK financial institutions’ investments
due to the absence of mainstreaming
climate risk and adaptation into
decision-making processes (BU1).
Unavailable (qualitative assessment only)
An increase in monetary losses as a
result of an increasing proportion of UK
tourist assets (natural and built) at risk
from flooding (BU2).
Impact of sea level rise on UK beach area: 3 – 16 km2 of beach
2
is projected to be lost by the 2020s, 12 – 61 km (or 3%-7% of
total beach area) by the 2080s.
Number of tourist visitor attractions and facilities at risk of
flooding (Flood Zone 3) in England: 33,069 buildings.
Preventative expenditure, through cost of flood bunds around
buildings: £9 million by 2050s and £18 million by 2080s.
A decrease in water (groundwater and
surface water) availability for industrial
usage (BU3).
Modelled flow reduction scenarios: between 2% to 3%
decrease for industrial abstractions by the 2080s. Change in
total value of industrial abstractions that may be prevented if
catchments switch from being sustainable to unsustainable in
England and Wales: £3.5 million across all time periods.
An increase in monetary losses as a
result of interruption to business from
flooding (BU4).
Estimated average annual cost to businesses from disruption
due to flooding: £24-50 million by the 2020s, £26-72 million by
the 2050s and £34-96 million by the 2080s (current figure: £20
million).
A decrease in productivity and revenues
due to ICT loss/ disruption (BU5).
Unavailable (qualitative assessment only)
Increased exposure for mortgage
lenders (BU6).
Number of residential properties in England and Wales at
“significant likelihood” of fluvial and tidal flooding: between
530,000 and 1.5 million by the 2050s and between 700,000 and
2.1 million by the 2080s. Mortgage fund value at risk: £1 to 8
billion and £2 to 9 billion by the 2050s and 2080s, respectively.
An increase in insurance industry
exposure due to flooding (BU7).
Annual insurance payout costs for flooding in the UK could
increase from a present-day annual average of £200 - £300
million, to £250-400 million by the 2020s and £0.5-1 billion by
the 2080s.
An expansion of new or existing tourist
destinations in the UK (BU8).
Unavailable (qualitative assessment only)
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Risk
Numerical results and costs
A decrease in output for UK businesses
due to an increase in supply chain
disruption as a result of extreme events
(BU9).
Unavailable (qualitative assessment only)
Loss of staff hours due to high internal
building temperatures (BU10).
Productivity losses due to workplace overheating: between
110% and 230% increase in staff days lost compared to
baseline by the 2020s, 140-860% by the 2050s and 1502,800% by the 2080s. This equates to financial losses of £1.1
billion to £15.2 billion by the 2080s (current estimate: £0.77
billion).
Adaptive capacity
The ability of organisations to adapt to climate change is highly variable across the
Business, Industry and Services sector and presents a particular challenge to this
sector. Despite the large international body of evidence that suggests climate change
is a reality, there is still a great deal of inertia within business and industry, with many
companies solely considering climate change as a future issue.
There are a number of large, well-resourced and innovative national and multi-national
companies based in the UK that are taking climate change adaptation seriously and
therefore can demonstrate a high degree of sophistication in terms of climate change
risk and opportunity management. On the other hand, the vast majority of organisations
have yet to recognise climate change as a material risk, and if they have recognised it,
it may only be considered as a long-term, future risk with little relevance to today’s
challenges.
Interdependencies
The Business, Industry and Services sector is intimately linked to all the other sectors
included in the CCRA. From marine and fisheries to built environment, from
biodiversity and ecosystem services to transport, business is reliant upon and supports
many of the other sectors of the CCRA. Through this assessment, there have been a
number of strong linkages that have been discussed; essentially the link between
business and the strategic importance of national infrastructure (e.g. roads, rail,
energy, telecommunications), as well as the importance of the natural environment
(e.g. beaches to attract tourist visitors, or water resource availability for industrial
abstraction). The message is clear, business does not operate in a void – these
externalities (whether in the UK or overseas) are vitally important for business
continuity and growth.
There are also a number of other business value drivers that are important to the
Business, Industry and Services sector, such as exchange rates, changes in markets
(e.g. consumer expectations), the cost of capital, changes in regulations and
Government policy, changing patterns of labour, cost of energy and raw materials.
These drivers may all be affected to a greater or lesser degree by climate change, and
that these changes will vary going forward. Further analysis is required to understand
the climate change effects on these drivers and therefore the overall cumulative effect
(adverse or beneficial) for business as a whole.
On the international stage, UK business is once again intimately linked. The growth in
globalisation and international supply chains means that there is a high dependence on
a global response to climate change adaptation. In fact, the notion of a UK ‘only’ CCRA
for business is not representative of the global market in which the UK operates.
Climate change is a global problem, affecting UK-based companies working solely in
the UK through to UK-listed multinational corporations that have interests in many of
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Business, Industry and Services
the countries that will face more severe climate change impacts than the UK. The UK
tourist operators’ international interests are a good case in point.
Challenges to overcome
In comparison to some other sectors (e.g. water or energy), the Business, Industry and
Services sector is typified by a lack of available quantitative data on the potential
impacts of climate change. Information that is currently collected is often considered
commercially sensitive and remains undisclosed for confidentiality purposes. There is
no regulatory requirement on most businesses to report on risks associated with either
current and future impacts of climate change on its sector, or on its proposals for
adapting to climate change (other than for those organisations who will report under the
Adaptation Reporting Power). Some organisations disclose climate change-related
information, however, under initiatives such as the Carbon Disclosure Project (CDP).
The report has identified a number of important challenges the Business, Industry and
Services sector and Government needs to overcome. These are broadly aligned with a
recent publication from the CBI 1. In this document, the CBI identifies a number of
challenges for business and industry, including:

The challenge of mainstreaming climate change considerations into
standard business practices.

Meeting adaptation goals whilst maintaining other corporate goals with
respect to sustainability.

There will be an increasing expectation for corporate reporting to disclose
material climate-related risks.

Some businesses will be challenged to ‘go it alone’ and the sharing of noncommercially sensitive climate change adaptation information within or
across should be encouraged.

Challenges to business will cover six key areas – supply chains, assets,
operations, markets, regulatory compliance and business reputation.
To overcome these challenges and provide a robust link between the physical impacts
of climate and the risks facing the Business, Industry and Services sector, numerous
parties will need to be involved, including climate scientists, risk analysts, the private
sector and Government. Individual businesses, and particularly those organisations
with a naturally low adaptive capacity, will require a great deal of information sharing
and support. Without this, there will be a constant challenge for business and industry
to effectively adapt to climate change, build long-term resilience and take the
competitive advantage.
1
CBI, 2010. ‘Whatever the weather: managing the risks from a changing climate’
Business, Industry and Services
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Business, Industry and Services
Key Term Glossary
The key terms are defined below.
Adaptation (IPCC AR4, 2007)
 Autonomous adaptation – Adaptation that does not constitute a
conscious 2 response to climatic stimuli but is triggered by ecological
changes in natural systems and by market or welfare changes in human
systems. Also referred to as spontaneous adaptation.
 Planned adaptation – Adaptation that is the result of a deliberate policy
decision, based on an awareness that conditions have changed or are
about to change and that action is required to return to, maintain, or
achieve a desired state.
Adaptive Capacity - The ability of a system to design or implement effective
adaptation strategies to adjust to information about potential climate change (including
climate variability and extremes), to moderate potential damages, to take advantage of
opportunities, or to cope with the consequences (modified from the IPCC to support
project focus on management of future risks) (Ballard, 2009). As such this does not
include the adaptive capacity of biophysical systems.
Adaptation costs and benefits
 The costs of planning, preparing for, facilitating, and implementing
adaptation measures, including transition costs.
 The avoided damage costs or the accrued benefits following the adoption
and implementation of adaptation measures.
Consequence - The end result or effect on society, the economy or environment
caused by some event or action (e.g. economic losses, loss of life). Consequences
may be beneficial or detrimental. This may be expressed descriptively and/or semiquantitatively (high, medium, low) or quantitatively (monetary value, number of people
affected etc).
Impact - An effect of climate change on the socio-bio-physical system (e.g. flooding,
rails buckling).
Response function - Defines how climate impacts or consequences vary with key
climate variables; can be based on observations, sensitivity analysis, impacts
modelling and/or expert elicitation.
Risk - Combines the likelihood an event will occur with the magnitude of its outcome.
Sensitivity - The degree to which a system is affected, either adversely or beneficially,
by climate variability or change.
Uncertainty - A characteristic of a system or decision where the probabilities that
certain states or outcomes have occurred or may occur is not precisely known.
Vulnerability - Climate vulnerability defines the extent to which a system is susceptible
to, or unable to cope with, adverse effects of climate change including climate
variability and extremes. It depends not only on a system’s sensitivity but also on its
adaptive capacity.
The inclusion of the word ‘conscious’ in this IPCC definition is a problem for the CCRA and we
treat this as anticipated adaptation that is not part of a planned adaptation programme. It may
include behavioural changes by people who are fully aware of climate change issues.
2
Business, Industry and Services
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Business, Industry and Services
Acknowledgements
This report incorporates inputs from a number of organisations, in addition to those
consulted during the draft of the scoping reports. The following organisations have
contributed to this work.
Association of British Insurers
Cambridge Programme for Sustainability Leadership
Department for Culture, Media and Sport (Northern Ireland)
English Heritage
Environment Agency (Northern Ireland)
Food and Drink Federation
Historic Scotland
IBM
Intellect UK
Mercer
National Parks Authority
National Trust
Natural England
Office of National Statistics
Scottish Natural Heritage
VisitEngland
We also wish to acknowledge the author of the costs assessment (Chapter 6), Alistair
Hunt.
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Business, Industry and Services
Contents
Statement of use
v
Executive Summary
vii
Key Term Glossary
xv
Acknowledgements
xvii
Contents
xix
1.
Introduction
1
1.1
Background
1
1.2
Scope of the Business, Industry and Services Sector Report
3
1.3
Overview of the Business, Industry and Services sector
4
1.4
Policy Context
6
1.5
Structure of this report
9
2.
Methods
11
2.1
Introduction: CCRA Framework
11
2.2
Outline of the method used to assess impacts, consequences and risks 12
2.3
Identify and characterise the impacts
14
2.4
Assess vulnerability
14
2.5
Identify the main risks
15
2.6
Assess current and future risk
15
2.7
Report on risks
16
3.
Impacts and Risk Metrics
18
3.1
Introduction and Tier 1 analysis
18
3.2
Cross-sectoral and indirect risks
23
3.3
Selection of Tier 2 impacts
27
3.4
Identification of risk metrics
36
4.
Sector Risk Analysis
38
4.1
Introduction and response functions
38
4.2
Estimates of changes in selected climate change scenarios
39
5.
Socio-Economic Change
89
5.1
Introduction
89
5.2
Estimates of changes in selected social and economic futures
90
6.
Costs
94
6.1
Introduction
94
6.2
Economic impacts
95
6.3
Presentation of results, uplifts and discounting
97
7.
Adaptive Capacity
103
Business, Industry and Services
xix
7.1
Overview
103
7.2
Assessing structural and organisational adaptive capacity
103
7.3
Adaptive Capacity in the Business, Industry and Services Sector
105
8.
Conclusions
107
8.1
Key findings
107
8.2
Limitations of current methodology
107
8.3
Challenges to overcome
108
9.
References
109
Appendices
119
Appendix 1 Policy background, scoring of Tier 1 impacts and risk scoring
explanation
121
Appendix 2 Response functions and the application of climate projections
137
Appendix 3 Economic impacts
165
Appendix 4 Social Vulnerability Checklist
169
Tables
Table 3.1
Table 4.1
Table 5.1
Table 6.1
Perceived risk level by sub-sector for the four types of climate risk identified in the KPMG analysis
(2008)
Selection of response functions
Socio-economic change summary, with extreme scenarios highlighted where applicable
Summary of results in £million per annum
19
38
91
96
Figures
Figure 2.1
Figure 2.2
Figure 3.1
Figure 3.2
Figure 4.1
Figure 4.2
Figure 4.3
Figure 4.4
Stages of the CCRA (yellow) and other actions for Government (grey)
Steps of the CCRA Method (that cover Stage 3 of the CCRA Framework: Assess risks)
Potential climate change impacts on the financial sector (assuming no adaptation)
th
Systematic map for the Business, Industry and Services sector based on 4 pass cause of “water
demand”
Total and industrial volumes of water licensed to be abstracted across 10 UK regions (Ml/d)
Cost of business interruption in the UK (£m) due to flooding
Insurance payout for weather related claims in the UK (£m)
Developments in Tourism Comfort Index (TCI)
11
13
20
27
54
59
69
73
Boxes
Box 4.1
Box 4.2
Box 4.3
Box 4.4
Box 4.5
Box 4.6
Box 4.7
Box 4.8
xx
Examples of consequences of climate-related events on financial and credit performance of ‘real
sector’ investments
Major on-going stakeholder-led developments pushing for climate change adaptation
mainstreaming
Community and governmental opposition to mining project in Chile fuelled by climate-related
concerns
Example of impact of average changes in climate on investments
Impacts of floods of summer 2007 on tourism and leisure sector
Impact of 2007 floods on businesses
Case Study: Flooding at BT Exchange in Paddington, London
Case study: 2007 flooding and the impact on transport infrastructure
Business, Industry and Services
41
43
43
46
50
57
63
82
1.
Introduction
1.1
Background
It is widely accepted that the world’s climate is being affected by the increasing
anthropogenic emissions of greenhouse gases into the atmosphere. Even if efforts to
mitigate these emissions are successful, the Earth is already committed to significant
climatic change (IPCC, 2007).
Over the past century, the Earth has warmed by approximately 0.7°C 3. Since the mid1970s, global average temperature increased at an average of around 0.17°C per
decade 4. UK average temperature increased by 1°C since the mid-1970s (Jenkins et
al., 2009), however recent years have been below the long-term trend highlighting the
significant year-to-year variability. Due to the time lag between emissions and
temperature rise, past emissions are expected to contribute an estimated further 0.2°C
increase per decade in global temperatures for the next 2-3 decades (IPCC, 2007),
irrespective of mitigation efforts during that time period.
The sorts of impacts expected later in the Century are already being felt in some cases,
for example:
 Global sea levels rose by 3.3 mm per year (± 0.4 mm) between 1993 and
2007; approximately 30% was due to ocean thermal expansion due to
ocean warming and 55% due to melting of land ice. The rise in sea level is
slightly faster since the early 1990s than previous decades (Cazenave and
Llovel, 2010).
 Acidification of the oceans caused by increasing atmospheric CO2
concentrations is likely to have a negative impact on the many marine
organisms and there are already signs that this is occurring, e.g. reported
loss of shell weight of Antarctic plankton, and a decrease in growth of Great
Barrier coral reefs (ISCCC, 2009).
 Sea ice is already reducing in extent and coverage. Annual average Arctic
sea ice extent has decreased by 3.7% per decade since 1978 (Comiso et
al., 2008).
 There is evidence that human activity has doubled the risk of a very hot
summer occurring in Europe, akin to the 2003 heatwave (Stott et al., 2004).
The main greenhouse gas responsible for recent climate change is carbon dioxide
(CO2) and CO2 emissions from burning fossil fuels have increased by 41% between
1990 and 2008. The rate of increase in emissions has increased between 2000 and
2007 (3.4% per year) compared to the 1990s (1.0% per year) (Le Quéré et al., 2009).
At the end of 2009 the global atmospheric concentration of CO2 was 387.2 ppm
(Friedlingstein et al., 2010); this high level has not been experienced on earth for at
least 650,000 years (IPCC 2007).
The UK government is committed to action to both mitigate and adapt to climate
change 5 and the Climate Change Act 2008 6 makes the UK the first country in the world
Global temperature trends 1911-2010 were: HadCRUT3 0.8°C/century, NCDC 0.7°C/century,
GISS 0.7°C/century. Similar values are obtained if we difference the decadal averages 20002009 and 1910-1919, or 2000-2009 and 1920-1929.
4
Global temperature trends 1975-2010 were: HadCRUT3 0.16°C/decade, NCDC
0.17°C/decade, GISS 0.18°C/decade.
5
http://www.defra.gov.uk/environment/climate/government/
3
Business, Industry and Services
1
to have a legally binding long-term framework to cut carbon emissions, as well as
setting a framework for building the nation’s adaptive capacity. The devolved
administrations also have their own strategies and plans in this regard.
The Act sets a clear and credible long term framework for the UK to reduce its
greenhouse gas (GHG) emissions including:
 A legal requirement to reduce emissions by at least 80% below 1990 levels
by 2050 and by at least 34% by 2020.
 Compliance with a system of five-year carbon budget, set up to 15 years in
advance, to deliver the emissions reductions required to achieve the 2020
and 2050 targets.
In addition it requires the Government to create a framework for building the UK's
ability to adapt to climate change and requires Government to:
 Carry out a UK wide Climate Change Risk Assessment (CCRA) every five
years.
 Put in place a National Adaptation Programme (NAP), covering England
and reserved matters, to address the most pressing climate change risks
as soon as possible after every CCRA.
The purpose of this first CCRA is to provide underpinning evidence, assessing the key
risks and opportunities to the UK from climate change, and so enable Government to
prioritise climate adaptation policies for current and future policy development as part
of the statutory National Adaptation Programme which will begin from 2012. The
CCRA will also inform devolved Governments’ policy on climate change mitigation and
adaptation.
Climate Change Act: First 5 year Cycle
The Scope of the CCRA covers an assessment of the risks and opportunities to those
things which have social, environmental and economic value in the UK, from the
current climate and future climate change, in order to help the UK and devolved
Governments identify priorities for action and implement necessary adaptation
measures. The Government requires the CCRA to identify, assess, and where possible
estimate economic costs of the key climate change risks and opportunities for the UK,
and for Devolved Governments. The outputs from the CCRA will also be of value to
other public and private sector organisations that have a stake in the sectors covered
by the assessment.
The CCRA will be accompanied (in 2012) with a study on the Economics of Climate
Resilience 7 (ECR) that will identify options for addressing some of the priority risks
identified by the CCRA, and will analyse their costs and benefits. This analysis will
provide an overall indication of the scale of the challenge and potential benefits from
acting; and, given the wide-ranging nature of possible interventions, will help to identify
priority areas for action by Government on a consistent basis.
This will be followed by the first NAP. The NAP will set out:
 objectives in relation to adaptation
 proposals and policies for meeting those objectives
 timescales
6
7
http://www.legislation.gov.uk/ukpga/2008/27/contents
http://www.defra.gov.uk/environment/climate/government/
2
Business, Industry and Services
 an explanation about how those proposals and policies contribute to
sustainable development.
The CCRA analysis has been split into eleven sectors to mirror the general sectoral
split of climate impacts research; agriculture, biodiversity and ecosystem services,
business, industry and services, built environment, energy, floods and coastal erosion,
forestry, health, marine and fisheries, transport and water.
1.2
Scope of the Business, Industry and Services
Sector Report
This Business, Industry and Services sector report is one of the 11 sector reports
commissioned as part of the CCRA contract with HR Wallingford. It is a key step in the
process of developing the evidence base required to deliver the UK CCRA to
Parliament, as required by the Climate Change Act (2008), by January 2012.
This report gives an overview of the impacts of climate change for the Business,
Industry and Services sector in the UK. The diverse nature of this sector has meant
that it has not been possible to provide a comprehensive picture of all of the potential
climate change risks that the sector is likely to face. For the purposes of this study, the
assessment of risks and opportunities for the sector was based on a number of subsectors, specifically: financial services; tourism; food and beverages; primary
extractives (oil, gas and mining) and chemical manufacturing. These sub-sectors are
used as illustrative examples to highlight the range of climate-related issues and
challenges the sector as a whole may face. They are of particular significance for three
principal reasons:
 They rely on large fixed assets (e.g. chemical manufacturing near large
main rivers or coastline)
 They have complex supply chains (e.g. food and beverages)
 They rely substantially on natural assets (e.g. tourism).
Within these sub-sectors, the study has made no distinction based on business size;
the risks to Small and Medium Enterprises (SMEs) through to large multi-national
corporations has been considered. It is important to highlight that although the focus of
the CCRA is on risks in the UK, the inherent international nature of the Business,
Industry and Services sector (e.g. UK banks, pension funds and insurers operate in a
global market place) means that it is difficult to ignore potential climate impacts in areas
outside the UK. However, the international dimensions of climate change, specifically
the effects of climate change that could occur outside of the UK and could give rise to
threats and opportunities, has been addressed in a recent Foresight Report (2011a).
Consequently, the emphasis in this report is placed on UK-based risks and
opportunities.
Our analysis follows a predetermined CCRA methodology as expressed in Chapter 2 of
this report. Evidence in this report has been obtained from published literature,
established datasets and consultation with a range of stakeholder organisations. The
consultation process was initiated as a part of an earlier ‘Tier 1’ set of studies
(Acclimatise, 2010a, Acclimatise, 2010b, Acclimatise, 2010c) and continued into this
phase of work, the selection and analysis of ‘Tier 2’ risks. These organisations are
acknowledged in the preface to this report. Our analysis was also undertaken in
consultation with UK Government departments including Defra, the Department for
Business, Innovation and Skills (BIS), HM Treasury, and the Department of Energy and
Climate Change (DECC). The devolved administrations of Scotland, Wales and
Business, Industry and Services
3
Northern Ireland were also consulted to establish a complete picture of the UK and
acknowledge differences in climate change policy frameworks.
1.3
Overview of the Business, Industry and Services
sector
The Business, Industry and Services sector is extremely diverse. It incorporates a
wider range of activities from financial services and retail to manufacturing and food
production. These industries occur at a range of scales. Midcap firms (with turnovers
between £25 million and £500 million) provide over 20% of UK jobs while, at the same
time, there are over 4.8 million registered small and medium enterprises (SMEs) that
account for half of all private sector output (HM Treasury, BIS 2011). The varied nature
of these activities is mirrored by the subsectors’ uneven geographies. BIS illustrated
this with reference to the financial services subsector: “The Greater South East
account[ed] for 60% of total UK activity in financial intermediation and more than half of
total UK output from real estate, renting and business services in 2006.” (HM Treasury,
BIS, 2011).
The IMF forecasts that the world economy will grow by $20 trillion in today’s prices
between 2010 and 2015. It expects advanced economies such as the UK to contribute
around $8.5 trillion (IMF, 2010). The Business, Industry and Services sector will be the
main driver of growth in the UK. BIS has highlighted ‘green’ growth as an area that
offers important opportunities for UK firms as the sector emerges from recession. The
low-carbon and environmental goods and services sector was estimated to be worth
£112 billion in 2008-09 (HM Treasury, BIS, 2011).
The economic case for the taking action to adapt to climate change was made strongly
in the 2006 Stern Review on the economics of climate change, which stated that;
“many adaptation options… will provide benefits in excess of costs” (Stern, 2006).
This study is based on an analysis of a number of climate risks identified in five subsectors of the Business, Industry and Services sector:
 Financial services
 Tourism
 Food and beverages
 Primary extractives (oil, gas and mining)
 Chemical manufacturing.
Each of these sub-sectors play an important role in driving growth in the UK economy,
and each will be affected by the impacts of climate change in a variety of ways.
1.3.1
Financial Services
The UK financial services sub-sector consists of banks, asset managers, insurers,
pension funds and other financial service providers. As well as being a significant driver
of the UK economy in its own right, it also supports other sectors by providing credit
and services to businesses and households. In 2008, it was responsible for 9% of total
economic output and contributed 14% of the Treasury’s fiscal revenue (HM Treasury,
2009; Turner et al., 2010). The UK is considered to be an international centre for
finance, with inward and outward financial investment flows amounting to more than
£10 trillion per year (Bank of England, 2010). This sub-sector employs over 1 million
people, and financial services are one of the UK’s largest export industries (HM
4
Business, Industry and Services
Treasury, 2011). In 2008, the countries that received the most investments from UKowned financial institutions were in the developed world, though emerging markets
represent a significant total share of foreign investments (HM Treasury, 2009).
1.3.2
Tourism
According to a recent study by Deloitte and Oxford Economics (2010) tourism was
worth £115.4bn to the UK economy in 2009 – equivalent to 8.9% of total UK Gross
Domestic Product (GDP). This makes it the UK’s fifth largest “sector”. Approximately
2.6 million people work in tourism accounting for 1 in 12 UK jobs (ibid). On a regional
scale, tourism contributes £96.7bn to the economy in England (8.6% of GDP), £11.1bn
in Scotland (10.4%), £6.2bn in Wales (13.3%) and £1bn in Northern Ireland (4.9%)
(ibid). Over the next decade, the UK’s visitor economy is forecast to be one of the best
performing sub-sectors, with above average growth at 3.5% in Gross Value Added
(GVA) terms (ibid).
1.3.3
Food and Beverages Manufacturing
Food and beverages is the UK’s largest manufacturing sub-sector and employs over
400,000 people (Defra, 2010, UK Trade & Investment, 2010). The UK is the second
most productive food and drinks manufacturer in the world. It contributed GVA £21.8
billion to the UK economy in 2009 (ONS/DEFRA Food Statistics Pocketbook 2009;
UKTI, 2010). The Cabinet Office (2008) estimates that in 2008 the sub-sector and its
supply chain accounted for 7% of GPD. In 2007, the UK attracted £8.4bn of new
overseas investment from food and drink manufacturers (ONS Foreign Direct
Investment 2007 Report, 2009). The sub-sector is comprised of over 7,000 enterprises
operating almost 10,000 factories (UK Trade and Investment, 2010).
1.3.4
Primary Extractives
Oil and gas production from the UK continental shelf accounted for over 75% of the
UK’s total primary energy in 2008 (Oil and Gas UK, 2009). The UK is the largest
producer of both oil and gas in the EU and is fourteenth highest globally. Oil and gas is
the highest tax contributing sub-sector in the UK, paying £6.9 billion in corporate taxes
in 2009-10 (Oil and Gas UK, 2010). In 2010, the sub-sector contributed £27 billion to
the economy and directly employed 32,000 people (Oil and Gas UK, 2009). The UK
coal sub-sector supports some 10% of all UK electricity supplies (DECC, 2010). With
respect to metals and minerals, British-based mining companies deliver two thirds of
global iron ore output, the majority of the world’s diamonds, platinum and titanium, and
a significant proportion of other metals and minerals (London Mining Network, 2010).
UK-listed mining companies together enjoy around half the market capital available to
the world’s ten biggest miners (Nostromo Research, 2009).
1.3.5
Chemical Manufacturing
The UK chemicals sub-sector is the largest exporter in UK manufacturing and accounts
for approximately 1.5% of GDP (UKTI 2009). UK-based turnover exceeds £57bn and
the industry employs over 180,000 people (Chemical Industries Association, 2010).
This is a sub-sector where Small and Medium Enterprises (SMEs) play a key role.
There are more than 3,100 chemical companies in the UK, with a high proportion being
located in the north of England and Scotland.
Business, Industry and Services
5
1.3.6
Cross-Sectoral Linkages
The diverse nature of the sub-sectors within the Business, Industry and Services sector
means that the climate risks are wide ranging. Perhaps unsurprisingly there is
considerable overlap between the risks faced by the Business, Industry and Services
sector and sectors covered by other CCRA reports.
Cross-sectoral linkages include:
 Coastal erosion and sea level rise putting tourist assets at risk (Flooding).
 Sea level rise and coastal inundation and erosion affect business and
industrial assets (Flooding).
 Increased flooding impacts on the insurance sub-sector due to increased
payout frequency and value (Flooding).
 Reduced groundwater levels and increased demand putting pressure on
industry and agri-business (Agriculture, Water).
 Disruption to port activities due to extreme weather and sea level rise
negatively impacting supply chains (Marine).
 Subsidence and landslips disrupt road, rail and port facilities and impact on
supply chains (Transport).
 Negative impact on cultural heritage impacts tourism industry (Built
environment).
 Loss of staff hours due to increases in internal building temperatures (Built
environment).
In light of this the findings of this report should be taken in the context of the other
CCRA sector studies, as is considered in the CCRA Evidence Report (CCRA, 2012).
1.4
Policy Context
1.4.1
Introduction
The Business, Industry and Services sector in the UK is administered and regulated by
a large number of bodies, reflecting the range of industries and the scales at which
they operate. This section presents the main policy instruments and institutions that
govern the specific risks (outlined in Chapters 3 and 4) to the five sub-sectors that are
the focus of this report.
BIS, HM Treasury, the Bank of England, UK Trade and Investment (UKTI) and trade
bodies such as the CBI, administer and communicate UK business policy. Their
principal focus is ensuring that the UK remains an attractive place in which to do
business. They promote sustainable growth and support businesses to mainstream
climate change adaptation policy into their management systems. This is especially
important in this sector as much of the responsibility for governing climate adaptation
remains with the individual businesses themselves.
For the purposes of the Business, Industry and Service Sector report, it is more
instructive to give a picture of the policy framework that governs the risks outlined in
Chapters 3 and 4. As such the bullet point text below is not an exhaustive description
of all the activities/responsibilities associated with each principal regulatory body.
Rather it highlights specific responsibilities that relate to the risks in this report.
6
Business, Industry and Services
Principal regulatory bodies include:

Defra: Leads in England on effective approaches to flood and coastal
erosion risk management; managing water resources balanced with growth
in the housing sector; and on planning policy for green infrastructure and
biodiversity.

BIS: A supporting role for business in mainstreaming adaptation, enabling
industries to respond to the future needs and opportunities presented.
Supporting research and innovation through partners such as the
Technology Strategy Board and Research Councils.

DECC: Responsible for coastal energy infrastructure; electricity
infrastructure in flood risk areas; policy on energy demand for cooling
buildings; and on methods for assessing energy efficiency to ensure that
new build homes are energy efficient and have minimal demands for active
cooling.

The Environment Agency: Enforces planning policy for flood and coastal
risk management, water quality and green infrastructure in England and
Wales. Environmental aspects of water resource management are
regulated by the Environment Agency in England and Wales, by the
Scottish Environment Protection Agency in Scotland and by the Northern
Ireland Environment Agency in Northern Ireland.

Department for Communities and Local Government (CLG):
Responsible for planning policy on housing, urban regeneration, and fire
and rescue for England. This responsibility is also devolved to appropriate
departments in Scotland and Northern Ireland and there is also further
planning policy for Wales overseen by the Welsh Government. The CLG is
also responsible for national policy on building regulations whether
domestic, commercial or industrial.

Department of Health: Responsible for research for policy on heat waves.

HM Treasury, Department for Work and Pensions (DWP) and the
Association of British Insurers through the Financial Inclusion
Taskforce: Responsible for financial regulation and impacts of climate
change for the mortgage and insurance industries.

Heritage bodies: Environmental impacts of industry on the natural
environment are monitored to ensure they do not have a damaging impact.
Heritage bodies play a particular role in supporting the tourism industry.
Responsibility is devolved and is covered by: Natural England and English
Heritage in England; the Countryside Council for Wales, Scottish Natural
Heritage and the Northern Ireland Environment Agency.

Welsh Government: Responsible for flood and coastal erosion risk
management; managing water resources; planning policy; biodiversity;
Building Regulations; regeneration; fire and rescue; and health policy.

Scottish Government: Responsible for the implementation of its own
Climate Change Act; managing flood risk; coastal flooding; building
regulations; planning policy; and tourism.

Northern Ireland Executive: Responsible for some areas of planning
policy, building regulations, tourism and transport.
Business, Industry and Services
7
1.4.2
UK Policy
The policy framework for managing the potential future risks of climate change is
extremely diverse, reflecting the broad range of the risks that the Business, Industry
and Services sector may face. Interdepartmental co-operation is essential to the
success of the climate change adaptation framework. Many of the policies outlined in
Table A1.1 require the co-operation of key stakeholders in the Business, Industry and
Services sector.
The Adaptation Reporting Power contained in the Climate Change Act (2008) is the
principle policy lever for the UK Government to influence businesses and help them to
mainstream climate change adaptation into their management practices. It is only able
to achieve its aims with the support and co-operation of those businesses that it asks to
report. Defra has produced guidance to help businesses through the reporting process
and has provided advice on ways in which they can implement climate change
adaptation strategies. The UK Climate Impacts Programme (UKCIP) has also
developed a number of tools that help business in this regard. UKCIP’s Business Areas
Climate Assessment Tool (BACLIAT), for example, is a simple checklist that can be
used to assess the potential impacts of climate change at an organisational level.
Policy that protects assets from flood risk and coastal erosion, and building regulations
and planning policy play a vital role in protecting UK businesses and their supply
chains from the negative impacts of climate change. There are a number of pieces of
primary legislation that aim to manage these risks, they include: the Planning Act
(2008), Planning Policy Statement 1 (PPS1), Planning Policy Statement 25 (PPS 25):
Development and Flood Risk, Building Regulations (2006), the Flood and Water
Management Act (2010) and the Civil Contingencies Act (2004).
Some of the key policy levers for managing climate change risk are shown in Table
A1.1 in Appendix 1. The reference numbers (BU1, etc) refer to the risks analysed in
this report, as listed in Table 3.3.
1.4.3
Devolved Policy
How policy is implemented varies across the devolved administrations. Some of the
key differences are explored below.
Scotland
The Scottish Government is committed to implementing climate change adaptation
policy through the Climate Change (Scotland) Act (2009), which governs Scottish
climate policy. The Act requires public bodies in Scotland to ensure that they put
measures in place to help with the implementation of an adaptation programme. The
Act contains an adaptation reporting power, which requires public bodies to report on
their adaptation strategies; however, unlike in England, there are currently no plans to
use this power. Additionally, the adaptation reporting power in force in the English
Climate Change Act (2008) is broader, enabling Government to require private
businesses and organisations that perform a public function (such as utility companies)
to report on their adaptation plans.
The Scottish Government and its agencies oversee adaptation policy. Scottish
Enterprise, Scottish Environment Protection Agency and the Scottish Climate Change
Impacts Partnership (SCCIP) have central roles in mainstreaming adaptation into the
management strategies of Scottish businesses.
Wales
The Welsh Government sets out its vision for providing the conditions and framework
to enable the private sector to grow and flourish in Economic Renewal: a new direction
8
Business, Industry and Services
(2010). A prominent sub-sector in Wales is tourism, which relies heavily on the
condition of the environment. Consistent with its central organising principle of
sustainable development, the Welsh Government’s Sustainable Tourism Framework
(2007) highlights the need to manage and adapt to climate change as being of critical
importance to the future of sustainable tourism in Wales.
One of the five priorities set out in Economic Renewal is the need for investment in
high-quality and sustainable infrastructure. This priority is also recognised in the Welsh
Government’s Energy Policy Statement, Spatial Plan and Transport Strategy.
Through the Climate Change Strategy for Wales, the Welsh Government is
implementing an Adaptation Framework, which is designed to incorporate climate
change adaptation into decision-making in the private, public and voluntary sectors.
The Strategy was developed and is being delivered in Partnership with the Climate
Change Commission for Wales that aims to drive action on climate change in Wales.
The business community is represented on the Commission by the Confederation of
British Industries (Wales) and the Federation of Small Businesses. The Climate
Change Strategy and the Climate Change Communications and Engagement Strategy
include commitments to engage with private sector organisations, highlighting the need
for businesses to understand and plan for the threats and opportunities arising from a
changing climate.
Planning Policy Wales helps to ensure the resilience of the built environment and
reduce the risk of disruption to business activities as a result of climate change. This is
supplemented by Technical Advice Notes (TANs), including TAN15 – Development and
Flood Risk, and TAN22 - Sustainable Buildings. Building Regulations will be devolved
in January 2012, after which time the Welsh Government will be able to set standards
for new buildings, including non-domestic buildings, and intends to utilise these powers
to improve further the resilience of the built environment to climate change.
Northern Ireland
The Climate Change Act (2008) is implemented in Northern Ireland by the Northern
Irish Executive and the Adaptation Reporting Power operates here in the same way as
it does in England. The Northern Ireland strategy for adaptation is laid out in the report
‘Preparing for a Changing Climate in Northern Ireland’ (2007).
Climate change adaptation policy in Northern Ireland is largely transposed from UK
policy and is managed by a series of regional strategies (such as the Region
Transportation Strategy for Northern Ireland), many of which fall under the Regional
Development Strategy managed by the Department for Regional Development.
Planning policy, as with the other UK regions, is devolved to local councils.
1.5
Structure of this report
Following this introduction chapter, Chapter 2 presents the risk assessment
methodology adopted in the CCRA. The subsequent and remaining chapters of the
report then broadly follow the risk assessment steps outlined in Chapter 2 and Figure
2.2. Chapter headings and sub-headings clearly make reference the relevant step of
the risk assessment methodology.
Chapter 3 provides an overview of the risks and opportunities identified for the sector. It
is linked to the full list of identified risks located in Appendix 1.
Chapter 4 contains the main body of the analysis. In this chapter, an assessment and
quantification of the key risks / opportunities is presented. For each risk identified for
the Business, Industry and Services sector, the approach taken is to include as
applicable:
Business, Industry and Services
9
 An introduction and supporting evidence
 Details of identified metrics and presentation of the “response function”
 Incorporation of future climate change projections
 Presentation of data assumptions and limitations
 Conclusions
 The majority of the technical and supporting information (data tables and
figures) for the risk analysis is located in Appendix 2. These are referenced
as necessary in the text (e.g. Table A2.* and Figure A2.*).
Chapter 5 considers the way in which the social and economic future of the UK may
affect the risks and Chapter 6 presents possible economic impacts of the 10 selected
risks.
Chapter 7 introduces the adaptive capacity of the Business, Industry and Services
sector as a whole, as well as the sub-sectors this report focuses on. An assessment of
current adaptive capacity across the sectors is the subject of an ongoing Defra study.
Finally, Chapter 8 summarises the main conclusions of this report, outlining the
limitations of the current methodology, including strengths and weaknesses, together
with the main challenges the Business, Industry and Services sector faces regarding
climate change adaptation.
10
Business, Industry and Services
2.
Methods
2.1
Introduction: CCRA Framework
The overall aim of the CCRA is to inform UK adaptation policy by assessing the main
current and future risks (threats and opportunities) posed by the current climate and
future climate change for the UK to the year 2100. The overall approach to the risk
assessment and subsequent adaptation plan is based on the UK Climate Impacts
Programme (UKCIP) Risk and Uncertainty Framework (UKCIP, 2003). The framework
comprises eight stages as shown in Figure 2.1. The CCRA has undertaken the Stages
1, 2 and 3 as outlined below. Stages 4 and 5 will be addressed as part of a separate
economic assessment, entitled the ‘Economics of Climate Resilience’, and the
remaining stages will be implemented by the UK Government and Devolved
Administrations. The framework presents a continual process that can adapt as new
evidence and policy emerges; in the case of the CCRA the process will be revisited
every five years.
Figure 2.1
Stages of the CCRA (yellow) and other actions for Government
(grey)
Adapted from UKCIP (2003)
 Stage 1 is defined by the aim of the CCRA project, to undertake an
assessment of the main risks (including both threats and opportunities)
posed by climate change that will have social, environmental and economic
consequences for the UK.
 Stage 2 established decision-making criteria for the study, which were used
to inform the selection of impacts for analysis in Stage 3. These criteria are
the social, environmental and economic magnitude of consequences and
the urgency of taking adaptation action for UK society as a whole.
 Stage 3 covers the risk assessment process. This involved a tiered
assessment of risks with Tier 1 (broad level) identifying a broad range of
potential impacts and Tier 2 (detailed level) providing a more detailed
Business, Industry and Services
11
analysis including quantification and monetisation of some impacts. A list
of climate change impacts was developed based on eleven sectors with
further impacts added to cover cross-cutting issues and impacts which fell
between sectors. This list of climate change impacts is referred to as the
‘Tier 1 list of impacts’. This list contained over 700 impacts – too many to
analyse in detail as part of this first CCRA. A consolidated list of the
highest priority climate change impacts for analysis was developed and
referred to as the ‘Tier 2 list of impacts’. This report presents the risk
assessment for Tier 2 impacts.
The background to the framework and approach used for each of the first three stages
is set out in more detail in the CCRA Method Report (Defra, 2010b). This chapter aims
to summarise the CCRA method for the risk assessment stage (Stage 3 in the
framework above) because this includes the specific steps for which results are
presented in this report.
2.2
Outline of the method used to assess impacts,
consequences and risks
The risk assessment presented in this report is the focus of Stage 3 in the CCRA
Framework (see Figure 2.1). This was done through a series of steps as set out in
Figure 2.2. These steps are explained in Sections 2.3 - 2.7 below and are discussed in
more detail in the CCRA Method report (Defra, 2010).
The components of the assessment sought to:
 Identify and characterise the impacts of climate change.
This was achieved by developing the Tier 1 list of impacts, which included
impacts across eleven sectors as well as impacts not covered by the
sectors and arising from cross sector links (presented in Chapter 3.1 and
3.2).
 Identify the main risks for closer analysis.
This involved the selection of Tier 2 impacts for further analysis from the
long list of impacts in Tier 1. Higher priority impacts were selected by
stakeholder groups based on the social, environmental and economic
magnitude of impacts and the urgency of taking action (presented in
Chapter 3.3).
 Assess current and future risk, using climate projections and considering
socio-economic factors.
The risk assessment was done by developing ‘response functions’ that
provide a relationship between changes in climate with specific
consequences based on analysis of historic data, the use of models or
expert elicitation. In some cases this was not possible, and a narrative
approach was taken instead. The UKCP09 climate projections and other
climate models were then applied to assess future risks. The potential
impact of changes in future society and the economy was also considered
to understand the combined effects for future scenarios (presented in
Chapter 5).
 Assess vulnerability of the UK as a whole.
This involved:
i.
a high level review of Government policy on climate change in the
eleven sectors (see Chapter 1 of this report)
12
Business, Industry and Services

ii.
a high level assessment of social vulnerability to the climate change
impacts (see Appendix 4 of this report)
iii.
a high level assessment of the adaptive capacity of the sectors. This
is the subject of an ongoing study by Defra to be reported later in
2012, but see Chapter 7 of this report for a preliminary view and
Section 2.4 below for an overview of the approach).
Report on risks to inform action.
This report presents the results of the risk assessment for the Business, Industry and
Services sector. The results for the other ten sectors are presented in similar reports
and the CCRA Evidence Report (CCRA, 2012) draws together the main findings from
the whole project, including consideration of cross-linkages, and outlines the risks to
the UK as a whole.
Figure 2.2
Steps of the CCRA Method (that cover Stage 3 of the CCRA
Framework: Assess risks)
Business, Industry and Services
13
2.3
Identify and characterise the impacts
Step 1 – Literature review and Tier 1 analysis
This step scoped the potential impacts of climate change on the UK based on existing
evidence and collating the findings from literature reviews, stakeholder participation
through workshops, correspondence with wider stakeholders and soliciting expert
opinion. This work developed the Tier 1 list of impacts (see Appendix 1). The Tier 1
impacts have not been analysed in detail; high level discussion of these impacts is
provided in Chapter 3 of this report.
Due to the natural diversity of the Business, Industry and Services sector, the Tier 1
analysis involved the scoping of climate change impacts and risks for the following
three sub-sectors:
1. Financial services (banks, pension funds and insurance) and tourism
(Acclimatise, 2010a)
2. Food and beverage manufacturing (Acclimatise, 2010b)
3. Primary extractive industries (oil, gas and mining) and chemical
manufacturing (Acclimatise, 2010c).
Step 2 – Cross sectoral and indirect impacts
The Tier 1 lists for the eleven sectors in CCRA were compared and developed further
to include cross-sectoral and indirect impacts. This was done by ‘Systematic Mapping’,
which sets out a flow chart to link causes and effects in a logical process. The impacts
that were identified in this step were added to the Tier 1 list of impacts.
2.4
Assess vulnerability
Step 3 – Review of Policy
Government policy on climate change develops and changes rapidly to keep pace with
emerging science and understanding of how to respond through mitigation and
adaptation. This report includes an overview of selected relevant policy in Chapter 1
as this provides important context for understanding how risks that are influenced by
climate relate to existing policies. This information will be expanded in the Economics
of Climate Resilience project and the National Adaptation Programme.
Step 4 – Social Vulnerability
The vulnerability of different groups in society to the climate change risks for each
sector was considered at a high level through a check list. The completed check list for
the Business, Industry and Services sector is provided in Appendix 4. This information
is provided for context; it is not a detailed assessment of social vulnerability to specific
risks. Note that this step is different from Step 10, which considers how future changes
in society may affect the risks.
Step 5 – Adaptive Capacity
The adaptive capacity of a sector is the ability of the sector as a whole, including the
organisations involved in working in the sector, to devise and implement effective
adaptation strategies in response to information about potential future climate impacts.
A high level initial overview of the adaptive capacity of the Business, Industry and
Services sector has been carried out through literature review and is presented in
Chapter 7. This information is provided for context. An assessment of adaptive
capacity is ongoing and will be reported on later in 2012.
14
Business, Industry and Services
2.5
Identify the main risks
Step 6 – Selection of Tier 2 impacts
The Tier 1 list of impacts for each sector that resulted from Step 2 (see above) was
consolidated to select the higher priority impacts for analysis in Tier 2. Firstly, similar
or overlapping impacts were grouped where possible in a simple cluster analysis,
which is provided in Chapter 3. Secondly, the Tier 2 impacts were selected using a
simple multi-criteria assessment based on the following criteria:
 the social, economic and environmental magnitude of impacts
 overall confidence in the available evidence
 the urgency with which adaptation decisions needs to be taken.
Each of these criteria were allocated a score of 1 (low), 2 (medium) or 3 (high) and the
impacts with highest scores over all criteria were selected for Tier 2 analysis. The
scoring for each sector was carried out based on expert judgement and feedback from
expert consultation workshops (or telephone interviews). Checks were carried out to
ensure that a consistent approach was taken across all the sectors. The results of the
scoring process are provided in Appendix 1.
Step 7 – Identifying risk metrics
For each impact in the Tier 2 list, one or more risk metrics were identified. Risk metrics
provide a measure of the impacts or consequences of climate change, related to
specific climate variables or biophysical impacts. For example, in the Business,
Industry and Services sector report, one of the risks identified is an increase in
monetary losses as a result of an increasing proportion of industrial assets at risk from
flooding. The risk metrics identified to measure the consequences of this risk included,
expected annual damage costs (£) for non-residential property, loss of staff time (days)
and proportion of business turnover lost (£).The risk metrics were developed to provide
a spread of information about economic, environmental and social consequences. The
metrics have been referenced using the sector acronym and a number; the Business,
Industry and Services sector metrics are referenced as BU1 to BU10.
2.6
Assess current and future risk
Step 8 – Response functions
This step established how each risk metric varied with one or more climate variables
using available data or previous modelling work. This step was only possible where
evidence existed to relate metrics to specific climate drivers, and has not been possible
for all of the tier 2 impacts. This step was carried out by developing a ‘response
function’, which is a relationship to show how the risk metric varies with change in
climate variables. Some of the response functions were qualitative, based on expert
elicitation, whereas others were quantitative.
Step 9 – Estimates of changes in selected climate change scenarios
The response functions were used to assess the magnitude of consequences the UK
could face due to climate change by making use of the UKCP09 climate projections.
This step used the response functions to provide estimates of future risk under three
different emissions scenarios (high carbon emissions, A1FI; medium emissions, A1B;
low emissions, B1; see http://ukclimateprojections.defra.gov.uk/content/view/1367/687/
for further details), three future 30-year time periods (centred on the 2020s, 2050s and
2080s) and for three probability levels (10, 50 and 90 percent, see
http://ukclimateprojections.defra.gov.uk/content/view/1277/500/ for further details),
Business, Industry and Services
15
associated with single or combined climate variables. The probability levels are
cumulative and denote the degree of confidence in the change given; for example 90%
suggests that it is thought very unlikely that the change will be higher than this; 50%
suggests that it is thought equally likely that the change will be higher or lower than
this; and 10% suggests that it is thought very unlikely that the change will be lower than
this. 90% does not mean that the change is 90% likely to occur, for example.
The changes given in the UKCP09 projections are generally from a 1961-1990
baseline.
The purpose of this step is to provide the estimates for the level of future risk (threat or
opportunity), as measured by each risk metric.
Step 10 – Socio-economic change
It is recognised that many of the risk metrics in the CCRA are influenced by a wide
range of drivers, not just by climate change. The way in which the social and economic
future of the UK develops will influence the risk metrics. Growth in population is one of
the major drivers in influencing risk metrics and may result in much larger changes than
if the present day population is assumed. For some of the sectors where this driver is
particularly important, future projections for change in population have been considered
to adjust the magnitude of the estimated risks derived in Step 9.
For all of the sectors, a broad consideration has been made of how different changes in
our society and economy may influence future risks and opportunities. The dimensions
of socio-economic change that were considered are:
 Population needs/demands (high/low)
 Global stability (high/low)
 Distribution of wealth (even/uneven)
 Consumer driver values and wealth (sustainable/unsustainable)
 Level of Government decision making (local/national)
 Land use change/management (high/low Government input).
The full details of these dimensions and the assessment of the influence they have on
the Business, Industry and Services sector is provided in Chapter 5. Note: this step is
different from Step 4, which considers how the risks may affect society; whereas this
step considers how changes in society may affect the risks.
Step 11 – Economic impacts
Based on standard investment appraisal approaches (HM Treasury, 2003) and existing
evidence, some of the risks were expressed in monetary terms. This provides a broad
estimate of the costs associated with the risks and is presented in Chapter 6 of this
report. A more detailed analysis of the costs of climate change will be carried out in a
study on the Economics of Climate Resilience 8.
2.7
Report on risks
Step 12 – Report outputs
The main report outputs from the work undertaken for the CCRA are:
8
http://www.defra.gov.uk/environment/climate/government/
16
Business, Industry and Services
 The eleven sector reports (this is the sector report for the Business,
Industry and Services sector), which present the overview of impacts
developed from Tier 1 and the detailed risk analysis carried out in Tier 2.
 The Evidence Report, which draws together the main findings from all the
sectors into a smaller number of overarching themes.
 Reports for the Devolved Administrations for Scotland, Wales and Northern
Ireland to provide conclusions that are relevant to their country.
Business, Industry and Services
17
3.
Impacts and Risk Metrics
3.1
Introduction and Tier 1 analysis
Step 1
The Tier 1 analysis involved the development of a long list of impacts of climate change
(the ‘Tier 1 list’), from which the Tier 2 was selected (Section 3.3). The Tier 1 list of
impacts is contained in Appendix 1.
The physical effects of climate change will present threats and opportunities across a
wide variety of Business, Industry and Services sub-sectors. For the CCRA, the
following sub-sectors were used as illustrative examples to highlight the range of
climate-related issues and challenges the sector as a whole faces: financial services;
tourism; food and beverage manufacturing; primary extractives (oil, gas and mining);
and chemical manufacturing. Current vulnerability to climate-related impacts for the
sector can be divided into the following common themes:
 Assets: Fixed and workforce (e.g. infrastructure damage, workforce
exposure to health and safety risks).
 Operations: Supply of services, customer demand and regulatory
environment (e.g. financial performance, markets shift due to change in
public attitudes and / or legislation).
 Procurement: Raw materials, supply chain and logistics (e.g. supply of
water, energy and materials, reliance on vulnerable transport networks).
 Environment: Natural and built, plus local community (e.g. climatesensitive resources and conflict over their use).
These impacts have the potential to create the following consequences for individual
businesses and collective sub-sectors within the Business, Industry and Services
sector:
 Financial performance (revenue loss / gain)
 Additional costs (capital expenditure (capex) and operational expenditure
(opex))
 Operational disruption
 Loss of staff work hours
 Corporate reputation
 Elevated stakeholder interest
 Additional regulatory requirements
 Contractual issues
 Litigation
 New market opportunities and product diversification.
In 2008, KPMG released a report that focused on the impacts of climate change for a
range of business sub-sectors, including each of the sub-sectors addressed in the
CCRA Tier 1 analysis. As a consequence, the KPMG report was one of the key
18
Business, Industry and Services
references used in the three Business, Industry and Services sector Tier 1 reports. The
KPMG study utilised 50 reports that addressed the business risks and economic
impacts of climate change, together with expert views. The report identified that
companies are exposed to four types of risk: regulatory, reputational, physical and
litigation. There are clearly interconnections between these four types of risk, for
example, there are regulatory, reputational and litigations risks associated with the
physical impacts. Although the report was heavily weighted towards issues related to
GHG emissions, it does have relevance to this report owing to their inclusion of
‘physical risk’ to business. The relative scores for the business sub-sectors addressed
in the Tier 1 report are highlighted in Table 3.1.
Table 3.1
Perceived risk level by sub-sector for the four types of climate risk
identified in the KPMG analysis (2008)
Regulatory
risk
Physical
risk
Risk to
reputation
Risk of
litigation
Perceived risks
versus
preparedness
Financial
services
Danger
Tourism
Danger
Food and
beverages
Safe haven
Oil and gas
Danger
Mining and
metals
Middle of the road
Chemicals
Safe haven
Red = High risk; Orange = Medium risk; Green = Low risk; and Blue = Not or hardly mentioned. Scale for perceived
risks versus preparedness: Danger = where risk is markedly greater than preparedness; Middle of the road = where risk
is roughly matched to preparedness; and Safe haven = reasonably well prepared for climate change and do not seem to
face significant risks. (Adapted from KPMG, 2008).
The Business, Industry and Services sector is very diverse and within the broad risk
categories identified by KPMG (2008), the impacts of climate change differ between
sub-sectors; this heterogeneity is explored below.
3.1.1
Financial services
Financial institutions are particularly exposed to the effect of climate change impacts on
investment financial and credit performance, reputation, investor pressures, legal
liabilities and market opportunities (KPMG, 2008; Stenek et al., 2010; UNEPFI, 2011).
Across the spectrum of finance and insurance industry activities, climate change
represents an unprecedented and highly complex threat to long-term economic
interests (UNEP FI, 2002). The combined effect of increasingly severe climatic events
and underlying socio-economic trends (such as population growth and unplanned
urbanisation) have the potential to undermine the value of business assets, diminish
investment viability and stress insurers, reinsurers, and banks to the point of impaired
profitability and even insolvency (UNEP FI, 2002) (Figure 3.1).
There are few financial institutions that are incorporating current and future climate risk
and adaptation considerations into their governance and risk management processes
(Stenek et al., 2010). Financial risk modelling tools are generally test portfolios against
known historic stress points. There is a lot of research in this area and insurers, for
example, are beginning to acknowledge the importance of longer term climate models.
For those investors that do recognise the need for progress to be made to avoid the
Business, Industry and Services
19
economic consequences of failing to adapt, there are many opportunities to finance
adaptation (INCR, 2010).
Figure 3.1
Potential climate change impacts on the financial sector (assuming
no adaptation)
For banks, insurers and pension funds climate change represents operational risks (in
the form of risks to buildings, infrastructure and staff) and market risks - risks to
customers (retail and commercial), and to their investment and lending portfolios
(Acclimatise, 2010a). The exposure through their investment portfolios occurs
indirectly, yet represents a significant risk to the sector, as evidenced by the position of
this risk at the top of the Tier 2 ranking (Section 3.3).
Within the UK financial services sector, exposure to climate change will be highly
variable, both between different organisations and financial investments. While asset
diversification constitutes one of the basic principles through which risk is spread, each
company operates according to its own performance measures, thresholds and
success criteria.
Furthermore, financial institutions can have very different investment portfolios and risk
exposures. Undoubtedly, financial investments will not be affected by climate change in
the same way; while all sectors of the economy are exposed to climate through some
pathway or another (such as the wider impacts of climate change on operating
conditions or essential service infrastructure), some sectors (such as agriculture or
water) feature a high degree of climate sensitivity (Huddleston et al., 2009).
However, the following factors can be used as a guide to determine the degree of
potential severity of climate change consequences to financial institutions:
 The nature of the investment or investment portfolio (e.g. investments in
sectors relying heavily on natural resources, such as water, may in general
20
Business, Industry and Services
be more sensitive to climate change than investments in sectors relying on
manufactured goods).
 The geographic location of the investment or investment portfolio (e.g.
coastal areas, water-stressed and flood-prone regions are likely to be
particularly vulnerable to climate change).
 The adaptive capacity of the investment and resilience of management
practices in place (e.g. low levels of debt may be relatively favourable
indicators of resilience to climate-related impacts).
 The nature and duration of investment (e.g. long-term investments may be
particularly exposed to climate change; in general, equity may be more
exposed to climate-related impacts than debt).
 Sound risk management, robust governance and good disclosure within
financial institutions themselves are a necessary condition for resilience, as
shown by the 2008-2009 financial crisis (Stenek et al., 2010; Acclimatise,
2009c).
It is worth noting that due to its importance in the global financial system, the UK
financial services sector is not only exposed to climate-related hazards affecting our
country, but also to the impacts of a changing climate in foreign jurisdictions where
investees operate or have assets, or where branch offices of UK-owned institutions are
located. For instance, it is known that Hurricane Katrina in 2005 had a ‘ripple’ effect on
UK fund performance. The composition of cross-border investments shows that the UK
is very dependent on developed regions of the world (particularly North America and
Europe). However, there remain significant cross-border investments between the UK
and emerging markets, where the challenges presented by climate change are
expected to be magnified in comparison to developed economies (Stenek et al., 2010).
3.1.2
Tourism
With its close connections to the environment and climate itself, tourism is considered
to be a highly climate-sensitive industry (Simpson et al., 2008). The United Nations
World Tourism Organisation, together with the United National Environment
Programme and the World Metrological Organisation (UNWTO-UNEP-WMO, 2008)
highlighted four broad categories of climate change impacts likely to affect the tourism
industry globally, although much of these could apply to the UK, through shifting
tourism destinations, their competitiveness and sustainability. These four categories
are summarised as:
 Direct climatic impacts (e.g. suitability of locations, seasonality in demand,
operating costs).
 Indirect environmental change impacts (e.g. water availability, biodiversity
loss, increased natural hazards, damage to infrastructure).
 Indirect impacts of mitigation policies on tourist mobility (e.g. national /
international policies that seek to reduce GHG emissions).
 Indirect societal change impacts (e.g. reduction in the distribution of global
GDP, national / international security).
One of the main opportunities highlighted in the Tier 1 report was the potential benefit
of warmer temperatures for the UK-based tourism industry, with a possible expansion
of new and existing tourist destinations. The projected northward shift in “tourist
comfort” means that there is the potential for the UK to capture some of the southern
European tourist market. This opportunity is explored further in Section 4.2.10.
Business, Industry and Services
21
3.1.3
Food and beverages
The food and beverages manufacturing industries are exposed to climate change,
largely through their dependence on long, complex supply chains, where input
commodities are sourced globally and food and drink products are exported around the
world (Acclimatise, 2010b). The main impacts climate change may have on the food
and beverage manufacturing industry are as follows (Acclimatise, 2010b):
 Security of primary commodity supply
 Food and drink quality (e.g. bacterial growth)
 Impacts to factories and depots
 Worker health and safety (e.g. heat stress)
 Environmental compliance
 Utility supplies (water, electricity and gas)
 Commodity price fluctuation and increases.
3.1.4
Primary extractive industries
Primary extractive industries are widely perceived to be at risk from climate change
(Acclimatise, 2010c) for several reasons:
1. They are reliant upon long-lived and capital-intensive assets.
2. The majority operate in regions that are the most vulnerable to climate
change, including the Arctic, offshore environments and developing
countries.
3. They have extensive product transportation networks and rely on deep and
complex supply chains, both of which make operations vulnerable to
disruption.
4. In developing countries, they depend on workforces and communities that
are geographically and socio-economically vulnerable to a changing
climate.
5. The legacy of pollution left by historical activities is a major environmental
issue for such industries, and there is the potential that climate changerelated environmental impacts will increase pollution risks and make fragile
environments even more stressed.
As a result, companies within the primary extractive industry are particularly at risk from
climate change-driven impacts, from both direct physical impacts (including day-to-day
and seasonal variability in weather and extreme events) and indirectly through
reputation and brand value, and legal and regulatory challenges (Acclimatise, 2010c).
3.1.5
Chemical manufacturing
The concentration of chemical manufacturing assets along the coast and riverside
ports, as a result of the sub-sector’s heavy reliance on maritime logistics and pipeline
infrastructure, means that they are particularly exposed to physical risks, such as
coastal erosion and flooding by sea level rise, tidal and storm surges (Acclimatise,
2010c). Future physical risks for chemical manufacturing companies are centred on the
sub-sectors:
22
Business, Industry and Services
1. Use of water and subsequent discharge (environmental compliance)
2. Security of supply chains
3. Impacts to factories and depots
4. Worker health and safety (e.g. heat stress)
5. Utility supplies (water, electricity and gas)
6. Commodity price fluctuation and increases
7. Storage and transportation of volatile chemicals, plus disposal of
hazardous waste (Acclimatise, 2010c).
On the other hand, leading chemical manufacturing companies advocate their position
as part of the solution to tackling the effects of climate change rather than part of the
problem (Ceres, 2006; Lehman Brothers, 2007; EEF, 2009; Kandel, 2009). Products
from the chemical industry could be used in many adaptive technologies, in the
development of new materials and in aiding the acceleration of technical advances
(Deutsche Bank, 2007; Lehman Brothers, 2007).
3.2
Cross-sectoral and indirect risks
Step 2
This section explores cross-sectoral links based on the systematic mapping of causes,
processes and consequences; and identifies the risks in other sector reports that are
pertinent to the sector.
Many of the risks examined for this sector are linked or interact with risks in other
sectors of the CCRA. This means that some risks that are pertinent to the Business,
Industry and Services sector are not addressed in this report because they have been
covered in one, or more, of the other sector reports. In addition, some of the impacts
identified in this sector have far-reaching consequences across other sectors. As such,
this report should be read within the context of the above associated sector reports.
Important linkages with other sectors and respective Tier 2 impacts, detailed in subbullet points include the following:
 Floods (and to a lesser extent coastal erosion) impact on many aspects of
the Business, Industry and Services sector, including direct effects on
assets, business disruption, investment portfolios and insurance:
- FL6: Residential property at risk of flooding
- FL7: Non residential property at risk of flooding
- FL8: Transport links at risk of flooding
- FL11: Energy generation and distribution installations at risk of flooding.
 Food and beverage sub-sector impacts will cascade to the Agricultural
sector and vice versa:
- AG1: Mean yield variability with summer rainfall
- AG2: Flooding risk to crop and pasture land
- AG3: Crop diseases
 The availability of water for industry and business is directly related to the
Water sector, which includes supply and demand across all sectors:
Business, Industry and Services
23
- WA1: Relative aridity
- WA2: Low river flows
- WA4: Water demand
- WA5: Water supply demand deficit
- WA8b: Number of sites with unsustainable abstractions (industry)
 Disruption to transport is covered in the Transport sector:
- TR2: Landslide impact on the road network
- TR5: Rail buckling
- TR6: Bridge scour
 Disruption to energy supplies is covered in the Energy sector:
- EN1: Flooding of energy infrastructure
- EN10: Energy transmission efficiency
 Impacts on buildings are covered in the Built Environment sector:
- BE3: Overheating of buildings.
Systematic Mapping
The systematic mapping process provides a clear indication of the important interrelationships between Business, Industry and Services sector and the other 10 sectors
of the CCRA, whether they are natural environment/ resource-based sectors (e.g.
biodiversity or energy) or infrastructure-based sectors (e.g. built environment and
transport) (Table 3.2).
Subjective grouping of an inter-sector cluster analysis identified six themes, as shown
in the Systematic Mapping report, Section 4.2 (HR Wallingford, 2011).
Throughout the systematic mapping process, the number of consequences attributed
to the Business, Industry and Services sector increased with every successive pass.
For all other sectors, the opposite occurred. This suggests that for many sectors of the
CCRA, the overall end-point consequence (regardless of the sector) is very likely to be
an effect on the Business, Industry and Services sector, either through changes
(typically adverse, but often beneficial) in revenues or business growth/ continuity.
Indeed it is noticeable that the final consequence of many impacts relates to the
Business, Industry and Services sector.
An example of this interaction is illustrated in Figure 3.2, which shows a selected
systematic map extracted for the Business, Industry and Services sector. It highlights
the causes and consequences over 4 tiers leading to an effect on water demand for
business via the agricultural and built environment sectors.
24
Business, Industry and Services
Table 3.2
Some interrelationships between Business, Industry and Services
and other sectors
Systematic
mapping Pass
No.
Description
5
Health care service
demands
Sector Report
Note
Health
Changes in the demand for health care
may have an effect on workers through
changes in access to health care and
knock-on effects on productivity.
5
Energy demand
Energy
Changes in energy demand may
increases prices for business or mean
that there are additional requirements for
high demand industries to consider
alternative sources, including private
power generation.
5
Human illness/
morbidity
Health
Changes in human health may affect
business through seasonal or annual
declines in productivity.
5
Land availability/
suitability
Built environment
A reduction in suitable land for business
and industry to develop may hinder
growth.
Water
Decline or changes in water quality may
affect business and industry by
increasing treatment costs or utilising
alternative sources.
5
Raw water quality
4
Mine water outbreak
Water
Acid mine drainage may affect business
and industry by reducing bathing water
quality in rivers and estuaries and/ or
increase treatment costs of water for
industrial or agricultural users.
4
Development sites
Built environment
A reduction in suitable land for business
and industry to develop may hinder
growth.
4
Travel demand
Transport
Increasing demand for travel in certain
parts of the UK’s road, rail, sea and air
network may cause increasing delays for
business and supply chains.
4
Renewable energy
potential
Energy
Opportunities for business are possible
from a changing socio-economic
situation.
Built environment
A reduction in suitable land for business
and industry to develop may hinder
growth. Also agriculture/ forestry may be
affected.
4
Land use
4
Marine loss/ damage
Marine
Loss of fisheries and associated
economically important marine areas will
affect businesses that rely of natural
marine resources.
3
Loading (waves)
Marine
Increased wave pressure may affect
shipping and port operations, with a
subsequent effect on supply chains.
3
Ship passage through
arctic
Marine
Global supply chains may be enhanced
by the emergence of new arctic routes.
3
Port operations
Marine
Increased disruption to port operations
may affect supply chains.
3
Damage to shipping
Marine
Increased disruption to shipping
operations may affect supply chains.
Business, Industry and Services
25
Systematic
mapping Pass
No.
3
Description
Pests/ mould
Sector Report
Note
Agriculture
Agricultural industry and other
associated businesses along supply
chains could be affected by increased
prevalence of pests/ mould at source or
during transit/ storage.
3
Potential yield
Agriculture/
Forestry
Agricultural/ forestry industry and other
associated businesses along supply
chain would be affected by decreases in
yield. Also increases in yield for certain
crops may have a beneficial effect.
3
Discolouration of
potable water
Water
Water companies may be affected
increased treatment costs associated
with discoloured water.
3
Tree/ crop damage
Agriculture/
Forestry
Agricultural/ forestry industry and other
associated businesses along supply
chain would be affected by increased
tree/ crop damage.
3
Housing demand
Built environment
Increased demand for housing, if not met
by adequate supply, may affect the
ability of business to attract workers.
2
Condensation ICT
failure
Energy
Increased condensation may affect ICT
and communication equipment.
2
Drying time for
products (paints)
Built environment
The construction industry may be
affected by schedule delays resulting
from increased drying times for paints
and other products.
2
Non-native species
invasion
Biodiversity
Tourism and leisure may be affected by
non-native species invasion. Also
blighted areas may be closed to visitors.
Health
Changes in lifestyle may benefit
business through increased health,
outdoor living, etc. promoting greater
productivity.
2
Lifestyle patterns
2
Plant growth
Agriculture
Agricultural/ forestry industry and other
associated businesses along supply
chain would be affected (adverse and
beneficial) by changes in plant growth.
2
Habitat condition/
extent
Biodiversity
Tourism may be affected by changes in
biodiversity and the attractiveness of
natural areas of the UK.
26
Business, Industry and Services
Figure 3.2
3.3
Systematic map for the Business, Industry and Services sector
based on 4th pass cause of “water demand”
Selection of Tier 2 impacts
Step 6
Following the production of the Tier 1 reports and consultation activities, a wide range
of over 120 impacts, risks and consequences were identified for the Business, Industry
and Services sector. It is important to note that many of the risks identified in the
original Tier 1 reports are equally applicable to other sub-sectors of Business, Industry
and Services, not just those addressed in these reports.
The key and marginal risks for the Business, Industry and Services sector are outlined
in Table 3.3. This table explores the link between climate effect, impact, risk and
consequence, with details of the scoring criteria (economic, social and environmental
consequence, plus likelihood and urgency) and a short commentary on the significance
of the risk for the Business, Industry and Services sector. The most important risks,
plus a selection of lesser (marginal) risks, were taken forward into the Tier 2 analysis.
The four marginal risks included in the analysis were at the request of stakeholders and
reviewers (peer-reviewers and Government departments), with further justification of
inclusion or exclusion presented in the “Comments” column in Table 3.3. Appendix 1
contains the full list of risks for the Business, Industry and Services sector, with scores
presented.
Business, Industry and Services
27
Table 3.3
Key and marginal risks for the Business, Industry and Services sector
This table explores the link between climate effect, impact, risk and consequence, with details of the scoring criteria (economic, social and
environmental consequence, plus likelihood and urgency) and a short commentary on the significance of the risk for the Business, Industry and
Services sector.
Climate
Effect
Impact
Risk
Consequence
Scoring criteria
Comment
KEY RISKS (above threshold score = 30)1
Extreme events
and
incremental
climate change
Wide variety of
effects on
investments
Reduced returns for UK
financial institutions’
investments due to the
absence of
mainstreaming climate
risk and adaptation into
decision-making
processes
Reduced financial
performance and
financial losses
Likelihood: 3
Urgency: 2
Incremental
sea level rise
and extreme
events (storm
surge and high
precipitation)
Coastal erosion
and inundation,
and fluvial
flooding of
tourist assets
An increase in monetary
losses as a result of an
increasing proportion of
UK tourist assets
(natural and built) at risk
from flooding
Damage or loss of natural and built
tourist assets is likely to be
economically very detrimental to the
UK-based tourism industry. It is likely
that there are limited coastal defences
in many locations and no industry
wide coordination/understanding of
risks; hence the likelihood and
urgency for action are both high.
Asset damage
and financial
losses
Likelihood: 3
Urgency: 3
28
As presented in Chapter 1.3, the
financial services sector is a key
component of the UK economy and
internationally recognised as a core
market, with several trillions of pounds
in invested. Underestimation of
climate change is likely to produce
multiple exposures and risks, both
within this sector and the wider
economy, hence the high economic
and social consequence scores.
Climate
Effect
Impact
Risk
Consequence
Low
precipitation
Low river flows
and reduced
groundwater
recharge
A decrease in water
(groundwater and
surface water)
availability for industrial
usage
Operational
disruption and
increased
operational costs
Scoring criteria
Likelihood: 3
Urgency: 3
Incremental
sea level rise
and extreme
events (storm
surge and high
precipitation)
Coastal erosion
and inundation,
and fluvial
flooding of
industrial assets
An increase in monetary
losses as a result of
interruption to business
from flooding
Asset damage
and financial
losses
Likelihood: 3
Urgency: 2
29
Comment
This risk is important across a number
of business sub-sectors, with the
potential to have significant
consequences for operational
expenditure and create conflict with
other water users, which may cause
reputational issues for the companies
involved. The cross-sectoral nature of
this risk and its far-reaching
consequences results in a high
urgency score.
The concentration of industrial assets
(oil, gas and chemical manufacturing)
in coastal and riverside locations
makes them particularly exposed to
coastal and fluvial climate change
impacts. The economic influence of
these sub-sectors results in a high
economic consequence score.
Exposure is dependent upon levels of
defence and understanding of the risk;
many industrial facilities already have
active risk management procedures
and a level of existing protection, so
exposure is reduced and hence
urgency for action is lower than that
for tourist assets, for example.
Climate
Effect
Impact
Risk
Consequence
Extreme events
and
incremental
climate change
Flooding, heator wind-induced
damage to ICT
infrastructure
A decrease in
productivity and
revenues due to ICT
loss/ disruption
Asset damage,
operational
disruption and
financial losses
Extreme events
Flooding, heator wind-induced
damage to
insured property
Increased exposure for
mortgage lenders
Scoring criteria
Comment
Likelihood: 3
Urgency: 2
Across business sub-sectors, ICT
forms a fundamental part of
organisations systems and
transactions. With the high value of
transaction rates per minute,
unplanned ICT downtime represents a
significant financial risk to the sector.
From a business continuity
perspective, it is likely that these risks
are largely understood and planned
for; hence the urgency of response is
considered moderate.
Risks to properties are well
understood so although likely to
happen there is a low score for
urgency. Economic and social score
is moderate as property will be
devalued, etc. Environmental impact
is limited from a property perspective.
Reduced financial
performance and
financial losses
Likelihood: 3
Urgency: 2
30
Climate Effect
Impact
Risk
Consequence
Scoring criteria
MARGINAL RISKS (above threshold score = 25)1. Those risks selected for Tier 2 analysis are marked by 2
Incremental
Flood damage
An increase in insurance Reduced financial
sea level rise
to insured
industry exposure due to performance and
2
and extreme
financial losses
property
flooding
events (storm
surge and high
precipitation)
Likelihood: 2
Urgency: 3
Incremental
climate change
Amelioration of
climatic
conditions
conducive to
tourism
activities
An expansion of new or
existing tourist
destinations in the UK2
Increased
revenue for the
tourism subsector
Likelihood: 3
Urgency: 2
31
Comment
Insurance products are currently
determined largely, but not
exclusively, by historic risk profiles. An
increase in extreme event frequency
or geographic clustering is likely to
create significant challenges for the
insurance industry. If products do not
consider future climate impacts, there
is the potential that the insurance
industry may face significant
economic consequences. The
urgency is considered high, due to the
need for industry-wide coordinated
action. Some action is already
underway and therefore there is a
moderate likelihood score.
An increase in temperatures may
create opportunities for the UK-based
tourism industry, as the appeal of the
UK as a tourism destination improves.
The increase in visitor numbers will
translate into increased revenue. The
UK-based tourism industry is largely
dominated by SME’s, with relatively
high adaptive capacity and an
entrepreneurial-spirit; hence the
urgency for action is viewed as
moderate.
Climate Effect
Impact
Risk
Consequence
Extreme events
Physical
damage to
transport and
supply chain
infrastructure
A decrease in output for
UK businesses due to
an increase in supply
chain disruption as a
result of extreme events2
Operational
disruption and
financial losses
Scoring criteria
Likelihood: 3
Urgency: 2
Increase in
average
temperatures
and extreme
events (heat
waves)
High ambient air
temperatures
Loss of staff hours due
to high internal building
temperatures2
Across the sector, the supply chain
(source, storage, transport) is likely to
be highly sensitive to extreme events.
Exposure to disruption is dependent
on the complexity and flexibility of the
supply chain (e.g. use of multiple
suppliers, transport modes), which is
likely to be highly variable between
and within sub-sectors. As a result, a
moderate urgency score is assigned.
This risk is likely to be more prevalent
in urban areas (due to urban heat
island effects) and in industrial /
manufacturing sub-sectors, with
moderate social consequences and
minimal economic consequences. The
largely localised nature of this risk
results in a moderate urgency score.
Operational
disruption and
reduced
profitability
Likelihood: 3
Urgency: 2
32
Comment
Climate Effect
Impact
Risk
Consequence
Incremental
sea level rise
and extreme
events (storm
surge and high
precipitation)
Coastal
erosion and
inundation,
and fluvial
flooding of
transport
infrastructure
Disruption from
flooding of assets,
transport links and
supply chain
Operational
disruption and
financial
losses
Scoring criteria
Comment
This risk is a sub-set of the supply chain risk
described above (and hence not taken further in
the Tier 2 analysis). This risk focuses purely on
the impacts from coastal erosion, inundation and
fluvial flooding on transport infrastructure; impacts
that are likely to occur at a local or regional scale.
Furthermore, many of the UK’s major transport
facilities (e.g. ports, airports) already have active
risk management procedures and a level of
existing protection; hence urgency for action is
considered moderate.
Likelihood: 3
Urgency: 2
Extreme events
and
incremental
climate change
Wide variety
of effects on
investments
Loss of reputation
due to interplay
between
environmental,
community and
climate change
pressures
Climate change has the potential to create or
exacerbate tensions that lead to reputational
damage, by impacting shareholder values, the
surrounding environments and local communities.
Once stakeholders become aware of company
exposure to climate change risks, there are
potential economic consequences through knockon effects on brand equity and share value. This
risk is largely confined to large multi-national
companies, with significant fixed assets and
hence not entirely typical for the Business,
Industry and Services sector. Due to this reason,
this risk has not taken forward into the Tier 2
analysis.
Reputational
damage, loss
of investor
confidence
and reduced
financial
performance
Likelihood: 3
Urgency: 2
33
Climate Effect
Impact
Risk
Consequence
Incremental
climate change
Changes in
the mobility,
etc. of
contaminants,
whether held
at surface or
below
ground.
Incremental climate
change may mean
that there is an
underestimation of
decommissioning
liabilities and end of
life costs
Decommission
ing provisions
(which are
treated in
additions to
debt) create
future debt
burden
Scoring criteria
Comment
Decommissioning of large fixed assets is a
complex and expensive procedure. Due to the
long-lifespan of such assets, it is unlikely that
climate change impacts have been considered in
decommissioning obligations, with the danger that
costs have been underestimated. Given the
number of assets across industrial sectors that
will be decommissioned over coming decades,
the economic consequences could be significant.
Furthermore, poorly scoped decommissioning
could have environmental consequences. This
risk is largely confined to the oil, gas and chemical
manufacturing sub-sectors and hence not entirely
typical for the Business, Industry and Services
sector. Due to this reason, this risk has not taken
forward into the Tier 2 analysis.
Likelihood: 2
Urgency: 2
Increase in
average
temperatures
and extreme
events (heat
waves)
Increased air
temperature leads to
increased energy
usage for cooling
systems for
machinery
Climate change has the potential to impact
industrial asset performance, maintenance
procedures and design. An incremental increase
in temperature is likely to reduce equipment
efficiency or cause failure, with associated
economic consequences. Furthermore,
adaptation actions (e.g. increased cooling
systems) will have implications for emissions
management and compliance. This risk is largely
confined to industrial sub-sectors and hence not
entirely typical for the Business, Industry and
Services sector. Due to this reason, this risk has
not taken forward into the Tier 2 analysis.
Increased
operational
costs and
reduced
financial
performance
Likelihood: 3
Urgency: 2
34
Climate Effect
Impact
Risk
Consequence
Low
precipitation
and increase
water
temperature
Low river
flows and
high river
temperatures
Seasonal
precipitation and
water temperature
effects wastewater
treatment systems
Increased
operational
costs and
regulatory
compliance
issues
Scoring criteria
Likelihood: 3
Urgency: 2
Incremental
climate change
Reduction in
the
availability of
natural
resources
Incremental climate
change may lead to
higher risk of conflict
and environmental
incidents which could
affect environmental
and social licence to
operate with loss of
consumer confidence
Reputational
damage, loss
of consumer
confidence
and reduced
financial
performance
Likelihood: 2
Urgency: 2
Comment
Climate change is likely to cause a reduction in
river flow and as a result, the capacity of rivers
and lakes to dilute industrial effluent may also be
reduced. As a consequence, there may be the
requirement for increased effluent treatment prior
to discharge to meet more stringent discharge
limits on water quality. This may result in higher
costs for compliance, due to requirements to stepup environmental monitoring and potential
installation of additional effluent treatment to
ensure continued compliance. This risk is largely
confined to industrial sub-sectors and hence not
entirely typical for the Business, Industry and
Services sector. Due to this reason, this risk has
not taken forward into the Tier 2 analysis.
Climate change is likely to present a number of
challenges to the management of natural
resources, with the potential for conflicts to arise
with other users and interested groups.
Stakeholder perceptions and expectations have
the potential to affect a company’s license to
operate and the regulatory environment, together
with their reputation. Multi-national companies
with operations in regions already experiencing
resource stress are likely to be more exposed.
The issue of national security and international
interventions was explored more generally in the
Foresight (2011a) “International Dimensions of
Climate Change” report and as such, this risk has
not taken forward into the Tier 2 analysis.
Notes
1
These threshold values were selected to provide a degree of consistency with other sectors, in order to facilitate a comparison of impacts across sectors. See Table A1.2 for a list
of all Tier 1 scores and Defra (2010b) for formula used to score.
2
Included in Tier 2 assessments, on request by stakeholders and reviewers (peer-reviewers and Government departments).
35
3.4
Identification of risk metrics
Step 7
The ten selected Tier 2 impacts are listed in Table 3.4. The next step is to identify risk
metrics for each impact (see Step 7, Section 2.5).
The Business, Industry and Services sector is typified by a lack of publicly available
quantitative data. Information that is currently collected is often considered
commercially sensitive and remains undisclosed for confidentiality purposes. There are
limited regulatory requirements on the sector to report the current and future projected
impacts of climate change or its proposals for adapting to climate change, other than
for those organisations that report under the Adaptation Reporting Power 9.
Furthermore, the consequences for business are usually economic, making the links
between climate impacts and consequences complex. As such, the development of
useful risk metrics is challenging, but possible in some cases.
Following review and liaison with sector representatives, the metrics available for the
priority risks and opportunities in this sector are shown in Table 3.4. Further information
on the elaboration of these risk metrics is included in Chapter 4.
Table 3.4
Selection of risk metrics
Ref. No.
Risk Description
Risk metric considered in the analysis
BU1
Reduced returns for UK
financial institutions’
investments due to the
absence of
mainstreaming climate
risk and adaptation into
decision-making
processes
Internal rate of return (£)
An increase in monetary
losses as a result of an
increasing proportion of
UK tourist assets (natural
and built) at risk from
flooding
Number of UK beaches and English fixed tourist
assets and infrastructure
A decrease in water
(groundwater and surface
water) availability for
industrial usage
Number of industrial surface- and groundwater
abstractions (total and consumptive) per England and
Wales river basin district (RBD)
BU2
BU3
Tangible and intangible asset value (£)
Tourism Direct Gross Value Added (TDGVA) (£)
Avertive Expenditure (£)
%-age total industrial abstractions within compliant
water bodies per region (England and Wales)
Turnover equivalent of the impact of changes in water
abstraction analysed using selected groups of the
standard industry classifications
BU4
An increase in monetary
losses as a result of
interruption to business
from flooding
Business interruption costs based on annual gross
incurred weather-related insurance claims (£)
Expected Annual Damages insurance claims for NonResidential Property (£)
9
For example, utilities such as water and energy companies, transport organisations such as
airport operators, harbour authorities, etc. For the full list see:
http://www.defra.gov.uk/environment/climate/documents/rp-list.pdf
36
Business, Industry and Services
Ref. No.
Risk Description
Risk metric considered in the analysis
Loss of staff time and proportion of business turnover
due to increased flood risk, analysed using section
and selected division level standard industry
classifications
BU5
BU6
BU7
BU8
A decrease in productivity
and revenues due to ICT
loss/ disruption
Number of days of productivity lost per annum
Increased exposure for
mortgage lenders
Number of UK properties
An increase in insurance
industry exposure due to
flooding
Annual weather-damage related insurance claims (£)
for commercial and domestic properties
An expansion of new or
existing tourist
destinations in the UK
Tourism Comfort Index (TCI)
Loss in business revenues (£) per annum
Gross mortgage value (£) for residential property by
UKCP09 region (England and Wales)
Number of properties in England and Wales inside the
1:75 year flood (fluvial and tidal) return period flood
zone
Tourism Direct Gross Value Added (TDGVA) (£)
Serviced accommodation room occupancy days per
annum
BU9
BU10
A decrease in output for
UK businesses due to an
increase in supply chain
disruption as a result of
extreme events
Internal rate of return (£)
Loss of staff hours due to
high internal building
temperatures
Lost productivity as a result of over-heating in the
workplace, analysed using section and selected
division level standard industry classifications
Tangible and intangible asset value (£)
Business, Industry and Services
37
4.
Sector Risk Analysis
4.1
Introduction and response functions
Step 8
This chapter forms the main body of the report, with the results and discussion of the
Tier 2 analysis presented. As outlined in Section 2.6, the CCRA methodology utilises
response functions, which define how climate impacts and their consequences on the
Business Industry and Services sector vary with key climate variables (e.g. mean and
maximum temperature or precipitation), based on past and current observations and
expert interpretation. This relationship can then be scaled using climate projections to
determine the future risk to the sector. The selection of response functions for the
Business, Industry and Services sector is presented in Table 4.1.
As explained in Sections 2.6 and Section 3.4, due to the inherent complexity of the
sector and data inadequacies, it was not always possible to determine suitable
response functions. Where this is the case, a brief explanation is given in Table 4.1
and Step 9 of the methodology (estimates of changes in selected climate change
scenarios) involved a qualitative literature review, to further elaborate on the potential
implications of climate change.
Table 4.1
Selection of response functions
Ref.
No.
Risk Description
BU1
Reduced returns for UK financial
institutions’ investments due to the
absence of mainstreaming climate risk
and adaptation into decision-making
processes
BU2
An increase in monetary losses as a
result of an increasing proportion of
UK tourist assets (natural and built) at
risk from flooding
A decrease in water (groundwater and
surface water) availability for industrial
usage
An increase in monetary losses as a
result of an increasing proportion of
industrial assets at risk from flooding
BU3
BU4
38
Response function available? In
cases where none is available, a
brief explanation is also given.
No
 Financial services sector contains a
diversity of actors
 International exposure
 Intrinsic vulnerability
 Limited substantive evidence of the
consequences of changes in
climate on UK financial institutions
 Myriad of socio-economic factors
(e.g. exchange rates, financial
regulations) mask any potential
climate change effect
Yes
Yes
Yes
Business, Industry and Services
Ref.
No.
Risk Description
BU5
A decrease in productivity and
revenues due to ICT loss/ disruption
BU6
Increased exposure for mortgage
lenders
An increase in insurance industry
exposure due to flooding
An expansion of new or existing
tourist destinations in the UK
Yes
A decrease in output for UK
businesses due to an increase in
supply chain disruption as a result of
extreme events
No
 Supply chains are highly complex,
with a network of interconnected,
yet independent elements
 Many climatic factors can disrupt
supply chains, making a single
response function too simplistic
Yes
BU7
BU8
BU9
Response function available? In
cases where none is available, a
brief explanation is also given.
No
Very little suitable literature that
specifically considers the potential
impacts of climate change on ICT and
its knock-on effects to business
Yes
Yes
BU10 Loss of staff hours due to high internal
building temperatures
4.2
Estimates of changes in selected
climate change scenarios
Step 9
This section explores the impacts of climate change on the ten selected Business,
Industry and Services sector risks (Table 4.1). Where response functions are available,
UKCP09 projections are applied to these response functions to estimate consequences
under different future scenarios. The results presented in this section are for climate
change impacts only, i.e. they consider the impacts of climate change under today’s
socio-economic baseline. Social and economic drivers are only introduced in
Chapter 5.
For each metric a scorecard is given at the
start of each section to indicate the
confidence in the estimates given and the
level of risk or opportunity. Confidence is
assessed as high (H), medium (M) or low
(L). Risks and opportunities are scored
either high (3) medium (2) or low (1) (shown
to the right). These are given for the lower
(l), central (c) and upper (u) estimates for the
2020s, 2050s and 2080s. Further
information is provided in Appendix 1.
Where estimates are uncertain, or no data is
available, this is stated in the scorecard.
M
Confidence assessment from high
(H) to low (L)
3
High opportunity (positive)
2
Medium opportunity (positive)
1
Low opportunity (positive)
1
Low risk (negative)
2
Medium risk (negative)
3
High risk (negative)
Business, Industry and Services
39
Reduced returns for UK financial institutions’ investments
due to the absence of mainstreaming climate risk and
adaptation into decision-making processes (BU1)
Metric
code
Confidence
4.2.1
Risk description
BU1
Reduced returns for UK
financial institutions’
investments due to the
absence of mainstreaming
climate risk and adaptation into
decision-making processes
Summary Class
2020s
l
c
L
2050s
U
l
c
2080s
u
l
c
u
Too uncertain
Introduction
For the financial services sub-sector, the most significant climate-related risk is that
financial institutions fail to mainstream climate change adaptation considerations into
their investment decisions. Currently, there are no (or very few) financial institutions
that are incorporating current and future climate risk and adaptation considerations into
their governance and risk management processes (Stenek et al., 2010). This view was
supported by Mercer and the Cambridge Programme for Sustainability Leadership in
discussions with them made as part of this study 10. Research has shown that financial
institutions that fail to integrate climate risk and adaptation considerations into their
processes are likely to be affected by climate change through:

Financial and credit performance of individual investments and investment
portfolios (loans, equity, guarantees, etc.).

Reputation, if by failing to assess and manage climate risks institutions fall
short of growing stakeholder expectations on adaptation.

Investor pressures for climate risk and adaptation disclosure, and climate
resilient risk management.

Legal liabilities, if decisions fail to take into account the reasonably
foreseeable impacts of climate change and information is not provided on
the material risks of climate change.

Market changes in the event of a change in demand for finance from
governments, commercial and individual clients. For the financial
institutions, this may represent a lost opportunity to finance adaptation
(Stenek et al., 2010; KPMG, 2008; UNEPFI, 2011).
Each of these consequences are explored in more detail below, utilising published
information to illustrate the state of knowledge on the interactions between the financial
performance and the risks to individual investments and investment portfolios for UK
financial companies, and their exposure to climate change.
Reduced financial and credit performance
Past weather events provide evidence of how climate-related events can affect ‘real
sector’ (non-financial sector) investments and, in return, affect the financial and credit
performance of debt, equity and other financial instruments (as shown in Box 4.1). It is
10
Entec, Pers. Comm., 2010.
40
Business, Industry and Services
worth noting, however, that climate factors are often part of a combination of other
factors influencing credit-worthiness and profitability.
Under a changing climate, the use of historic climate data in financial models and credit
risk analysis to make projections is no longer robust. The potential consequences are
inaccurate forward-looking estimates, inadequate instrument pricing and structuring,
higher default on loan repayments, and lower return on equity. For example, if an
institution guarantees, as part of a risk sharing facility, loans to farmers in an area
severely affected by water scarcity, it may have to cover higher losses than expected
due increased rates of loan default as a result of reduced revenues (Stenek et al.,
2010).
While recognition of current financial and credit risks due to climate change varies
between financial institutions, most agree that they will become important in the future.
Yet, climate change risk considerations are still not being incorporated into mainstream
investment considerations (FairPensions, 2009).
Box 4.1

Examples of consequences of climate-related events on financial
and credit performance of ‘real sector’ investments
Market conditions
Changes in customer needs, behaviours and demand in response to climatic
changes will affect the revenues of a number of companies that fail to adapt to these
changes. For instance, retailers that understand how weather affects sales and plan
supply accordingly stand to benefit from climate-related impacts. For example, the
hot UK summer of 2006 caused a reduction in total sales of 5% for the month of July
(department stores reported that trade decreased by 7%).

Production output
The 2003 summer heat wave in Europe led to large losses in the agricultural sector
totalling 13 billion Euros (~£11bn) in the European Union. For example, there was a
10% and 20% decrease in wheat output in the UK and France respectively,
compared to the previous year. As wheat fodder is one of the principal ingredients of
livestock feed, there were fears that reduced European wheat production would
increase animal feed prices and affect farming revenues and investors (animal feed
representing a significant share of total animal production costs, e.g. <60% for pigs).
This justified intervention by the European Commission and European countries.
Note that 2003 summer temperatures were considered exceptionally high
(corresponding to a 1 in 500-year event), but are likely to become ‘normal’ by the
2040s and occur once every two years.
In Brazil, severe droughts led to major power disruptions as the country relies heavily
on hydroelectric power. The cost to the national economy was estimated to be
approximately US$20 billion (the equivalent of 2% of Brazil’s GDP). Individual power
companies suffered significant losses: in 2001, AES Tiete had to postpone
repayment of a US$300 million bond due to reduced revenues.

Commodity prices
Future increased volatility of commodity prices is expected in response to climate
change. Research has found that Australian droughts have played a role in the sharp
wheat price increases observed between 2006 and 2008. Such commodity price
increases can affect revenues for industries using agricultural products as production
inputs (such as animal production, food and beverage, and pulp and paper),
although there are differences between producers depending on the amount of gross
margins and on the capacity to pass-on price increases. For instance, in the wake of
the 2008 global food crisis, major food and beverage producers suffered significant
Business, Industry and Services
41
increases in raw material prices: brewers (Scottish & Newcastle and Greene King)
reported yearly price rises of 25%, 50% and 150% for malted barley, apples and
hops in 2008 and Domino's Pizza announced a 48% reduction in its profits for the 4th
quarter of 2008, due to the rising raw material bill.

Operating costs
Some assets will require higher maintenance costs to cope with climate change
impacts. For instance, a section of the railway between London and Penzance in
Southern England is subject to repeated speed restrictions and closures at Dawlish
due to seawater overtopping. Sea level has been rapidly rising in the area at a rate of
450mm per year since the mid-19th century. The owner and operator of the rail line,
Network Rail, spend significant amounts in repair and maintenance. Yearly costs for
the most affected section average £500,000. With accelerated sea level rise, future
seawater overtopping at Dawlish is projected to increase (between 120 and 115%
compared to 1961-1990) and further affect the balance sheet of the operator.
(Sources: Morisson et al., 2009; Wight et al., 2008; Telegraph, 2008; RSSB, 2008; Acclimatise, 2006;
McKie, 2006; COPA-COGECA, 2004; Stott et al., 2004.)
Reduced reputation
Most financial institutions with lending activities consider reputational risks from climate
change as being already relevant today and agree that it will gain importance in the
future (UNEPFI, 2011).
Large amounts of research on climate change adaptation have been done by civil
society organisations, which highlight the level of stakeholder interest in the issue.
Stakeholder expectations with regards to how UK financial institutions should integrate
climate risk and adaptation considerations in their decision-making processes are
changing and could affect the reputation of those financial institutions, which fail to
mainstream climate change adaptation.
There are a number of on-going stakeholder-led developments, which are likely to
result in higher pressure on financial companies to increase the climate resilience of
their investment decisions and support adaptation investments, especially in
developing countries where vulnerability is high and climate change threatens
development progress. The most important stakeholder-led developments are
presented in Box 4.2.
Furthermore, there could be significant consequences if financial institutions fail to take
note of the impacts of climate change on the environmental or social performance of
their investments. For instance, they may be criticised for supporting non-climate
resilient projects or, worse, projects promoting “mal-adaptation” (e.g. high water
withdrawals in water-stressed areas) (Morison et al., 2009). In some cases, concerns
over climate risks and adaptation can influence government and community support of
a project, as highlighted in Box 4.3.
42
Business, Industry and Services
Box 4.2
Major on-going stakeholder-led developments pushing for
climate change adaptation mainstreaming

The review of the International Finance Corporation (IFC) Performance
Standards on Social and Environmental Sustainability are likely to include climate
change adaptation requirements, which is expected to influence a number of
global finance standards, including the Equator Principles, to which many UK
institutions are signatories.

Recent work by international financial institutions, such as the World Bank, the
IFC and the European Bank for Reconstruction and Development (EBRD), are
setting examples of good practice of mainstreaming climate risk management in
banking activities.

The European Commission is revising its Environmental Impact Assessment
(EIA) Directive. As indicated by the 2009 White Paper “Adapting to climate
change: towards a European framework for action”, climate change adaptation
should be included in the scope of this revision, which could mean that UK
financial institutions will have to include such considerations in their due diligence
processes for projects within the European Union.

In many countries, knowledge of climate change impacts is starting to influence
national and local sector strategies, and regulatory frameworks, through the
inclusion of climate change resilience considerations. For example, the World
Bank Energy Sector Management Assistance Programme (ESMAP) is assisting
governments to develop energy policies that are resilient to future climate
change.
(Source: IFC, 2010: Stenek et al., 2010; World Bank, 2010b; European Commission, 2010 and 2009)
Box 4.3
Community and governmental opposition to mining project in
Chile fuelled by climate-related concerns
In certain parts of the world, physical climate change impacts on water resources
and communities are starting to affect planned projects.
Barrick Gold Corporation is facing strong stakeholder opposition to its Pascua-Lama
project on the Argentina-Chile border to exploit gold, silver and copper reserves,
though governments have approved the project.
Communities fear that mine construction and exploitation will further accelerate
glacier melting (through dust deposition on the glacier), reduce water availability and
contaminate water supplies. It appears that this perception of project risk to water
could be linked to observations of receding glaciers. The company argues that
glaciers have been receding for years because of temperature rise and that the
project has state-of-the-art management measures in place to avoid impacts that
could accelerate melting in the future.
The Argentinean and Chilean governments have also been hardening their positions
in relation to mining operations near glaciers due to their vulnerability to climate
change. A bill to curb mining activities in ice zones was recently passed by the
Argentinean Parliament, which could make it more costly or even impossible for
Barrick Gold to exploit the Pascua-Lama site, despite having committed already
US$1.2 billion of the pre-production budget at the end of 2010.
(Source: Brenning, 2008; Barrick Gold, 2010; and Mines and Communities, 2010)
Business, Industry and Services
43
Investor pressures
There are a number of investor-led initiatives promoting corporate disclosures on
physical climate risks and adaptation, including:
 The Carbon Disclosure Project (CDP). In the UK, this is an independent
not-for-profit organisation that sends out annual questionnaires on climate
change mitigation and adaptation to the world’s largest private companies
on behalf of 534 institutional investors with US$64 trillion in assets under
management 11. The CDP investor questionnaire includes questions on
physical climate change risks, adaptation and governance, and companies’
answers are scrutinised by analysts and stakeholders.
 The Investor Network on Climate Risks (INCR). This is a US initiative that
supports more than 90 institutional investors with assets exceeding US$9
trillion in understanding the financial opportunities and risks of physical
climate change 12.
While these types of initiatives are non-mandatory, they may trigger in the short- to
medium-term increased investor scrutiny with regards climate risk disclosure, higher
scrutiny by stakeholders on climate risk management and increased activity of groups
advocating for socially and environmentally responsible investment, including possibly
shareholder resolutions on such issues (Baker and McKenzie, 2010).
Such a risk is particularly high in light of recent legislative and regulatory developments
on mandatory climate risk disclosure in a number of countries. First, the UK Climate
Change Act of 2008 empowers the Secretary of State to require companies with assets
critical to the UK economy to disclose their risks and adaptation actions. In 2010,
financial regulators in the US and Canada published guidance on existing requirements
relating to disclosure of material risks, which informed public companies that disclosure
of climate change risks can be required when they can be considered material 13.
Legal liabilities
A number of lawyers acknowledge that there is now enough information available on
the impacts of climate change to consider them “reasonably foreseeable” (Stenek et
al., 2010; Dowden, 2005; Dowden et al., 2005). Company directors or asset managers
who fail to take these impacts into account may incur liability in negligence (LCCP
Finance Group, 2009). This contrasts sharply with the view among financial institutions
that the level of information on current and future climate risks is not sufficient
(UNEPFI, 2011).
Furthermore, landmark reports have stated that inclusion of environmental, social and
governance considerations (including climate change impacts) in investment analysis
falls under the fiduciary duty that asset managers legally owe their clients in most
jurisdictions (UNEPFI, 2005 and 2009).
Finally, there is increasing attention from the legal community on the potential
inconsistency between mandatory and voluntary corporate disclosures relating to
climate risks and adaptation. Information provided in non-statutory documents, such as
media advertisements or statements, can sometimes contradict or go further than what
11
See https://www.cdproject.net/en-US/WhatWeDo/Pages/overview.aspx (Accessed
14/01/2011).
12
See http://www.incr.com/ (Accessed 14/01/2011).
13
See www.sec.gov/news/press/2010/2010-15.htm and http://www.davis.ca/en/blog/ClimateChange-Law-Practice-Group/2010/11/04/Ontario-Securities-Commission-Releases-NewGuidelines-for-Environmental-Reporting (Accessed 13/01/2011).
44
Business, Industry and Services
is disclosed in formal disclosures, creating potential legal liabilities 14 (Baker and
McKenzie, 2010).
Lost opportunity to finance adaptation
Climate change is expected to have a profound economic impact (Stern, 2006). Some
sectors and regions of the world will be economically favoured by changing climatic
conditions, while others will see their competitiveness altered. Further, as climate
change accelerates this century, adaptation investments to reduce vulnerability and
exploit opportunities will likely increase.
Though there are uncertainties, climate change adaptation costs have been estimated
at between US$70 and 100 billion per year by 2050 15, with East Asia and Pacific and
Latin America and the Caribbean bearing the highest cost (World Bank, 2010).
Distribution of adaptation costs per sector shows that infrastructure, coastal zones,
water supply and flood protection will bear the largest share of total adaptation costs
(World Bank, 2010a) 16.
Financial institutions have an opportunity to take a leading role in providing finance to
climate change adaptation (Stenek et al., 2010):
"A financial services sector that understands climate change and pro-actively
drives adaptation is not only in the highest interest of broader economic stability
and the societal well-being it underpins; it is clear that it will increasingly be in
the very interest of financial institutions themselves" (UNEPFI, 2011).
Failure to understand climate risks and priorities for adaptation investment and adapt
finance offerings accordingly could lead to missed revenues for the UK financial
services industry.
Barriers to climate risk management mainstreaming by UK financial institutions
Having presented the risks resulting from failure of financial institutions to mainstream
climate risk management into their decision-making processes, it is useful to briefly
identify some of the barriers preventing this. In order to make progress towards this
goal, it is proposed that reducing the intensity of these restraining forces would be the
most effective option.
 Surveys have shown that financial institutions do not feel sufficiently well
informed on climate risks and adaptation to mainstream these
considerations in their decision-making processes (UNEPFI, 2011). They
report the need for user-friendly projections, analyses and advice on how to
interpret climate-related information and evaluate quality and confidence of
results. Information on future changes for a certain location or a defined
time horizon is also required. The quality of information is also reported to
vary across world regions and economic sectors (UNEP-FI, 2011).
 Gradual changes in average climate conditions are often difficult to identify
because of the lack of available evidence. Furthermore, there is little
recognition of the potential investment implications of changes in average
14
For example, Columbia Law School in the US maintains a Climate Change Securities
Disclosures Resource Centre, see
http://www.law.columbia.edu/centers/climatechange/resources/securities#rules (Accessed 14/01/2010).
15
Depending on the climate change scenario retained and whether the positive impacts of
climate change are deduced from adaptation costs or not.
16
Note that other economic assessments of climate change adaptation costs have found either
lower (UNFCCC, 2007) or higher adaptation costs (Parry et al., 2009). There appears, however,
to be a consensus that adaptation represents a significant financial challenge and will affect
disproportionally certain regions of the world and economic sectors.
Business, Industry and Services
45
climate conditions. However, it is likely that these changes may have
material consequences when investment critical thresholds are breached,
possibly resulting in unforeseen operational costs, unplanned capital
investment or falling revenues (Acclimatise, 2009d). A practical example of
the effect of changing average climatic conditions on investments is given
in Box 4.4.
 UK equity fund managers expect governments will not achieve or
implement strong legislation or regulation, short-term pressures to generate
profit and the lack of standardised framework to disclose information
(Trucost, 2009).
Box 4.4
Example of impact of average changes in climate on investments
Over 85% of Albania’s electrical power output originates from five large hydropower
plants. Climate variability explains the large difference between hydropower
production in very dry years and in abnormally wet years (2,900 GWh
approximately). The combined effect of droughts, lack of investment in transmission
and distribution systems, and absence of diversified energy generation assets
explains recent difficulties in maintaining the country’s energy security, such as
common power cuts.
Between 1961 and 1990, Albania has overall become drier, with annual average
precipitation decreasing by over 1% in certain areas of the country. Due to climate
change, summer precipitation is projected to decrease by 10% and 20% by the
2020s and 2050s, respectively. (There is less agreement between climate models on
changes in average winter precipitation). Furthermore, annual average temperatures
are expected to increase by about 1 to 2°C by the 2020s and 3°C by the 2050s, with
the greatest temperature increases expected to occur in the summer months.
The coupled effect of average changes in temperature and rainfall (summer drying
and rising temperatures) will lead to significant compound risks for the power
industry in Albania, including:

Reduced annual runoff of ~20% by the 2050s, with expected decreases in
electricity generation of ~15%

Increased demand for air conditioning and refrigeration in the summer when
hydropower production is most constrained by reduced rainfall

Competition of small hydropower plants with other water users, such as
agriculture, which will face a greater irrigation need and receives legal priority
over water use.
(Source: World Bank, 2008; World Bank, 2010b; Bruci, 2008)
There are some companies and organisations that have started on the journey towards
climate resilience, including:
 Barclays are developing their understanding of the potential impact of
climate change, and the possible need and mechanisms for incorporating
them into credit risk analysis and management, through support of various
climate research programmes (Acclimatise, 2009c).
 HSBC has established a Climate Change Centre of Excellence, which
analyses the commercial implications of a changing climate for HSBC
businesses and clients. It also aims to enhance knowledge or risks and
opportunities and ensure integration within HSBC’s core financial services
business (Stenek et al., 2010).
46
Business, Industry and Services
 UK Universities Superannuation Scheme and other investment advisers are
researching the implications of changing climatic conditions for key
investment value drivers (such as efficiency and availability of assets for
power investments) and demonstrate progress in knowledge of asset
managers of the consequences of climate change impacts (Acclimatise
2009e, 2009f, 2009g, 2009h).
 Group of 14 institutional asset owners and investors from around the world
that work with Mercer, the UK Carbon Trust and the International Finance
Corporation to explore the potential impact of climate change projections on
asset allocation, as well as volatility and correlations among asset classes,
regions and sectors 17.
However, much more progress is needed if the risks of climate change for UK financial
institutions are to be adequately managed and the opportunities to finance adaptation
realised (INCR, 2010).
Key assumptions and limitations
The performance of financial institutions is dependent on many socio-economic drivers
and discerning the effect of climate change is particularly challenging. This is made
even more difficult due to the fact that information on credit scores and revenue is
deemed commercially sensitive and therefore not widely available in the public domain.
This naturally leads to information gaps when undertaking an assessment of climaterelated risks and financial performance. Data that would enable such assessments to
take place include internal rate of return and tangible and intangible asset value.
Conclusion
Whilst reduced returns and/or increased risks to investments of UK financial companies
represent one of the largest climate change exposures for the UK industry as a whole,
it has not been possible to undertake quantitative analysis on the basis of the available
information. A detailed literature review reveals, however, the main potential
consequences of failing to mainstream climate risk management into investment
practices are: (i) reduced return on investment or credit performance of investments; (ii)
reduced reputation; (iii) increased investor pressure; (iv) legal liabilities; and (v) lost
business opportunity to finance adaptation.
Progress to take account of climate risk and adaptation considerations in UK financial
institutions is slow and faces considerable barriers, such as the lack of knowledge and
perceived lack of information. Failure to resolve these issues could ultimately affect the
competitiveness of the UK financial services industry in the international market place.
Furthermore, by mainstreaming climate risk management into their processes and
practices, UK financial institutions have a role to play in promoting climate resilient ‘real
sector’ investments.
Due to the potentially large economic consequence of this risk to the UK economy, it is
recommended that it becomes a focus for further work in preparation for the next
CCRA. For this to occur, there are significant challenges overcome, largely around the
knowledge and data gaps that occur due to the confidential nature of credit scores and
revenue information.
17
Some of the investor partners include AP1, APG, AustralianSuper, British Columbia
Investment Management Corporation (bcIMC), CalPERS, CalSTRS, the Environment Agency
Pension Scheme, the Maryland State Retirement and Pension System, the Norwegian
Government Pension Fund, the Ontario Municipal Employees Retirement System (OMERS),
PGGM and VicSuper Pty Ltd.
Business, Industry and Services
47
Metric
code
BU2
An increase in monetary losses as a result of an increasing
proportion of UK tourist assets (natural and built) at risk
from flooding (BU2)
Confidence
4.2.2
Risk description
Monetary losses as a result of
an increasing proportion of UK
tourist assets at risk from
flooding
M
Summary Class
2020s
2050s
2080s
l
c
u
l
c
u
l
c
u
1
1
2
2
2
3
2
3
3
Introduction
Although tourist assets are dispersed across the UK, there are concentrations in
certain locations, for example along the coast and rivers (e.g. London). This makes
them particularly susceptible to coastal (sea level rise and storm) and fluvial (river)
flooding. In some areas of the UK (e.g. Cardiff), relative sea level is projected to
increase by around 0.44 m (0.37 to 0.53 m) by the end of the 21st century (UKCP09).
Such changes have affected, and will continue to affect, the tourism industry through
increased infrastructure damage, additional emergency preparedness requirements,
higher operating expenses (e.g. insurance, backup water and power systems, and
evacuations) and business interruptions (Simpson et al., 2008).
This metric considers the impact of climate change on both:
1. Natural tourism assets, by exploring the impact of sea level rise on beach
area throughout the UK; and
2. Built tourism assets and infrastructure, by assessing the numbers of tourist
visitor attractions and facilities in England which are at risk from fluvial
flooding and the potential associated increase in monetary losses.
4.2.3
The impact of sea level rise on beach area
During the last century, global average sea level rose by ~1.7 mm per year (Church
and White, 2006), believed to be due to a number of factors including thermal
expansion of warming ocean waters and melting of land-based glaciers. After
adjustments for natural land movements, the average rate of sea level rise around the
UK during the last century was approximately 1 mm per year (UKCP09). However, the
rate for the 1990s and 2000s has been higher than this value (UKCP09). Future
projections suggest that sea level change will display significant regional differences,
due to land rise/ fall (due to post-Ice Age isostatic readjustment). For example, the
most dramatic increases in sea level are anticipated in London and eastern England,
where the land is subsiding (Shennan and Horton, 2002; Rennie and Hansom, 2011).
As sea level rises, the response on the open coast varies depending on the
geomorphology but in all cases will result in some form of marine transgression.
Beaches, dunes and shingle ridges will tend to ‘roll’ landwards, whereas cliffs are
slowly eroded allowing the beach shore-face to migrate landwards. Where this is
constrained, either by slowly eroding cliffs or sea defences, ‘coastal squeeze’ will
occur, with the consequence that the area of beach and other natural coastal assets is
reduced (Taylor et al., 2004). Furthermore, the combination of higher sea levels and
greater loading from wave action will increase damage to natural and built assets
48
Business, Industry and Services
(Townend, 1994). Beaches are one of the key natural tourism assets in the UK and
any change in their extent would clearly have a major impact on seaside resorts.
Metric response function
In order to gain an appreciation of the magnitude of the risk from projected sea level
rise to these natural tourist assets, a high level assessment of the potential loss of
beach area has been undertaken in this Tier 2 analysis.
The number and length of beaches around England, Scotland and Wales has been
digitised from OS Maps (Figure A2.1). For Northern Ireland, the beach lengths were
assessed using Google Earth. The projected sea level rise for England and Wales,
Scotland and Northern Ireland, combined with an assumed slope for the (lower) beach,
was used to estimate the amount of beach area lost.
Climate change projections
Using the UKCP09 projections for future sea level rise, there is a risk of beach loss of 3
– 16 km2 (300 – 1600 hectares) by the 2020s, rising to 12 – 61 km2 (1200 – 6100
hectares) by the 2080s (which is between approximately 3% and 7% of total beach
area). Uncertainty in the estimate is considered by testing the results against different
assumptions on beach slope and on proportion of beaches that might be affected
(Table A2.1).
Key assumptions and limitations
There are a number of key assumptions and limitations with this methodology:

For all the beaches considered, it was assumed that the beach high water
mark is unable to move landwards.

Beaches on most of the 291 inhabited islands around the UK, including the
beaches of the Outer Hebrides, were excluded from this analysis.

The accuracy of the analysis is constrained by the resolution of the beach
dataset. It is known that the Environment Agency is in the process of
compiling a detailed dataset, which would enable a more detailed estimate
to be made, but that this dataset is unfortunately not yet available.

Coastal geomorphology, oceanography and sediment transport processes
are very complex and difficult to model. This analysis takes a very simplistic
view; it is important to stress that localised responses will depend on the
regional geomorphological setting.
Conclusions
The consequence of the estimated change in beach area is to contribute to increased
pressure for space in some of these beaches, when demand is already high in the
summer months and potentially may increase in the future (see Section 4.2.10).
Beaches particularly exposed to loss of area could experience reduced popularity, as
overcrowding dissuades visitors and as a consequence, the local tourist economy
suffers. Conversely, beaches less vulnerable to physical change could become
increasingly attractive, leading to “honeypots”, which providing the carrying capacity of
the destination ecosystem, infrastructure network and social system can support
increased numbers, would result in thriving local tourist economies.
Business, Industry and Services
49
4.2.4
Number of tourist visitor attractions and facilities at risk
from fluvial flooding
Current projections suggest that flooding may increase in the winter due to increased
winter rainfall. The increasing trend in the UK to cater for visitors all year round means
that the tourism industry may be impacted, with tourist attractions and facilities
damaged by floods. In addition, as temperature rises, it is likely that the frequency and
magnitude of intense summer storms may increase. Tourists are particularly active in
the outdoors during this season and as a consequence may be affected. Visitor
discomfort, distress, injury or fatality could result in significant negative public relations
and reputational risks for the destination and businesses involved. Negative public
relations could follow the cancellation or postponement of bookings due to weatherrelated events, and ultimately reduce visitor numbers and revenues (DCMS, 2010a).
As an illustration, Box 4.5 describes the impacts of the floods of 2007 on the UK’s
tourism and leisure sector.
Box 4.5
Impacts of floods of summer 2007 on tourism and leisure sector
During the 2007 floods, businesses in the tourism and leisure sector suffered with
fewer customers and lost revenue. Some hotels benefited from people displaced by
the floods, demands for takeaways increased, with people unable to cook, and
building firms were inundated as the recovery process began.
English Heritage and National Trust visitor attractions were significantly affected by
the floods of summer 2007, as well as numerous World Heritage Sites, suffering both
physical damage and lost revenue. World Heritage Sites affected included
Birdoswald Roman Fort (part of the Hadrian’s Wall Site), Fountains Abbey,
Ironbridge Gorge, Derwent Valley Mills and Blenheim Palace. Many listed properties
were also affected. During August 2007, DCMS 18 announce a £1 million cash
injection to promote tourism, rural destinations and visitor attractions, which is likely
to have been a response to the flood losses.
(Source: Pitt, 2008)
Metric response function
A range of stakeholders across the UK were contacted to obtain data on tourism assets
at risk of flooding. Responses received indicated that data was either not available or
incomplete, and as a consequence the data used in this metric has been based on
research undertaken by DCMS (2010b). This study focused upon assets in England
and unfortunately at present no equivalent sources have been identified to enable
analysis to be extended to the Devolved Administrations (DAs).
By drawing on published material from partner organisations (e.g. English Heritage,
2009; Visit Britain’s National Tourism Product Database, 2009), the DCMS report
(DCMS, 2010b) made an assessment of the number of buildings within the tourism and
leisure sectors in England at risk from fluvial flooding.
Utilising the Environment Agency's flood risk zone map (2008), 33,069 English
buildings within the tourism and leisure sector were identified as being in areas within
Flood Zone 3 (High Risk). These include listed buildings and churches (Table A2.2), a
range of tourist buildings and assets (Table A2.3) and arts, theatres, museums and
archive buildings (Table A2.4). Areas within Flood Zone 3 are those affected by a 1 in
100 year return period fluvial event or a 1 in 200 year return period tidal event. The
flood zones do not account for protection afforded by flood defences. In the
18
Department for Culture Media and Sport
50
Business, Industry and Services
assessment by DCMS (2010b), by far the most numerous building type exposed to
flood risk were English listed buildings and churches, with 28,659 identified.
Climate change projections
Utilising UKCP09 data and work carried out by the CCRA Floods sector (Ramsbottom
et al., 2012), change in the return period of flood for the current area (which has a
return period for 1 in 100 years) has been projected for the 2020s, 2050s and 2080s for
England and Wales (Table A2.5 and Table A2.6). The data shows how the risk to the
tourism assets currently located in the English Flood Zone 3 zone may change in the
future, with assets currently at risk projected to become more so. The 1 in 100 year
flood event 19 is projected to become approximately twice as frequent (range of no
increase in frequency to 7 times increase in frequency) by the 2050s and 3-5 times
more frequent (range of no increase in frequency to 12 times increase in frequency) by
the 2080s. These are average UK estimates and are based on the medium emissions
scenario and p50 (50% probability level) estimate.
Key assumptions and limitations
There are a number of limitations with the methodology outlined above:

Whilst the data show how the risk to tourism assets currently located in the
English Flood Zone 3 zone may change, it is limited in that there is no
expansion of the geographical area of Flood Zone 3.

Changes in flood frequency are average values for the UK as a whole;
significant regional and local variability is likely to exist.

The breakdown of risk by coastal or fluvial flooding was unavailable for this
assessment.

Location information for each of the assets highlighted in Table A2.2 to
Table A2.4 was not available for this assessment.
As a consequence of these limitations, it has not possible to provide a quantified
estimate of tourism assets at risk. However, potential financial implications from
flooding on built tourism assets are explored below.
Increase in monetary losses associated with risk of flooding
There have been a number of regional studies that examine climate impacts on the
visitor economy (e.g. McEvoy et al., 2006, Frost, et al., 2010), some of which include
the impact of flooding. No previous studies, however, have been identified that have
evaluated the impact flooding currently has or is predicted have upon Tourism Direct
Gross Value Added (TDGVA) at a national scale. There are also standard approaches
to considering flood risk in relation to recreational gains and losses (Multi-Coloured
manual, 2005 and updated 2010) but these are based upon visitor numbers; figures
unavailable for this study.
As presented in Table A2.5 and Table A2.6, it is clear that flood risk is going to change
in each region and that ultimately this will have impacts on total TDGVA. As discussed
above, however, it has not been possible in this analysis to establish what proportion of
total tourism assets are located in each English region of Flood Zone 3, and therefore
what proportion of the TDGVA will be affected as a result of flooding.
Nevertheless, a high level estimate can be made of the potential value of the risk to
properties highlighted in Table A2.2 through the concept of ‘Avertive Expenditure’; an
established method used to conservatively assess the value of damages to sites of
national or international importance, that otherwise might simply be considered
19
The threshold definition for assets at risk of fluvial flooding to fall into Flood Zone 3
Business, Industry and Services
51
‘priceless’. A damage cost is simply calculated by estimating the cost of a flood bund
around each building. Assuming the average length of bund required is 150m, at a
nominal average UK construction cost of £5,000 per metre, and an expected lifetime of
50 years, this equates to a total present-day annual average ‘damage’ value 20 of
£40,000 per year 21. Considering the changes to flood frequency highlighted in Table
A2.5, this annual average damage cost estimate for the 312 buildings listed in Table
A2.4 would increase to £100,000 by the 2050s and £0.12-0.24 million by the 2080s.
Assessing the value of damages to assets in Table A2.3 is more difficult, even at such
a simplified level as undertaken above. The reason is simply the broad range of assets
described, including natural features, holiday villages, and campsites. The financial
impact of tourism assets at risk of flooding has therefore not been fully assessed, and
could be significantly higher than the figures estimated above.
Furthermore, it is worth highlighting that climate-related impacts to the tourism sector
are much broader. For example in summer 2010, heavy rainfall in Cornwall led to
severe flooding and closure of the railway line into the county as a result of landslips.
These are the worst floods Cornwall has experienced since Boscastle in August 2004,
which cost insurers £15 million.
Conclusions
The tourism sector forms a large part of the local economy for many communities in the
UK, particularly on the coast. Increasingly, the impacts of climate change will offer both
challenges and opportunities (as discussed in Section 4.2.10) for the tourism subsector. Increased flooding is likely to have an adverse impact. Whilst fluvial flooding
and coastal storms are more likely to occur outside the traditional summer tourist
season, the risk of summer flooding will increase and sea level rise is an everincreasing threat.
Many tourist visitor attractions and facilities are at risk of flooding and this risk is likely
to increase. Unfortunately, it has not been possible to fully monetise the risk of fluvial
flooding on built tourism assets, but even this qualitative analysis shows how the risk of
flooding is projected to increase, with increased risk to tourist assets in the absence of
appropriate defence measures. It is also worth noting that the historical and cultural
importance of some assets makes the impact of flooding especially significant, while at
the same time posing particular adaptation challenges.
Metric
code
BU3
A decrease in water (groundwater and surface water)
availability for industrial usage (BU3)
Confidence
4.2.5
Risk description
A decrease in water availability
for industrial usage
L
Summary Class
2020s
2050s
2080s
L
c
u
l
c
u
l
c
u
1
1
2
1
2
3
1
3
3
Introduction
The amount of water that can be abstracted for public water supply, agriculture and
industry is sensitive to the annual water balance and subject to changing licence
conditions (Rance et al., 2012). One of the key findings of the Water sector report is
that water abstraction may become unsustainable in a large proportion of UK rivers due
20
21
Assumes all floods of 1 in 100 years and greater cause the same damage
0.01 (return period) x (£5,000*0.02) x 150m x 312 buildings
52
Business, Industry and Services
to low summer flows (Rance et al., 2012). A shift in seasonal and/or total availability of
water resources, as a result of climate change, has the potential to have significant
impacts on industry in the UK.
Industrial abstraction should be viewed in the context of other abstraction sectors, as
changes in water resource availability will have an effect on the way in which all
abstraction is regulated. The responses and adaptive approaches of other sectors,
(especially that of public water supply, as the dominant sector), will determine the
extent of any effect on industrial abstraction. This work is derived from analysis
undertaken in the Water sector Tier 2 analysis, focused on England and Wales, and
supported by the information described below.
Metric response function
Total industrial abstraction per River Basin District (RBD) in England and Wales were
taken from the abstraction datasets of the Environment Agency’s Water Resources GIS
(WRGIS) 22. These datasets originate from the Environment Agency’s National
Abstraction License Database (NALD) and have been processed by Environment
Agency staff through the Catchment Abstraction Management Strategies (CAMS).
Industrial and total abstraction data for each RBD were obtained by summing the
individual abstractions within the boundary of the RBD.
The industrial abstraction dataset (Table A2.7 and Figure A2.2) contains information
on:
 Abstraction sources licensed to industry, including the proportion from
rivers, lakes or the ground, but not from estuaries or where industrial
processes use treated mains supply from the public water supply network.
 Distribution of licensed abstraction across RBDs.
 The locations of industrial abstractions and their relative size distribution
across England and Wales.
 Total abstractions and total consumptive abstraction, which is defined as
the total water used and not returned to the environment through discharge.
For this reason total consumptive abstraction will always be lower than total
abstraction.
As noted previously, it is important to understand industrial abstraction in the context of
total abstraction. Figure 4.1 shows total abstraction in each RDB, compared to the total
industrial abstraction. A number of key points are worth highlighting from the industrial
abstraction dataset (Figure 4.1 and Table A2.7):
 Industrial abstraction is a small proportion of the total amount of water
abstracted in most RBDs (with the exception of the North West); the
majority is used by public water supply providers.
 The majority of industrial abstraction is in the north west of England,
centred on the large urban conurbations of Manchester and Liverpool.
Abstraction in the area is mostly from surface water, with some
groundwater. It should be noted, however, that a significant proportion
~70% is returned to the environment after use.
 The second most significant area for industrial abstraction is located in the
south east of England, where industrial abstraction forms a significant
proportion of total abstractions in this region.
22
September 2010 version
Business, Industry and Services
53
 A significant amount of industrial abstraction (72%) is non-consumptive,
meaning that it is used in industrial processes and then discharged into a
receiving water body.
It is clear from this picture that climate change impacts on river flows should be
considered alongside the responses of other sectors to understand the effect on water
availability for industrial usage.
25000
Industrial Abstraction
Total Abstraction
Total abstraction (Ml/d)
20000
15000
10000
5000
0
Dee
Figure 4.1
Humber
Thames
Severn
South East
Northumbria
South West
Western
Wales
North West
Anglian
Total and industrial volumes of water licensed to be abstracted
across 10 UK regions (Ml/d)
Climate change projections
Analysis of the potential climate change impacts on industrial abstraction utilises
several of the metrics developed in the Water sector report (Rance et al., 2012), which
examine the potential effects of climate change on river flows and water resources:
54

Metric WA2 investigates the risk to percentage changes in Q95 (a statistic
indicative of low river flow rates) and shows that even under wetter future
projections, significant reductions in Q95 could occur. For example, the
medium emissions p10 (wetter) scenario projects a 29% reduction in the
natural Q95 in the Anglian RBD by the 2080s.

Metric WA8b extrapolates the potential effect on industrial abstraction by
using three modelled Environment Agency Water Resource GIS (WRGIS)
flow reduction scenarios (-10%, -15% and -25% in Q95). Results suggest
that there will be a 3% projected decrease for industrial abstractions by the
2080s, under the 50% probability level medium emissions scenario (Table
A2.8; the lower and upper bounds are 1% and 3% respectively). This is a
small volume in most river basins, but it is a significant reduction in volume
terms in the north west of England. With reference to Figure 4.1, a 3%
reduction in abstraction would be equivalent to ~500 Ml/d of lost licences
with a value of ~ £1 billion. Under current legislation, there is a risk that
these licences would be taken away from industry in order to maintain
environmental flows.
Business, Industry and Services
Building on this analysis, a further assessment was made to find the total amount of
industrial abstraction that fell within water bodies where there was a flow surplus
against Water Framework Directive flow thresholds. These water bodies would be
classified as locations where further resources were available for abstraction.
From this research, it is apparent that the proportion of industrial abstraction in water
bodies with resource available for further abstraction decreases with a reduction in
natural flow (Table A2.9). This relationship, however, is not linear and will vary
depending on the flow conditions and regulatory constraints in individual river reaches.
Abstraction will be more constrained in the English south east, south west, Anglian and
Severn RBDs (where 13% of total industrial abstraction occurs), although the degree of
constraint and the time period over which it happens varies between scenarios. For
the north west of England, however, there is likely to be less of a constraint on
abstraction. Nevertheless, it should be noted that the large amount of industrial
abstraction in this area could mean that a small shift in long-term availability, which
consistently affects time of peak demand, could translate into a significant risk for
industrial processes.
Exposure of water sensitive industries
The analysis above provides an overall indication of the exposure of businesses in
general to potential shortages in water supply. However, to manage this exposure in
any meaningful way requires a more detailed disaggregation of the risk in terms of the
different types of business being impacted. One way of doing this is to make use of the
Standard Industry Classification (SIC) 2007 classification 23.
To examine the sensitivity to water abstraction, those businesses with a requirement
for either their own abstraction licences, or the supply of large quantities of water, were
identified subjectively at the group level of the SIC. These business locations are then
mapped against the information on water abstraction generated for metric WA8b in the
Water sector report (Rance et al., 2012), as described above. The results were
aggregated at the section level, comprising sections A to F 24 of the SIC. The need for
water is assumed to be a necessary contributor to overall turnover and the change in
water abstractions scaled in proportion to the individual turnover of businesses
affected, assuming access is restricted for 1 year in 10 (see Table A2.10). This by no
means represents the real cost to business of having reduced access to water but
provides a surrogate measure. A more detailed investigation of water dependency for
individual groups of industries would be needed to develop more realistic estimates.
For each SIC section, the results were summed on a 10 km grid to provide a high-level
indication of the spatial distribution (e.g. Figure A2.3) and to the UKCP09 regions for
spatial climate change maps (e.g. Figure A2.4). The results for Sections A to F are
summarised in Table A2.11, considering the case with no adaptation and then scaled
based on efficiency savings of 20% to provide an indication of the order of the costs
with some adaptation.
Results of the SIC data analysis indicate that the present day (2010) turnover of the
businesses requiring water abstraction (summed over sections A-F) amount to some
£294 billion. By far the largest section is manufacturing (C), with an annual turnover of
£192 billion. The next two largest sections are mining (B) and electricity & gas (D) with
turnovers of £23 and £65 billion, respectively. Comparing 2010 data to 2009 data,
however, it becomes apparent that significant inter-annual variations in turnover
occurred (~20%), presumably reflecting changing market conditions.
23
24
http://www.statistics.gov.uk/StatBase/Product.asp?vlnk=14012&Pos=&ColRank=1&Rank=224
A = Agriculture, forestry and fishing; B = Mining and quarrying; C = Manufacturing; D =
Electricity, gas, steam and air conditioning supply; E = Water supply, sewerage, waste
management and remediation activities; F = Construction.
Business, Industry and Services
55
Under the various climate change projections, most sections experience a loss of
abstraction equivalent to 0.2% of turnover by the 2020s increasing to 0.4% by the
2050s and between 0.5 and 0.6% by the 2080s (Table A2.11). Agriculture, which has a
relatively small turnover of £40 million, is an exception but may experience a loss of
abstraction equivalent to 0.5% of turnover by the 2020s increasing to 0.9-1.0% by the
2050s. Allowing for some adaptation these figures are typically reduced by 0.1%,
although for agriculture the reduction is over 0.2%. Construction would also appear to
be more sensitive based on the 2010 data but this is presumably highly dependent on
the location of major construction schemes.
Key assumptions and limitations
There are a number of limitations with the methodology outlined above:
 Total industrial abstraction per RBD is only provided for England and
Wales.
 For assessment WA8b, the method of extrapolation of the original
modelling to larger flow reductions has the potential to produce significant
inaccuracies and the exact figures produced by this assessment should be
treated with some caution.
 Whilst the SIC data provides a UK-wide coverage, the water abstraction
data are limited to England and parts of Wales. Coverage is therefore
limited to that of the abstraction data.
 The estimates of loss of abstraction equivalent turnover do not represent
the real cost to business resulting from reduced access to water. However,
it does provide a surrogate measure and allows the relative change to be
evaluated in relation to individual industries. A more detailed investigation
of water dependency for individual groups of industries would be needed to
develop more realistic estimates.
Conclusion
The tentative conclusion that can be drawn from this analysis is that climate change
could affect the industrial sector’s access to water. For the majority of the country,
however, (with the exception of the north west of England), this must be put in the
context of industrial demand being a small part of the total, with public water supply
abstraction being the main use of water. It is also shown that the projected changes to
industrial abstractions coming from sustainable sources is relatively small (-3%) in
comparison to agriculture (-11%) and the consequences in terms of compliance with
low flow limits will be greatest for the north west of England.
It is possible that the extent of adaptive measures practised by other sectors (e.g.
public water supply) or changes in regulatory controls could have more of a day-to-day
impact on industrial abstractors than any absolute changes in water availability. Thus,
though constraints on supply as a result of climate change do have the potential to
affect industrial use, the wider constraints on water supply will possibly have a larger,
albeit more indirect, effect.
56
Business, Industry and Services
Metric
code
BU4
An increase in monetary losses as a result of interruption
to business from flooding (BU4)
Confidence
4.2.6
Risk description
An increase in monetary losses
as a result of interruption to
business from flooding
M
Summary Class
2020s
2050s
2080s
l
c
u
l
c
u
l
c
u
1
1
2
1
2
2
2
2
2
Introduction
In April 2004, Foresight published its Future Flooding report (Foresight, 2004).
Subsequently updated following the large-scale flooding in 2007 (see Box 4.6), the
report highlighted that climate change is an important factor in increasing flood risk,
particularly through the impacts of rising sea levels and more stormy weather.
Estimates for annual UK damage from flooding could rise from the present level of
approximately £1 billion to about £28 billion by the 2080s, assuming there is no
additional investment to manage the flood risk other than what is presently available.
Note: these estimates are an underestimate of the total cost of flooding, as they do not
include consequential losses (e.g. due to transport disruption).
Box 4.6
Impact of 2007 floods on businesses
Many business properties were flooded during the summer 2007 floods, resulting in damage to
premises, equipment and fittings, and loss of stock. They also suffered disruption of business.
The method of cost estimation is similar to that used for domestic properties, namely identifying
the number of properties affected and the average cost of damage. There are similar challenges
interpreting available data.
Estimates of the number of commercial properties flooded ranged between 7,100 and 7,300
according to Defra (2007) and Pitt (2008) respectively. The ABI subsequently estimated that
8,000 business premises had been affected. According to the ABI, there were in June 2009
35,000 insurance claims by businesses associated with the summer 2007 floods; far exceeding
the number of commercial properties that were reportedly flooded. This is presumably because
businesses submitted claims against more than one insurance policy, and possibly because
multiple claims were made on individual policies.
In addition to damage costs, some businesses claimed compensation from insurance for
disruption to businesses where this involved extra costs and lost income. For example, it is
known that disruption was acute in many locations, such as in Sheffield, where disruption to
business was reported at £50 million.
Furthermore, a survey by the Chartered Management Institute found that the effects of flooding
were felt well beyond the workplace and impacted on staff availability, suppliers, customer
demand as well as direct impacts such as loss of power and flooded premises.
Overall, the total economic costs associated with business impacts caused by the 2007 floods
were estimated as £740 million.
(Source: Environment Agency, 2010)
The financial implications of flooding for the Business, Industry and Services sector
include issues such as:
 Direct damage to buildings, materials and other assets
 Workforce health and safety infringements
 Environmental non-compliance
Business, Industry and Services
57
 Changes to market demand
 Business interruption.
The remainder of this section focuses upon the financial implications for business
arising from interruption and the spatial distribution of lost turnover / staff days lost due
to flooding, with a focus on England and Wales. This focus is a function of the data
available, which was supplied by the Environment Agency.
Metric response function
Determining interruption
Business interruption is determined in this response function through three steps.
These are explained below.
Step 1:
The Expected Annual Damages (EAD) associated with Non-Residential Properties
(NRP) has been calculated in the Floods and Coastal Erosion sector report
(Ramsbottom et al., 2012) for England and Wales, fluvial and/or tidal flooding only
(metric FL7b). This provides an indication of how damage costs relating to NRPs might
change under future climate projections. These data have been used in the estimation
of the increased costs of business interruption due to climate change. In this case, a
change in the EAD can be used to scale a similar rise in the losses due to interruption.
The current EAD for NRP are estimated to be about £560 million. This includes all
types of NRP and therefore is greater than the equivalent value for properties
associated with business.
Step 2:
The cost of business interruption following flooding between 2002 and 2009 are shown
in Figure 4.2, using gross incurred claims data from the ABI for the UK. Unfortunately
the data provided by the ABI was not disaggregated into different weather events; for
example, losses incurred from windstorms were not collected separately from flooding.
To circumvent this issue, the proportion of flood claims (out of all weather related
claims) for domestic property was used as a proxy to estimate this number. This
proportional cost has therefore been taken to represent the financial impact of business
interruption caused by flooding.
58
Business, Industry and Services
Figure 4.2
Cost of business interruption in the UK (£m) due to flooding
Based on insurance claims as a proportion of total losses due to weather events.
The total business interruption costs for the eight-year period is approximately £150
million. This includes 2007, which was a record-breaking year in terms of insurance
claims, as the floods in this year were the most severe weather-related event that the
UK has experienced in decades (Environment Agency, 2010). Therefore, the average
claims for UK business interruption for any one year associated with flooding are
estimated to be approximately £20m. This is the baseline business interruption cost
due to flooding at present.
Step 3:
Another important component of interruption is the loss of staff time. Standard Industry
Classification (SIC) information is used to identify the businesses and number of staff
that are located within a zone of ‘significant likelihood of flooding’ 25 in England and
Wales. An average length of flood disruption was gleaned from previous experiences;
the 2007 floods (>1 in 200 year event) created an average length of disruption of 8.75
days (Chartered Management Institute, 2008), which was considered too high,
therefore a value of 3 days was used to reflect the lower annual probability of a flooding
event (1:75).
To estimate the average annual lost staff time, a value of 3 days was multiplied by the
annual probability of a flood event (1.3%) and the number of staff employed within the
1:75 year flood zone. Using this approach, it is estimated that the annual average days
lost is 105,000, which is around 0.05% of the staff days of businesses in the flood
zone. With an average staff cost of £150 (ONS web site), this generates a value of
interruption of about £5.8 million. This is a simplistic approach, but it suffices to give an
order of magnitude to the potential consequence for business.
Staff time lost data were also used to scale the turnover of businesses in the flood plain
(assuming 250 working days per year). This assumes that turnover is proportional to
staff time, which, whilst true for some businesses, is not universally the case. For the
Defined as the 1.3% (1:75) annual probability of flooding. This probability was chosen
because it was used in the Environment Agency, Long Term Investment Strategy (LTIS) (2009)
analysis, which forms the basis of the CCRA analysis of flood risk (Ramsbottom et al., 2012).
25
Business, Industry and Services
59
present-day (2010), SIC data estimates turnover of businesses (summed over Sections
A-R, see Figure A2.6) amount to £151 billion and employ over 1 million staff.
Climate change projections
Drawing together the information from the three steps above, a value for the expected
increase in business interruption costs to can be estimated for future climate change
(2020s, 2050s and 2080s). These costs do not include consequential losses.
The projected increase in EAD for NRP in England and Wales are shown in Table
A2.12, which has been taken from the Floods and Coastal Erosion sector report
(Ramsbottom et al., 2012). Assuming that business interruption costs increase at the
same rate as EAD, and taking the baseline present-day business interruption cost of
£20 million per year, this equates to an estimated increase in average annual cost to
UK businesses of disruption due to flooding of: £24-50 million by the 2020s, £26-72
million by the 2050s and £34-96 million by the 2080s (across all climate scenarios
considered by CCRA).
In terms of staff time lost, estimates for 2020s, 2050s and 2080s suggest that this may
increase by 0-50%, 0-71% and 10-81% respectively. This equates to annual costs of
£5.8–8.7 million by the 2020s, £5.8-9.9 million by the 2050s and £6.4–10.5 million by
the 2080s for businesses located within the zone of significant flood risk.
Regional exposure of business in England and Wales
Similar to BU3 (see Section 4.2.5), SIC data is used to gain an appreciation of the
spatial patterns of flood risk for the Business, Industry and Services sector. In the case,
wholesale and retail trade SIC data was used as an example of the potential effects.
When mapped for England and Wales, this data shows turnover losses increasing
particularly in the Midlands and eastern counties, although not as significantly as one
might expect (see Figure A2.6). Changes in future staff days lost is more significant
however, with particularly pronounced changes in the south and east of the country,
although under the high emissions scenario, p90 situation in 2080, all regions of
England and Wales become more affected (see Figure A2.5).
For some businesses in flood prone areas with defences that are already close to
being vulnerable to the “significant” risk level (1.3%) used in the analysis, the onset of
the increase in risk is in the short to medium term. This may however, be influenced by
improvements to defences and further development of the strategic programmes of
flood risk management.
Key assumptions and limitations
There are a number of key assumptions and limitations with this methodology:
 It is assumed that business continuity losses are proportional to changes in
Expected Annual Damages (EAD) associated with Non-Residential
Properties (NRP).
 Proportion of flood losses out of all weather related claims are the same for
business and domestic customers.
 The 8-year average business continuity figure could be overestimated,
given the small sample size, which includes the 2007 event.
 The 8-year average business continuity figure does not include uninsured /
unclaimed losses. It is likely therefore that the true baseline cost of
business disruption caused by flooding is greater than the £20 million per
year used in the above estimate.
60
Business, Industry and Services
 The loss figures are likely to underestimate business continuity risk as they
do not include uninsured losses and disruption to business activity, supply
chains, etc.
 There is a mismatch in terms of UK-wide EAD for NRP data and the other
data used in this section, which only relates to England and Wales. This is
explained in the text above.
 Figures are purely indicative and should be treated with caution.
Conclusions
The financial impact of business and industry assets at risk of flooding includes direct
damage to assets and business interruption during and following a flood. An estimate
has been made of business interruption costs caused by flooding, which indicate that
these could increase by 20-150% by the 2020s rising to a 70-380% increase in the
2080s. Considering just the lost staff time component of business interruption also
suggests an increase but to a lesser extent, with the increase to the 2080s being
approximately 10-80%.
Direct damages to properties have been estimated in the Floods and Coastal Erosion
sector report (Ramsbottom et al., 2012).
Metric
code
BU5
A decrease in productivity and revenues due to ICT loss/
disruption (BU5)
Confidence
4.2.7
Risk description
A decrease in productivity and
revenues due to ICT loss/
disruption
Summary Class
2020s
l
c
L
2050s
u
l
c
2080s
u
l
c
u
Too Uncertain
Introduction
A recent report (AEA, 2010) produced for Defra found that “UK plc.” is heavily reliant on
the effective functioning of the Information and Communication Technologies (ICT)
sub-sector for a number of reasons:
 98% of business is reliant on technology to power their day-to-day
operations
 84% of UK businesses are estimated to be heavily dependent on their IT
systems
 90% of high street purchases are transacted using plastic cards which
depends on wired and wireless communications to work
 £50 billion of consumer purchases and sales in Britain take place wholly
online
 In the high street, stock ordering, inventory control and the cash tills are all
completely dependent on electronic communications
 4.2 million people in the UK are estimated to work flexibly – the vast
majority of these use broadband and other technology to work remotely.
Business, Industry and Services
61
The report suggests there is substantial scope for growth in these numbers. Weather
has already disrupted the provision of services and the increasing dependence on ICT
means that the consequences of these weather events could become more significant
(AEA, 2010).
Climate change risks for ICT
The AEA report states that the majority of devices (e.g. laptop computers, mobile
phones, etc.) typically used in the UK already have operating tolerances to temperature
and humidity that will accommodate UKCP09 projected temperature changes – both
peak and average – provided they are appropriately installed and maintained.
 It is, according to the report, the ICT enabling infrastructure that is
vulnerable to the environmental conditions surrounding it. For example,
those elements of the infrastructure which are below ground are vulnerable
to flooding (see Box 4.7), rising groundwater levels, water ingress
(particularly during times of snow melt or flooding), subsidence caused by
drought or flooding, and consequential risks arising from damage to other
elements of the infrastructure (AEA, 2010). For example, following a fire in
underground cable tunnels in Manchester in March 2004, more than
130,000 homes and businesses across the north west of England were
without BT voice and data services. Although this event is not necessarily
weather related, it gives an indication of the impact of a severe event to the
ICT enabling infrastructure. Furthermore, most international
communications (95%) are routed via submarine fibre-optic cables, which
are both cheaper and quicker than satellite (Carter et al., 2009). It is
estimated that worldwide there is ~1 million km of submarine cable, which
may be increasingly vulnerable to underwater turbulence as a result of
extreme weather events (Carter et al., 2009).
 Above ground, infrastructure (e.g. masts, antennae, switch boxes, aerials,
overhead wires and cables) is at risk from precipitation (e.g. water ingress,
snow melt), wind, snow (e.g. weight), unstable ground conditions (e.g.
flooding, subsidence) and changes in humidity. High humidity can lead to
condensation and the risk of water ingress and short-circuiting of
equipment. There is also risk to the serviceable lifespan of the artefacts
brought about by increased environmental stress (e.g. high winds, greater
temperatures) (AEA, 2010).
ICT is dependent on electricity supplies, and therefore any failure of supplies arising
from climate change will directly impact on ICT systems. The Energy sector report
(McColl et al., 2012) has considered the main risks arising from climate change on
electricity generation and distribution. Specific risks identified include the impact of
flooding on electricity distribution, for example flooding of sub-stations. Incidents such
as the collapse of bridges during floods can also disrupt connections (as bridges are
often used as a river crossing for cables and other services).
Perhaps the greatest risks are the currently unknown potential future impacts of climate
change. For example, fires arising from excessive heat or flood damage to critical
components could lead to major failures. A major flood event covering a large
geographical area could affect many elements of the system leading to widespread
failures.
These types of major disruptions to ICT would affect all businesses and may take
considerable time to restore services. Whilst the probability of such events occurring is
currently considered to be very low, the consequences could be very high. In the
future, the consequences will be further exacerbated because of the increasing
reliance of all sectors and business on ICT, and also because the frequency and
severity of the kinds of weather events that currently disrupt ICT are likely to increase.
62
Business, Industry and Services
Box 4.7
Case Study: Flooding at BT Exchange in Paddington, London
It is possible for localised incidents to have a considerable impact, as was experienced when a
major flood occurred at a BT exchange in Paddington, London. The flood subsequently led to
an electrical fire and affected broadband and telephone services across the UK for several
hours in March 2010 (AEA, 2010).
According to Gradwell, a business ISP, 437 local exchanges and up to 37,500 Datastream
circuits were affected with nationwide repercussions on communications. Vodafone also
reported that its network was hit by the incident.
(Source: The Register, 2010)
Vulnerability and exposed groups
The AEA (2010) report suggests that very few impacts are expected to affect the entire
national network. The localised effects of weather-related disruption, however, are
generally expected to increase and could increasingly affect individual businesses and
home workers in vulnerable locations.
The potential for equity issues amongst SMEs related to the impacts of climate change
in the ICT sector has been recognised (AEA, 2010). Rural single-sited SMEs are
potentially more vulnerable to localised weather-related disruption to their ICT than
larger multinational companies. Large businesses are often based in large urban
centres and have flexibility in managing their ICT systems, for example, transferring
their ICT requirements between sites around the world to avoid weather risks.
Remote workers may also be at particular risk, which is of concern as the UK is already
experiencing a shift to home-working and remote working (relying on both broadband
and mobile telephony systems). Indeed, a 2009 market-wide exercise (Financial
Services Authority, 2010) to assess and improve the UK financial sector’s ability to deal
with major operational disruption found that, due to high levels of resilience and backup
on-site, disruption to a particular telecommunications provider was more of a problem
in the context of remote-working than in-office operations.
Several participants in the FSA (2010) study noted that if a key domestic provider (such
as BT) were inoperable for a sustained period, it would render their remote-working
solution ineffective. Many firms noted that while they had high levels of resilience built
into access points to Internet service providers at the company end, they would not
know how to increase resilience at the home-user end. The Electronic Communications
Resilience and Response Group found that there are also particular risks as telephone
companies move towards the adoption of Next Generation Network IP technologies
(EC-RRG). The diversity of the present network may be reduced and switching will be
concentrated in fewer nodes than at present (Cabinet Office, 2010). This again may
have an impact on the home-worker.
The business sector is also exposed to the international interdependence of the ICT
sector, which includes the provision of materials and devices, as well as the hosting,
storage and transmission of the data itself. The expansion of international digital offshoring and international data centres may mean that the UK experiences additional
vulnerability in the face of climate change. For instance, rising sea levels and extreme
weather events will also affect the operation of data centres and service centres in low
lying areas, such as the Netherlands and vulnerable areas of the sub-continent of India
(AEA, 2010). Changing patterns of activity and predicted trends towards ‘cloud
computing’, will lead to the requirement for additional data storage sites (Bein et al.,
2010), which represents a significant cost of construction and maintenance for
business.
Business, Industry and Services
63
Key assumptions and limitations
Although historical case studies provide information of weather-related disruptions to
IT, these tend to be isolated and robust data is currently not available to provide
meaningful estimates of potential climate change impacts.
Conclusions
It has not been possible to provide an estimate of the number of days that might be lost
due to disruption to ICT owing to a lack of suitable information. The risk of major ICT
disruption due to climate change is considered to be relatively low for large businesses.
The risks for smaller companies (including SMEs) and remote workers are, however,
greater, particularly if they are located in relatively remote areas where they may be
dependent on single electricity and telecommunications connections.
Perhaps the greatest risks are the currently unknown potential future impacts of climate
change, for example major widespread weather events. Whilst the probability of such
events occurring is currently considered to be very low, the consequences could be
very high.
Metric
code
BU6
Increased exposure for mortgage lenders (BU6)
Risk description
Increased exposure for
mortgage lenders
Confidence
4.2.8
L
Summary Class
2020s
2050s
2080s
l
c
u
l
c
u
l
c
u
2
2
2
2
2
2
2
2
3
Introduction
Climate change is expected to cause an increase in flood probability to properties,
including flooding from tidal, fluvial and surface water sources (Pitt, 2008). As the
probability of flooding increases, insurance for properties that flood may be increasingly
costly or difficult to obtain in certain circumstances. There are already cases in the UK
where property insurance is either not obtainable or very expensive.
It is a standard condition of all mortgages for a property that they are covered by
standard buildings insurance, including flood cover, for the full term mortgage, in order
to protect the borrower and the lender. Most properties in the UK are insurable on
normal terms, under an agreement reached between the Association of British Insurers
(ABI) and Government in 2002 (and updated in 2005 and 2008), known as the
Statement of Principles. In order for this situation to continue, Government has
committed to capital investment in flood management and to the control of
development in flood risk areas through the planning system. Mortgage lenders have a
keen interest in insurance remaining widely available, thereby ensuring that mortgages
can be offered in flood risk areas.
Insurers have committed to continue to make flood insurance for domestic properties
and small businesses built before 1 January 2009 available as a feature of standard
household and small business policies until 2013, if flooding is not a significant
likelihood 26, or if flooding is a significant likelihood but defences are planned that will
reduce likelihood below that threshold.
If insurance cover is no longer widely available it could leave borrower and lender
exposed. As such, the desire to retain flooding cover, as a standard aspect of buildings
26
‘Significant likelihood’ is defined as a 1.3% or 1 in 75 annual probability of flooding or greater.
64
Business, Industry and Services
insurance, is important for the continued operation of the mortgage, and the wider
housing, market in its current form.
Initial assumptions:

House buyers may not be able to obtain new mortgages, re-mortgage, nor
afford high insurance costs on properties where an unacceptable risk of
flooding is considered by insurers, thus affecting both market growth and
the reputation of lenders (and insurers).
 Should a flood event occur, customer’s homes with no insurance cover
(due to unaffordable flood insurance or no cover available) may default on
mortgage repayments as a result of the cost of damage repairs. This
increases lender’s exposure.
 Housing areas where insurance cover is expensive, or difficult to obtain
may be affected by property blight – a reduction in the stock asset value
both within affected areas, but also potentially inferred in immediately
adjacent areas due to a perceived issue. This could potentially leave
mortgage lenders with assets that are insufficient to cover loans values
(negative equity).
The remainder of this section is concerned with estimating the overall gross mortgage
fund value at potential risk in England and Wales as a result of the changes in the
availability of flood cover (as part of building insurance). These figures are then placed
in the context of research on flooding and property value undertaken by RICS (2009)
and expert elicitation, and subsequently adjusted. The key findings of the RICS
research are shown in the following extracted list (RICS, 2009):

The evidence indicates that flooding has only a temporary impact on
property values, and after three years prices had returned to their normal
level.

Flood events in low risk areas had no impact on property prices.

Being designated at high risk of flooding has had no effect on property
values in areas with no flood events.

Insurance remains available to householders, with flood risk not being the
major factor in determining levels of premium.

At point of purchase, there was not a high level of awareness among
homeowners as to the flood risk to their property, and this is particularly
true among longer-term homeowners.

The fact that flooding does not have a major impact does suggest that
current insurance and risk disclosure regimes may not be encouraging
behaviours that reduces the danger of damage from flooding.
Metric response function
For the purposes of this analysis, the number of properties in England and Wales at
significant likelihood of flooding (river or tidal) is used as an indicator of the impact of
flooding on the availability of insurance, and consequently on the gross level of
mortgage lending exposed (metrics FL6a and FL7a in the Floods and Coastal Erosion
sector). Here, the baseline (current) sea level and river flow peak data are used to
derive the existing level of ‘significant likelihood of flooding’ (1 in 75 year annual
probability or greater) to properties in different regions (by numbers of properties).
Business, Industry and Services
65
The mortgage fund value (£) of properties at significant likelihood of flooding is
calculated for each English region and Wales using a number of important
components. These are as follows:
1. The overall ratio (%) of mortgage to property price is calculated using the
average UK house price (Land Registry, 2011; Halifax, 2011) and the
average UK mortgage value (pers. comm. Council of Mortgage Lenders,
2011). As such an average mortgage in the UK is estimated to be 68% of
the average house price.
2. The number of properties in 1 in 75 year fluvial and tidal flood prone areas
of England and Wales is calculated (see Appendix 8 in the Flood Sector
report).
3. The number of properties in England that have mortgages (pers. comm.
FSA, 2011). This is estimated at 48% for England, and is assumed to be
similar for Wales. As such the gross mortgage fund value can therefore be
reduced from 68% of the overall gross total property value in the UK by
48%, to reflect that not all properties in England and Wales have
mortgages. This equates to 33% of the total property value in England and
Wales that is mortgaged.
4. Climate change projections can then be used to scale the change in
number of properties, and therefore the mortgage fund potentially at risk
from tidal and fluvial flooding in England and Wales, assuming there is no
additional investment to manage the flood risk other than what is presently
available.
Climate change projections
An assessment of this risk metric has been made based on:

the number of properties in England and Wales at significant likelihood of
flooding

how this may influence insurance affordability and availability.
The estimated maximum number of properties at ‘significant likelihood’ of river and tidal
flooding under the climate change scenarios has been estimated as part of the Floods
and Coastal Erosion sector analysis (Ramsbottom et al., 2012) and cover England and
Wales only. The mortgage fund value of these properties has been estimated using
the four steps described above and the results are provided in Tables A2.16 and
A2.17.
This assessment indicates that in some regions of England and Wales there is already
a high fund value for mortgages associated with properties at ‘significant likelihood’ of
river and tidal flooding. It is estimated that there are about 370,000 residential
properties in England and Wales at ‘significant likelihood’ of river and tidal flooding out
of a total of 24.3 million residential properties. This is projected to rise to between
530,000 and 1.5 million by the 2050s and between 700,000 and 2.1 million by the
2080s, based on the assumption that flood defences remain at today’s coverage and
standards. The overall mortgage fund value of properties that is estimated to be at
significant likelihood of flooding is of the order of £46 billion by the 2050s and £52
billion by the 2080s (at today’s prices). The mortgage fund value at risk due to
insurance becoming unaffordable or unavailable is a small proportion of this total for
the following reasons:

66
The gross value at risk suggests that if insurance cover is unavailable, or
unacceptably high, the full (100%) value of the mortgage fund could be lost
due to blight with both owner and lender equity lost. This is likely to be an
Business, Industry and Services
overestimation. The reduction in mortgage fund value is linked to the
property value. RICS (2009) found that only three years after a flood, in
many cases, properties returned to pre-flood values. Temporary
devaluation ranged from zero to 30% of market value.

Supply and demand of property (market effects) will have a greater
influence than climate change under the existing Statement of Principles
and therefore attributing gross value at risk solely to climate change in
isolation is inaccurate. However, the future scope of this is uncertain.

This RICS study suggested that many residents on flood plains had
experienced difficulties renewing insurance policies but in general
insurance was available at a reasonable price for residents. Homeowners
that experienced difficulties usually obtained better terms by switching
insurance company.

The gross value at risk estimates quoted assumes no management by
insurance and mortgage lenders other than what is currently applied. This
is highly unlikely and therefore the gross value at risk overestimates the
issue.

Currently, only in extreme cases are mortgages declined on the basis of
flood risk. This is supported by the RICS study that suggested that
insurance was currently available in most instances and that flood risk was
not a major factor in determining premiums.

Only a small proportion of homes with a 1 in 75 or greater annual
probability of flooding will suffer flood damages in any given year on
average.

The housing market may respond to flood risk through reduced house
prices for properties in exposed areas. This in turn may reduce the value of
mortgages at risk and the exposure of lenders.

The risk to capital value of homes does not necessarily translate to a loss
to the lender; the lender incurs loss if the owner fails to repay their
mortgage.
It is therefore reasonable to adjust down the value of mortgage fund value at risk.
Assuming 5% to 15% 27 of the value is at risk this reduces the risk to £1 to 8 billion in
the 2050s and £2 to 9 billion in the 2080s (at today’s prices).
These figures provide an indication of the estimated fund value at risk where mortgage
provision may be affected by changes in insurance cover in the future if there is no
adaptive action.
In reality, the uncertainty around the true value at risk is extremely high. This work
does, however, highlight the interconnected nature of Government flood policy,
insurance and mortgage provision. The results indicate that there is a major opportunity
to potentially develop new products for homeowners that will allow for insurance and
mortgage provision in areas of ‘significant likelihood’ of river and tidal flooding.
Assumptions and limitations
 More data is needed to accurately discern the distribution and value of at
risk mortgage assets now and in the future across the UK. Data used only
covers England and Wales.
27
Note that this assumption is not supported by data but is a judgement estimation based on the bullet
points above. The judgement estimation in this case, is based on discussion with a number of
Government Departments and important non-governmental stakeholders.
Business, Industry and Services
67
 The management of flood risk is clearly not a new issue for primarily
financial institutions and insurance companies. As such this forecast serves
to underline the process of adaptation already occurring, however, the
magnitude of the numbers involved, should provide added impetus to
making such changes take place.
 The number of properties in England and Wales that are considered by
Defra and the Environment Agency to be at significant likelihood of river
and tidal flooding 28 may increase because of surface water flooding. The
2007 summer floods in some cases were caused, or significantly
exacerbated, by inefficient urban drainage in the face of torrential rainfall.
This will not necessarily be remedied by increased spending on flood
defences, and also needs to be considered in terms of the insurability and
mortgage-ability of properties. Indeed, it is projected that such intense
storms could become increasingly frequent as the impacts of climate
change become more prevalent, bringing into question the risk level for
thousands of homes that were previously thought to be safe from repeated
flooding. Managing the location of new housing development is a major
challenge that needs to both meet regional demand and recognise that
flood risk is changing.
 More generally, there is a great deal of uncertainty in relation to future
Government policy, its agreements with insurers on covering flood risk, and
the likely levels of Government investment on flood management. The
figures presented in this analysis underline the importance of this risk to the
UK economy.
Conclusion
The increase in flood risk expected as a result of climate change could affect the
availability and affordability of insurance and therefore the availability of mortgages,
and the potential blight on asset value for properties at high risk of flooding. This
assertion is subject to high uncertainty.
An assessment has been made of the impacts of increased flooding based on:

the number of properties in England and Wales at significant likelihood of
flooding

how this may influence insurance affordability and availability.
The mortgage fund value at risk due to insurance becoming unaffordable or
unavailable may be of the order of £1 to 8 billion by the 2050s and £2 to 9 billion by the
2080s, assuming the value at risk is 5% to 15% of the total value at significant
likelihood of flooding, and that this does not spur cost-effective adaptation activity.
Metric
code
BU7
28
An increase in insurance industry exposure due to flooding
(BU7)
Confidence
4.2.9
Risk description
An increase in insurance
industry exposure due to
flooding
M
Summary Class
2020s
2080s
l
c
u
l
c
u
l
c
u
3
3
3
3
3
3
3
3
3
Greater than a flood event every 1 in 75 years.
68
2050s
Business, Industry and Services
Introduction
As a whole, the insurance industry has seen an increase in weather-related claims over
recent decades (Figure 4.3), largely due to an increasing number of extreme events.
Munich Re (2010) recently emphasised the likely link between the increasing number
of weather extremes and climate change. This concern is not new within the insurance
industry. In 2007, Pricewaterhouse Coopers published results from a survey of 100
insurance industry representatives from 21 countries that indicated climate change was
the fourth most important issue for the industry (out of 33 identified), with natural
disasters being the second.
Data available from the ABI provides insights into the recent cost of weather-related
claims in the UK. The cost of weather-related damage claims between 2001 and 2009
is shown in Figure 4.3. Domestic data includes damage from flood and storm, while
the commercial data is all claims in the weather-related category (although claims due
to burst pipes have been excluded from both). As discussed in Section 4.2.6 (risk
metric BU4), Figure 4.3 clearly illustrates the impact of the unusually widespread and
severe floods of summer 2007. It has been estimated that ~£3 billion of the summer
2007 loss was covered by insurance, with insurers receiving ~165,000 claims. To put
this into context, this is eight times the combined cost of the floods in Carlisle in 2005
and in Boscastle in 2004 (both localised events) and makes it the most costly insured
weather event in the UK (ABI, 2007). In fact, the widespread flooding of 2007 led to an
underwriting loss for the UK property insurance market of £1.5 billion (ABI, 2010).
Figure 4.3
Insurance payout for weather related claims in the UK (£m)
(Source: ABI)
Note: From 2004, companies were asked to report a further split in their "escape of water" claims. This has
led to a great reduction in weather related claims as misreported figures have now been eliminated.
The impact of climate change on both the level of premiums charged and level of
capital required by insurance companies is expected to be considerable. For example,
for a 4°C temperature rise, insured flood losses in the UK could lead to insurance rate
increases of 21% and a further £1.9 billion could be added to the £5.9 billion capital
requirement (ABI, 2009).
Metric response function
The baseline insurance claim data is taken to be the UK average from between 2001
and 2009 (for commercial and domestic property). The baseline number of properties
deemed at significant risk of flooding (over 1 in 75 year flood plain) is also calculated.
Business, Industry and Services
69
The change in the number of properties at risk can then be determined according to the
climate change scenario and the insurance claims can be scaled accordingly.
Excluding data from 2007 (given the extreme level of this event), an estimated average
annual claim for flooding in the domestic sector is calculated to be approximately
£135m and for commercial property approximately £70m between 2001 and 2009. If
the 2007 event is included, these average figures (for the nine-years 2001 to 2009) are
~£180 million and £100 million respectively.
An analysis of the number of commercial and residential properties at significant
likelihood of flooding (from tidal and fluvial sources) has been carried out, including
projections of future change as a result of climate change and socio-economic change
(metrics FL6a and FL7a, Ramsbottom et al., 2012). This provides a total number of
properties at risk in England and Wales (although many of which may not hold
adequate insurance cover). This is the baseline risk, which is scaled according to the
climate change scenario (and also number of new properties being built).
Climate change projections
To provide a proxy for national flood risk, an average proportional increase in the
number of properties at risk has been determined (based on regional change). The
projected increases in residential properties at risk of tidal and fluvial flooding are
shown in Table A2.18. A summary of the number of residential and commercial
properties at significant risk of flooding by the 2020s, 2050s and 2080s is given in
Table A2.19.
The results suggest that the combined domestic and commercial claims could double
by the 2020s (p50), and furthermore, see an almost three-fold increase by the 2050s
and an increase of between three and four times by the 2080s, assuming that flood
defences remain at today’s coverage and standards. This equates to an estimate
average annual total claim for flood related damage of the order of £700 million to £1bn
a year by the 2080s (based on present day costs). This is about a third of the total
weather-related insurance claims in the record year of 2007.
These results are compared with a recent ABI research paper (ABI, 2009) that sought
to monetise projected climate change impacts. The approach developed in the study
combined results from recent climate model outputs, diverse published data and
scientific literature to monetise potential impacts. The research estimated that the
impact values of climate change, assuming a global temperature rise of 4°C, are as
follows:
 Average annual insured losses from inland flooding in Great Britain could
rise by 14% to £633 million.
 The insured inland flood 100-year loss could rise by 30% to £5.4 billion and
the 200-year loss could rise by 32% to £7.9 billion.
The methods used in the ABI (2009) study are not directly comparable to that
employed in the CCRA, so it is not possible to make a direct comparison with the
findings. In particular, the study did not look at the impact of rising sea levels on the risk
of coastal flooding in the future. There are also differences in the way in which climate
projections have been applied. Furthermore, baseline present day figures used in the
ABI analysis were higher than those derived in the CCRA analysis. To refine both
estimates, more robust studies are required. At this stage, it is acknowledged that the
overall impact to the industry is unclear.
Key assumptions and limitations
There are a number of key assumptions and limitations with this methodology:
70
Business, Industry and Services
 Given the short time-series sampled, it is difficult to robustly link the
impacts of climate change to any recorded increase in insurance payout
costs. It is stressed that these figures only provide an approximate
estimate of average annual claims made and are uncertain.
 Regional variations are neglected in this methodology, due to a lack of
flood data for Scotland and Northern Ireland. Assumptions were made that
the average exposure to flood risk across England and Wales is a
reasonable approximation for Scotland and Northern Ireland.
 This methodology assumes that provision of flood damage insurance cover
will remain on the same basis as currently provided.
 The estimation that payout costs increase in the future and have increased
in the past cannot necessarily be viewed as a risk to insurance companies
associated with climate change, if this is matched by higher and adjusted
premiums. This would therefore only be problem if this was not anticipated
and accommodated for by insurance companies.
 If premiums are adjusted accordingly by the industry, a change in risk can
be managed. However, the rise in premiums may eventually become
unsustainable in some geographical areas.
Conclusions
It is estimated that annual insurance payout costs for flooding in the UK for both
domestic and non-domestic property could increase from a present-day annual
average of £200 - £300 million, to ~£1 billion by the 2080s (at present-day prices) as a
result of climate change. What is important to understand, however, is that payout
costs are not necessarily the central issue here. Instead there are a number of key
issues:
 High capital requirements. This requirement would be needed to make the
necessary payouts to claimants, particularly during more frequent or
extreme and widespread weather-related events.
 The increasing unpredictability in our climate means that the risks of a
particularly extreme and widespread event occurring, such as flooding,
cannot be priced by the insurance industry accurately, and thus premiums
may not be sufficient to cover subsequent pay-out costs. Conversely, an
overly conservative pricing of policies by some insurers may affect
competitiveness. In some circumstances, insurers know what they should
charge but if they do charge these prices, people may struggle to obtain
insurance.
 Mismanagement many lead to a loss of brand value and market share.
The likelihood of the points above occurring is dependent on the action taken by the
insurance industry; it is highly unlikely that they will do nothing. However, this part of
the risk assessment process considers risk without management and/ or market
changes, and therefore these statements should be considered in this context. The
reinsurance market, which is only currently a small part of the domestic insurance
market, will be another option for managing risk, but once again, consideration of the
benefits of reinsurance are outside the scope of this risk assessment. The risk is thus
fundamentally one of how well the industry understands weather-related risk, and how
this may vary as climate changes, which is discussed further in Chapter 7 (Adaptive
capacity).
Business, Industry and Services
71
Metric
code
BU8
An expansion of new or existing tourist destinations in the
UK (BU8)
Risk description
An expansion of tourist
destinations in the UK
Confidence
4.2.10
L
Summary Class
2020s
2050s
2080s
l
c
u
l
c
u
l
c
u
1
2
3
2
2
3
2
3
3
Introduction
Future climate change is likely to cause major changes in the distribution of tourists
around the world and different trends for tourism, both in the UK and overseas.
Historically, one of the longest-established major movements of international tourists
has been the annual migration of northern Europeans to the Mediterranean, during a
relatively confined summer season (Viner, 2006). An estimated 84% of the international
tourists that visit the Mediterranean come from Europe, mostly from northern and
western countries (Amelung and Viner, 2006).
Based on modelling studies, future climate change is likely to make countries at higher
latitudes and altitudes more attractive as a tourist destination, due to the poleward shift
in the “Tourism Comfort Index” (TCI) (Hamilton et al., 2005; Amelung and Viner, 2006;
Amelung and Moreno, 2009). Consequently, providing planning and adaptation are
considered carefully, future climate change represents an opportunity for that part of
the UK tourism industry whose operations and assets are largely based in the UK.
Metric response function
The TCI was developed in 1985 by Mieczkowski to rate climatic conditions for outdoor
recreational activities. The index is based on the notion of “human comfort”, utilising
five sub-indices as follows: (1) daytime thermal comfort index (maximum daily
temperature (˚C) and minimum daily relative humidity (%)); (2) daily thermal comfort
index (mean daily temperature (˚C) and mean daily relative humidity (%)); (3)
precipitation (total precipitation (mm)); (4) sunshine (total hours of sunshine); and (5)
wind (average wind speed (km/h). The index is weighted and calculated as follows:
Tourism Comfort Index (TCI) Equation
TCI = 2 . (4 . ThCDT + ThCDL + 2 . Sun . Prec + Wind)
TCI = Tourism Climate Index
ThCDT = Daytime Thermal Comfort Index
ThCDL = Daily Thermal Comfort Index
Sun = Index of the amount of sunshine
Prec = Index of the amount of precipitation
Wind = Index of the appreciation of wind
All the TCI sub-indices have a maximum value of 5. The maximum value of the index is
100. Based on a location’s index value, its suitability for tourism activity is then rated on
a scale from -30 to 100. Mieczkowski (1985) divided this scale into 10 categories,
ranging from ‘ideal’ (90 to 100), ‘excellent’ (80 to 89), ‘very good’ (70 to 79), ‘good’ (6069) and ‘marginal’ (40-49) to ‘extremely unfavourable’ (10 to 19) and ‘impossible’ (9 to
–30).
Climate change projections
Application of the TCI to explore the possible effects of climate change on the suitability
of tourism destinations only started in earnest during the middle of the last decade, with
72
Business, Industry and Services
research focused on the world as a whole (Amelung et al., 2007), Canada (Scott et al.,
2004), the Mediterranean (Amelung and Viner, 2006) and northwestern Europe (Nicolls
and Amelung, 2008). These studies form part of a small volume of peer-reviewed
publications, and as such, it can be concluded that research addressing the
interactions between climate change and tourism is very much still in its infancy.
The study of Amelung and Viner (2006) examined future climate change projections for
the Mediterranean region, in order to anticipate possible changes in tourism within this
region and northern Europe. For the last few decades (1960-1990), most of the
Mediterranean region is considered ‘good’ or ‘very good’ for tourist comfort, with scores
in excess of 60 (Amelung and Viner, 2006). For the same periods, scores for northern
and western Europe are rated ‘acceptable’ (40-60) during the summer months
(Amelung and Viner, 2006). Experiments with climate change projections suggest that
the Mediterranean will become too hot in summer, with northern Europe having a more
attractive climate (Amelung and Viner, 2006). Furthermore, the Mediterranean region
may become a more pleasant destination in spring and autumn, as highlighted by a bimodel distribution in TCI values for the 2080s in Figure 4.4 (Amelung and Viner, 2006).
b) Blackpool (UK)
100
90
90
80
80
70
70
60
50
1970s
2080s
40
30
Tourism Comfort Index
Tourism Comfort Index
a) Balearics (Spain)
100
60
50
2080s
30
20
20
10
10
0
1970s
40
0
Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec
Figure 4.4
Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec
Developments in Tourism Comfort Index (TCI)
Distributions for a) the Balearics and b) Blackpool in the 1970s and 2080s, according to the IPCC (2000)
A1F1 Special Report on Emissions Scenarios (SRES).
(Adapted from Amelung and Viner, 2006). A value in excess of 60 is considered a “good” tourist comfort.
In the UK, research published in 2010 by South West Tourism, in partnership with
South West Environment Agency and Amelung Advies (a Netherlands-based
organisation), investigated the 2009 UK Climate Projections (UKCP09) for the south
west region of England and explored the likely impact on tourism comfort and
seasonality in the 2020s and 2050s. The south west of England is Britain’s most
popular holiday destination, with UK residents alone making over 20 million trips to the
region in 2007 (Visit Britain, 2007). The tourism sector is one of the South West's
largest economies, with over 22 million staying visitors and 96 million day visitors
accounting for approximately 8% of the South West’s GVA and supporting around
240,000 jobs (South West Tourism, 2007).
The results of the South West Tourism study (2010) predict that the TCI scores will
improve for the whole region for both the 2020s and 2050s (Table A2.20 and Figure
4.5); a result that is consistent with previous international studies (e.g. Hamilton et al.,
2005; Amelung and Viner, 2006). At the 90% probability level, the improvement in TCI
is particularly marked and by the 2050s a large proportion of the region achieves the
‘ideal’ TCI score for the months of July and August (South West Tourism, 2010). The
TCI improvement is greatest for the shoulder months of June and September, with a
Business, Industry and Services
73
reduction in seasonality, which has the potential to widen the ‘holiday’ season (South
West Tourism, 2010).
Key assumptions and limitations
Despite the wide use of the TCI, this index does have a number of limitations:
 It has been considered too coarse an indicator, as it is insensitive to the
large variety of weather requirements that are posed by tourist activities.
 A lack of consideration of additional climate variables that are important to
tourism-related activities.
 Empirical validation of the index is relatively weak, with the index based
heavily on expert judgement (Moreno and Amelung, 2009).
Progress has been made in addressing these issues and improving the climate indices
for tourism. De Freitas et al., (2008) proposed a new index that accounts for the
overriding properties of some weather aspects and acknowledges the existence of
intercultural differences in climate preferences. Morgan et al., (2000) also developed a
tailor-made climate index for beach tourism, based on Mieczkowski’s TCI, but finetuned with empirical information (the stated preferences of actual beach users, through
survey data).
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Business, Industry and Services
TCI July 1970s, 50% probability
TCI July 2050s, 90% probability
TCI July 2020s, 50% probability
TCI August 2050s, 90% probability
TCI July 2050s, 50% probability
Figure 4.5
Tourism Comfort Index (TCI) scores
Source: South West Tourism (2010)
Validating the link between climate and tourist behaviour
In the study of Amelung and Viner (2006), the performance of the TCI as a predictor of
tourist demand was tested for the Balearics, with encouraging results. In 2002, the six
months with TCI scores over 75 accounted for 88% of total nights spent that year;
whereas in the remaining six months, in which scores did not exceed 60, visitation
levels were very low (Amelung and Viner, 2006). These results are in agreement with
findings from tourist surveys from which ‘the climate’ emerged as the Balearics’ single
most important attractor, receiving 76% of responses (Amelung and Viner, 2006). For
Business, Industry and Services
75
the UK, a different story emerges, in that historically the weather has not been a
primary consideration for visitors, with heritage, culture, the natural environment, and
visiting friends and family tending to be much more important determinants (McEvoy et
al., 2006).
The UK heat wave in August 2003 was used in the study by South West Tourism
(2010) to investigate the impact on occupancy levels in tourist accommodation. The
high temperatures (>31 ˚C) experienced in the UK attracted record numbers of visitors
to ‘honeypot’ locations, such as Bournemouth and Poole, leading to accommodation
reaching capacity and significant over-crowding on local beaches. In the case of
Bournemouth, serviced accommodation room occupancy figures over a six-year period
for the corresponding month show a distinct change (Table A2.21). Data for the months
either side of the August heat wave show occupancy levels as normal in comparison to
the rest of the year and the following years, which suggest that the August 2003 peak
could be a direct result of the heat wave (South West Tourism, 2010). Projections
suggest that extremely hot August temperatures, such as those experienced in 2003,
whereby the average temperature was 3.4°C above normal in the UK, may occur as
often as one year in five by the 2050s, and three years in five by the 2080s (Stott et al.,
2003).
In this analysis for the CCRA, the link between temperature and room occupancy was
further explored using Met Office temperature anomaly data 29 and Enjoy England
monthly room occupancy data 30 for the years between 2001 and 2009. For the whole
of the UK, there appears to be some degree of correlation between temperature and
the level of accommodation room occupancy, with years that experienced warmer than
average summer months (e.g. 2003, 2006) linked to a higher degree of room
occupancy (Figure A2.7). A couple of anomalies do exist, however, including the fact
that highest room occupancy across the UK for this period was experienced in 2007,
when temperatures were below average for the months of July and August. This could
potentially be explained by people assuming these months would be warm based on
the experiences of the previous few years (which were warmer than average).
Exploring visitor behaviour further, by studying the link between temperature and
annual bedroom occupancy by location of establishment (in this case, seaside
locations), there also appears to be a broad correlation between temperature and visits
to the seaside (Figure A2.8). A tentative assumption could be that it is these locations
that will experience the most benefit from increasing tourist comfort in the face of future
climate change.
It is difficult to justify, however, a direct causal link between climate and holiday trends,
and furthermore, even more difficult to make quantitative projections for the future. This
is because additional factors (e.g. the national economy, change in consumer spending
levels, exchange rates and world events, including terrorism and disease) play a role in
holiday decisions.
Consequences for visitor numbers and the UK-based tourism industry
The projected northward shift in the TCI means that there is the potential for the UK to
capture some of the southern European tourist market. Modelling studies predict that
the impact for the UK would be to reduce outbound tourism (i.e. an increase in
domestic holidays in the UK) and reduce inbound tourism slightly (the balance being
broadly positive for the tourism industry as a whole) (Hamilton et al., 2005). The same
study, also suggests that later in the century the relative increase declines, as the UK
becomes too hot (Hamilton and Tol, 2007).
http://www.metoffice.gov.uk/climate/uk/anomalygraphs/
http://www.enjoyengland.com/corporate/corporate-information/research-andinsights/statistics/UKOS/UKOS.aspx
29
30
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Business, Industry and Services
In addition to the change in the number of domestic tourists in the UK, there may be a
shift in the regional distribution of tourists (from both the UK and internationally) under
future climate change projections (Hamilton and Tol, 2007). By 2080, the general
pattern for both domestic and international tourists is for the south of England to have a
reduced market share, whilst Scotland, the north of England and Wales to have an
increased market share (Hamilton and Tol, 2007). In the high scenario, for the majority
of regions the change is not greater than half a percent; however, the exceptions are
London with a drop of 1.19 % in the high scenario and the regions of Highlands and
Islands and eastern Scotland with market share increases of 0.54 and 0.66 %,
respectively (Hamilton and Tol, 2007). In absolute terms, however, all regions will have
increasing numbers of tourists during the 21st century (Metroeconomica, 2006a).
Furthermore, Taylor and Ortiz (2009) discovered that climate influences are particularly
important in some months and not in others; domestic tourism is particularly sensitive
to climate in March and April and is not sensitive at all in February and October.
Overall for the UK, Pinnegar et al., (2006) summarise the main consequences that
climate change may have for tourism and coastal areas as:
 Decline in numbers of UK outbound tourists visiting the Mediterranean
during summer months.
 Increase in domestic tourism within the UK.
 Increase in overseas tourists visiting Britain during summer months for
coastal (sun, sea, sand) tourism.
 Increasing pressures on the coastal zones and waters on the UK.
Quantifying future visitor numbers and economic consequences
An estimation of the economic impact of climate change on tourism would need to
consider likely changes to numbers of visitors from abroad, changes to numbers of
trips by UK nationals overseas, and changes to spending patterns by UK nationals
holidaying in the UK, as well as changes to pressures on infrastructure,
accommodation services and food and drink, as well as the impact of projected
changes to sea level, water quality, and beach area.
Several studies have used previous ‘hot’ summers as a potential analogue with which
to estimate the impact of future hot summers on the UK tourism industry (e.g. WISE
report, 1999; Agnew and Palutikof, 2006; Taylor and Ortiz, 2009). The influence of the
hot summer of 1995 and 2003 has been shown to have a positive impact on tourist
numbers, but a mixed impact on tourist expenditures (WISE report, 1999; Agnew and
Palutikof, 2006; Taylor and Ortiz, 2009). A summer warming of 1 ºC is estimated to
increase domestic holidays by 0.8–4.7 % (WISE report, 1999). Based on regressions,
Agnew and Palutikof (2006) estimate a net increase of £309 million for tourism
expenditure due to the hot weather in the UK in 1995.
For the 2003 summer heat wave, Defra (2006b) estimate the impacts at between £17.6
million and £41.2 million for England. Using panel data models, Taylor and Ortiz (2009)
quantify the impacts of the summer 2003 heat wave at between £11.48 million and
£23.54 million for England. Assuming that the impacts on tourism in Scotland and
Wales were similar to those in England, this gave an estimated impact on domestic
tourism expenditures of between £14.79 million to £30.32 million from the effect of the
summer of 2003 (Taylor and Ortiz, 2009). UKCP09 projections state that for the UK as
a whole, under the medium scenario (A1B), a hot ‘1995-type’ August increases from a
1% chance of occurring in the 2020s, to 63% in the 2080s; this will clearly have
significant implications for the tourism industry in the UK.
Business, Industry and Services
77
Using a modelling approach, Amelung and Moreno (2009) provided projections of
tourist activity, to estimate the role of climate and to explore the effects of climate
change. To quantify the economic impact, Amelung and Moreno (2009) developed an
equation to convert change in bed nights into tourist expenditures using a value for
expenditure per bed night across the EU. Across Europe, the authors predict large
increases in bed nights in 2080 (compared to 1970s), with the British Isles experiencing
a 3 – 18 % increase in bed nights depending on climate scenario (2.5 °C – 5.4 °C).
Across Europe, this equates to an increase in annual expenditure between €529 –
3105 million (under a flexible season situation) and between €474 – 3432 million
(under a fixed season situation, i.e. school holidays remain same and people forced to
shift holiday location) (Amelung and Moreno, 2009).
Conclusions
Tourism is climate-sensitive and changes in the weather, seasons and climate will
impact on the tourism industry affecting the health of destinations, choice of trip and
tourist spending. Modelling studies that utilise the TCI indicate that future climate
change is likely to result in an improvement in the attractiveness of the UK as a tourism
destination and furthermore, extend the tourist season. As exemplified in the south
west of England, the climate for tourism activity is projected to not change significantly
in the winter but both shoulder seasons are likely to experience an improvement, and in
the height of the summer could become excellent and even ideal especially under the
90% probability by 2050 (South West Tourism, 2010). This in turn could mean more
visitors, not only throughout the season but also at peak times.
Alongside this climatic amelioration, however, the incidence in severe weather events
(e.g. flooding, heat waves and drought) is projected to increase. These events have the
potential to directly and indirectly affect tourism (see Section 4.2.2 and Box 4.5).
Projected changes in climate will need careful consideration in both regional and local
tourism development, management and planning. Climate change will not only affect
tourism through changes in thermal conditions, but also through ecosystem change,
impacts on infrastructure and services, effect on access and transport prices, and even
changes in economic growth and prosperity (Stern, 2007). This leads to challenges
relating to the carrying capacity of the destination, which can be grouped into four
categories (McEvoy et al., 2006):
 Physical capacity: the point at which site facilities (such as car parks, visitor
centres) or access routes become congested.
 Ecological capacity: the level at which unacceptable change starts to occur
in floristic composition, soil structure and wildlife populations.
 Perceptual or social capacity: the point at which the recreational experience
starts to deteriorate.
 Economic capacity: the threshold beyond which the investment needed to
sustain environmental quality becomes prohibitive.
78
Business, Industry and Services
Metric
code
BU9
A decrease in output for UK businesses due to an increase
in supply chain disruption as a result of extreme events
(BU9)
Confidence
4.2.11
Risk description
A decrease in output for UK
businesses due to an increase
in supply chain disruption as a
result of extreme events
Summary Class
2020s
l
c
L
2050s
u
l
c
2080s
u
l
c
u
Too Uncertain
Introduction
In recent years, lean supply chains have become the standard. Businesses have
invested considerable effort in maximising efficiency by delivering products to the
customer with minimal waste. This is achieved by streamlining operations across all
links in the supply chain, from procurement and manufacturing to warehousing and
transportation. Leanness has brought efficiency and cost savings, but it has also
resulted in increased risk of disruption. A survey from the Business Continuity Institute,
which analysed responses from businesses in 35 countries, showed that over 70% of
respondents recorded at least one supply chain disruption in 2010 (BCI, 2010).
Adverse weather was the main cause of disruption, with 53% of businesses citing this
as contributing to recent supply chain disruption.
Supply chain disruptions can cause significant harm to business operations. They can
raise costs, trigger inventory accumulations, and reduce a business’ market share. A
broken or damaged chain puts production and distribution in jeopardy, reducing
revenue when goods cannot be manufactured or delivered. Disruptions can also affect
credibility with customers, investors and other stakeholders. A fifth of businesses
surveyed in the BCI study admitted they had suffered damage to their brand or
reputation as a result of supply chain disruptions.
Climatic factors have the potential to disrupt UK businesses’ supply chains by affecting
availability of natural resources and raw materials, or by causing distribution delays
(Foresight, 2011a). Climate change represents a key challenge to the security of
supply and price of essential commodities that are imported to the UK (Lewis et al.,
2010). The manufacturing sub-sector is in turn dependent on a secure supply of
electricity, water and transportation (Lewis et al., 2010). Any climate-driven problems
with electricity or water supply, or the transportation of raw materials and manufactured
goods, would affect the production and trade of manufactured goods in a way that
would be difficult to adapt to (Lewis et al., 2010). The climate is also a factor in market
demand for goods. If extreme weather events affect key suppliers, and no alternate
supply is available, then supply chains are severely interrupted. Each of these risks is
likely to increase as the climate changes.
Climate change risks to retail supply chains
All UK businesses, regardless of sector, location and size, are faced with direct and
indirect climate change impacts on raw materials and supply chains. The agricultural
and manufacturing sectors are vulnerable to direct impacts that affect supply of input
materials. General retailers are less exposed to direct risks, but they face knock-on
impacts in terms of transportation and distribution impacts. Infrastructure for transport
and utilities is particularly vulnerable, and therefore places at risk wholesale and retail
trade businesses. Retailers should also not only consider the effects of extreme events
on supply chains, but also the incremental effects. As both extreme and incremental
Business, Industry and Services
79
effects potentially become increasingly apparent, businesses will experience knock-on
effects through their business models, potentially increasing costs and reducing
competitiveness.
Availability of natural resources and raw materials
The retail sector is heavily reliant on raw materials as inputs to manufacturing
processes. Climate related impacts on the supply of these resources could reverberate
through supply chains to affect business performance. Although UK agriculture
provided around 60% of food for UK consumers (Defra, 2010c), imports of raw
materials continue to be very important for UK retail supply chains. The following
discussion looks at the availability of natural resources and raw materials for global
supply chains.
Several climatic variables (e.g., temperature, radiation, precipitation, soil moisture and
wind speed) affect the processes that drive productivity of agricultural raw materials
and fibre feedstock. Crops generally grow better when CO2 concentrations are higher,
however growth, development and yield can all be constrained by climatic thresholds
(e.g. lower than average rainfall). As discussed in the Agriculture sector report, the
most favourable climatic conditions for individual crop species often exist over a
relatively small area. As a result, though species may continue to grow in current
locations, they may face competition from other species better suited to altered climate
conditions, and suffer a consequent drop in quality.
Animal yields are less sensitive to gradual changes in climate, though they are
vulnerable to extremes of heat and water stress. Aquaculture is most at risk from
increased water temperatures, access to clean water supplies and ocean acidification
as a result of increased concentrations of atmospheric carbon dioxide (Foresight,
2011b).
Climate change will result in migration of new pests and diseases, which affect
individual commercial crops and animals. In the western Canadian province of British
Columbia, recent warming has helped the mountain pine beetle to survive in climates it
would normally find inhospitable (Carroll et al., 2006). In 2006 alone, 9.2 million ha of
forest were in an advanced stage of attack from the beetle, and by end of 2006 the
cumulative outbreak area affected was estimated at 130,000km2 (close to the total area
of England). Timber losses are estimated to be more than 435m m3, with additional
losses outside the commercial forest, according to Natural Resources Canada.
Mountain pine beetles are expected to wipe out 80% of the province’s pine forest by
2013.
Short-term extreme events, like exceptionally strong winds or floods, can also have
negative impacts on commercial crop productivity. Increasing temperature alone is
likely to lead to an increase in fire in timber-growing areas. Depending on the region,
however, changes in precipitation frequency and intensity may counteract this effect,
possibly even leading to a decrease in fire activity. Compound climatic stressors (e.g.
high temperatures combined with decreased rainfall) can increase vulnerability in the
agricultural sector as a whole. Finally, farmers with smallholdings are likely to be
disproportionately sensitive to extreme events, and vulnerable to an additional range of
socio-economic pressures, including demographic shifts, urban sprawl, and pollution.
Against this backdrop of changing climatic conditions, agricultural production must also
keep pace with growing demand for food from an expanding world population
(Foresight, 2011b).
Stocks of non-agricultural raw materials can also affected by extreme weather events.
Queensland, Australia, which produces about one-third of the world’s supply of coking
coal (used in the production of steel) suffered widespread flooding in early 2011.
Flooded mines left export stocks stranded in port, pushing up the global prices of both
coking coal and thermal coal, which is used for power plants (New York Times, 2011).
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Business, Industry and Services
The recent review of future resource risks faced by UK business acknowledges several
climate-related risks to the food and drink industry, including rising costs of raw
materials, rising costs of water and energy (which are likely to negatively impact food
production, processing and transportation), and rising costs of timber, with knock-on
impacts on packaging prices for manufacturing and processing (Defra, 2010c).
Agricultural yields and commodity prices are likely to become more volatile as the
climate changes. Disruptions in trade may also drive up prices. UK business will be
faced with increasing costs as they endeavour to source raw materials from new areas
of the world in response to changes in the geographical viability of crops, or the
unreliability of supply. As a potential response, businesses may find it easier to
maintain supplies in the event of disruption by diversifying supply chains and providing
additional storage capacity to carry higher inventories of input products and raw
materials.
Reliability of transport systems
Transportation systems are critical to the supply chains they support. In addition to
direct climate change impacts on the production of key resources and commodities, the
security of supply to the UK will be affected by the impact of climate change on
transportation (Lewis et al., 2010). Global transport networks are likely to be affected
by climate change as much as any commodity itself (Lewis et al., 2010). Climate
change will affect transportation hubs, such as ports and airports, as well as the
transportation networks such as shipping routes, air routes and road and rail networks
(Lewis et al., 2010). Globally, many cities, large trading and transport hubs lie in low
lying regions, which are most vulnerable to rising sea levels and coastal-related natural
hazards expected from climate change. When transport disruptions occur, many supply
chains break down and take a long time to recover, with significant costs to business.
The UK is highly reliant on international infrastructure for energy transportation and
communications networks (Foresight, 2011a). Furthermore, the growing global reliance
on oil and gas reserves in the Middle East is leading to longer, more complex supply
chains which are inherently more vulnerable to disruption (Foresight, 2011a). Climate
change has the potential to affect energy security, with potential negative impacts for
the supply chain and businesses dependent on a reliable supply and stable energy
costs.
As demonstrated by the December 2010 snow chaos that disrupted Heathrow for five
days, affected about a million passengers and cost the airport group £24m,
transportation system performance is keenly sensitive to weather effects, even in the
current climate. Because the design of transportation infrastructure incorporates a
pragmatic range of temperatures and precipitation as reflected by the local climate,
these systems are likely to be increasingly affected by a changing climate. Impacts
may result from gradual, incremental changes in key climatic variable (e.g. increasingly
hot summers will cause more frequent rail buckling; see the Transport Sector report for
a detailed discussion of this risk). Impacts may also occur as a result of extreme
climatic events, such as widespread floods or storms.
The Transport sector report focuses on road transport systems, as 90% of national
transport needs are provided by roads in the UK. Because UK businesses’ supply
chains are global in nature, a brief discussion of climate risks to all transport modes is
included in this section.
Longer periods of higher temperatures, combined with traffic loading and speed, can
damage roads in several ways, including softening of asphalt that leads to rutting from
heavy traffic. The projected increase in heavy precipitation in the UK is likely to cause
increases in weather-related accidents and traffic disruptions (see Box 4.8). Increases
in precipitation and wind speeds may lead to worse driving conditions. This may result
in increased numbers of accidents, and therefore delays on the road network. If more
Business, Industry and Services
81
precipitation falls as rain rather than snow in winter and spring, there will be an
increased risk of landslides, slope failures, and floods from the runoff. This may cause
road closures as well as the need for road repair and reconstruction, further increasing
supply delay.
Box 4.8
Case study: 2007 flooding and the impact on transport
infrastructure
In June 2007 there were unprecedented levels of rainfall in the UK, in some areas as
much as over 400% of the monthly average from the 1961-1990 baseline, creating
serious flooding issues throughout much of the UK, particularly the East and West
Midlands and parts of the South West.
In a report produced by the Environment Agency, researchers state that the total
economic costs of the 2007 floods are estimated at about £3.2 billion in 2007 prices.
The closure of roads resulted in extra costs due to congestion, and increased travel
time and distances. Estimated costs were about £191 million, half of which was due to
road damage and half to traffic delays.
With respect to disruption, six motorways were closed. The M1 (Junction 31 to 34)
closed for 40 hours. Disruption costs are difficult to assign but have been estimated by
the Highways Agency at £2.3 million for the M1 incident alone.
Data on the type and magnitude of traffic flows were used to determine the cost of the
extra time and distances travelled due to blockage at given ‘nodes‘ on the road
network. Interpretation of flood maps suggested blockages at 200 flood/transport
nodes. This gave a mean of direct traffic disruption of £98 million, but the range in this
estimate is very large, between £22 million and £174 million depending on
assumptions.
(Source: Environment Agency, 2010).
Extreme heat can cause deformities such as rail buckling in train tracks, at minimum
resulting in speed restrictions and, at worst, causing derailments. An increase in
summer temperatures may increase the sag of overhead power cables, adding to the
risk of damage to infrastructure and vehicles. Hotter, drier summers may increase the
seasonal soil shrinkage, necessitating increased maintenance levels for rail lines. For
rail transport of goods, there is less opportunity to bypass flooded areas than for road.
Local floods, particularly in urban stations, can cause major disruption across the
network. Driving rain and hail can cause a higher number of hazards such as
derailments, and collisions. Overhead lines may snap under more extreme wind or in a
storm. Significant sections of track in Wales and the south west of England run directly
along the coast; these are already vulnerable to coastal flooding and are likely to be
increasingly at risk without enhanced flood defences.
Increased delays due to heavy downpours are likely to affect air traffic operations,
causing increasing flight delays and cancellations, as aircraft may not be able to take
off during heavy downpours. As with roads, runways may be subject to cracking during
exceptional drought periods causing delays. Airports are frequently located in low-lying
areas and can be expected to flood with more intense storms as a result of rainfall
descending from higher altitude areas. Airports in coastal cities are often located
adjacent to rivers, estuaries, or open sea, and are therefore more vulnerable to flooding
from rivers and the sea causing disruption and necessary maintenance in order to
prevent this.
Sea freight represents the most significant contribution to global transportation of
commodities and resources, carrying over 80% of the volume of world trade (UN,
2009). To date very little work has been carried out to assess the impacts of climate
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Business, Industry and Services
change on ports and shipping. However, a scoping report of behalf of Associated
British Ports (2007) identified a number of potential consequences of marine climate
change. Using a risk matrix, which took into account scientific uncertainties, the
probability of an impact occurring, and the economic severity of any impact, the
following main issues were highlighted:
 Delays, closure of ports and prevention of port activities arising from
flooding and severe weather
 Damage to infrastructure and cargo from flooding and severe weather
 Changes to sedimentation and tidal patterns leading to increases in the
costs of maintaining navigation channels.
A number of studies have attempted to assess the possible impact of future climate
change on the operation of roll-on-roll-off ferries throughout Europe (Woolf et al., 2004;
Weisse et al., 2009). One such case study included assessing the potential disruption
of future climate change, due to changes in wave climate on the operation of roll-onroll-off ferries to the Western Isles of Scotland. The Western Isles of Scotland are
remote, sparsely populated and are highly dependent on maritime activities. In
particular ferry services are vital to the region. At the same time, the seas to the west
and north of Scotland are among the roughest in the world during autumn and winter,
making maintenance of a reliable ferry service both difficult and expensive. A
deterioration in wave climate in response to either natural variability in the North
Atlantic Oscillation (NOA) or as a regional response to anthropogenic climate change is
a distinct possibility. By analysing the contemporary response to shifts in the NOA,
Woolf et al., (2004) projected a significant (although admittedly uncertain) increase in
ferry service disruption in the future, as a consequence of deterioration in wave climate.
Further discussion regarding the disruption to marine transport due to climate change
can be found in CCRA Marine sector report.
The economic cost of adverse wave climate in the region is currently of the order of
£10 million per annum. These costs are very small compared to the cost of ‘climate
change’ globally. The current case can be identified, however, as an example of an
exceptionally high per capita cost to a particular community of an adverse climate,
mediated by the impact on the safety and reliability of a maritime service (Woolf et al.,
2004; Weisse et al., 2009). Further information on the ferry services routes, passenger
numbers and the impacts of potential disruption are provided in the CCRA Marine and
Fisheries sector report.
At present, confidence in the wind projections from Global Climate Models (GCMs) and
downscaled Regional Climate Models (RCMs) is very low, with some models
suggesting that the UK might experience fewer storms and others suggesting an
increase. Thus the confidence in projections of wind and storms from the models
underlying UKCP09 were also considered unreliable and uncertain. Wave heights
around the UK depend on winds and storms both locally and in the wider Atlantic.
Measurements of wave heights in UK waters have indicated substantial variability in
wave height, depending on season and location. Although there have been no clear
trends over the twentieth century, the wave climate seems to have roughened
appreciably between the 1960s and the 1990s.
Due to the uncertainty regarding future changes in extreme wind conditions (and hence
waves), it was decided not to consider storm-related disruptions to port operations
beyond the work described above. More detail on these topics is, however, provided in
the CCRA Marine and Fisheries sector report.
Chill chains (used to transport frozen or perishable products from producer to
consumer) are also at risk during hotter weather. Higher temperatures may increase
Business, Industry and Services
83
refrigeration needs for goods during transport, raising transportation costs due to
reductions in fuel efficiency of transport vehicles.
Key assumptions and limitations
Because supply chains are complex and dependent on a network of interconnected,
yet independent, elements, it is not possible to develop a clear and direct causal link
between climate change and supply chain disruption. Many climatic factors (e.g. heat,
precipitation, melting, flooding) can break supply chains, making a single response
function too simplistic.
Import intensity could be considered as a proxy for climate change risk, as businesses
which are heavily dependent on foreign imports are exposed to climate impacts in other
parts of the world. However, this is a narrow view which ignores the fact that even
domestic suppliers can be affected by extreme weather events or changes in climatic
thresholds. Moreover, it is the ability of retailers and manufacturer to shift suppliers that
is more important than the level of international imports, as it is entirely possible that a
UK retailer with no imports may be highly vulnerable to climate change if the retailer
has limited or no alternative suppliers.
Conclusions
Supply chain disruptions are costly to business. A report that assessed supply chain
integrity showed that disruptions negatively affect company stock price, return on
assets, and return on sales (Pricewaterhouse Coopers, 2008). The report also shows
that businesses do not tend to recover quickly from supply chain disruptions. On
average, affected companies’ share prices dropped 9% below the benchmark group,
and two-thirds of affected companies were lagging their peers in stock price
performance a year after the disruption.
Climate change will cause shifts in both average conditions and the frequency and
severity of extreme climate events. These shifts have the potential to affect every
aspect of the business supply chain, often in ways that are gradual, diffuse or indirect.
Increasing globalisation, outsourcing and just-in-time approaches to inventory already
create significant risk exposure. It may be more difficult to map out and understand
supplier relationships (supply chain visibility) and contain costs under continuing
climate change. Climate-related disruptions all over the globe will affect suppliers in
their own locations, with knock-on risks UK businesses.
Metric
code
BU10
Loss of staff hours due to high internal building
temperatures (BU10)
Confidence
4.2.12
Risk description
Loss of staff hours due to high
internal building temperatures 31
M
Summary Class
2020s
2050s
2080s
l
c
u
l
c
u
l
c
u
1
2
2
1
2
3
1
2
3
This has been scored using expert opinion and the percentage reductions in productivity
rather than the potential economic losses. The potential economic costs have been considered
in the economic analysis in the Evidence Report and the more general topic of overheating in
buildings has been assessed as one of the most significant risks for the Built Environment.
31
84
Business, Industry and Services
Introduction
Changes in climate will clearly influence both the heating and cooling energy demand
within buildings. Modern factory buildings, due to their design characteristics, are more
vulnerable to climate change, through increased ambient air temperatures, and
reduced cloud cover (increasing UV radiation), as well as heat created by plant and
machinery, IT equipment and lighting. Internal building temperatures are likely to
increase throughout the year and especially during summer months. With respect to
cooling requirements, longer, drier summer periods may cause overheating in naturally
ventilated buildings and affect the capacity of low energy cooling systems to provide
comfortable conditions across all building types. These changes may have knock-on
implications for worker health and safety, productivity and product quality.
The issue of overheating of buildings has been considered in the Built Environment
sector report, metric BE3 (Capon & Oakley, 2012). This considered the number of
days per year when the temperature exceeds a comfort level, which is taken as the
threshold for overheating. To relate this to business interests, this risk metric has been
extended to consider the implications of overheating on productivity in the work place.
Using data from the Inter-departmental Business Register (IDBR), it was possible to
make a preliminary assessment of the impact on different business sectors, by utilising
regional projections for more frequent warm days during the summer months and
statistics for staff numbers.
Metric response function
The combination of overheating and warm weather periods has been observed to
produce two responses in the workforce; increased absenteeism (Kronos, 2007) and
reduced productivity (Parsons, 2009). The fall in productivity when working in high
temperatures has been examined by National Institute of Occupational Safety and
Health in the US (CEBR, 2003; NIOSH, 1986). A response function based on an
interpretation of their estimates is presented in Figure 4.6.
A baseline was established using the same time series data used in the Built
Environment sector report (Armstrong et al., 2010; Capon & Oakley, 2012). The data
consists of average daily maximum temperature on those days when the temperature
exceeds 26°C, covering England and Wales. A value of 26°C was used to allow for the
effect of solar gains, building performance and the fact that some productivity loss
starts to be observed at around this temperature (Figure 4.6). This is, however, lower
than the CIBSE guidance, which suggests a value of 28°C is more appropriate (CIBSE,
2006). As a sensitivity check, the analysis was repeated using this higher value.
40
Temperature (deg C)
Fall in productivity (%)
80
60
40
20
0
25
30
35
40
30
26
20
10
0
Temperature (deg C)
Figure 4.6
10
20
30
time (hr)
Fall in productivity as a function of temperature
Interpreted from NIOSH (1986) estimates (left plot). Function used to estimate duration above threshold based
32
on min, max and mean daily temperatures, compared with observations for a typical hot day (right plot).
32
Based on observed air temperatures in Southampton on 27 June 2010 (source: www.sotonmet.co.uk)
Business, Industry and Services
85
An initial model using the daily maxima, the average number of days over the threshold
and the response function for loss of productivity was found to significantly overstate
the impact. A more detailed model was therefore developed comprising the following:
 Tmax – the maximum daily temperature was available in the observation
record and was scaled using the UKCP09 projections for the summer
seasonal average of the maximum air temperature.
 Tmean – the mean daily temperature was also available in the observed
record and was scaled using the UKCP09 projections for the summer
seasonal average of the mean air temperature.
 N – number of days that Tmax exceeds the threshold (either 26°C or 28°C).
For the projections this was found by counting the number of exceedances
having re-scaled Tmax.
 D – the duration of exceedance. The hourly variation of temperature over
the day was approximated by a sine curve. This is illustrated in Figure 4.
against some measured date, where the modelled curve is generated using
Tmax and Tmean. An upper bound was placed on the duration of half a
working day, to account for lunch breaks and the increasing likelihood of a
shift in work time practices as sustained hot periods become more routine
(e.g. early starts or long lunch breaks).
 P – the loss in productivity was found by estimating the percentage loss in
productivity, p, at the daily maximum temperature, using the scaled value of
Tmax and the response function (Figure 4.). The daily loss was then the
product of the duration and the percentage loss in productivity, again
assuming a sine wave growth and decay (P=2.D.p/π). These values were
then summed for each region of England and Wales to get the loss in
productivity in days. To take account of existing cooling infrastructure
(predominantly in modern offices and factory spaces) the values were then
halved. No further adjustment was made, however, to take account of any
future provision of cooling.
Climate change projections
Using the UKCP09 climate projections, the loss of productivity due to overheating was
calculated for the UKCP09 regions, and the various epochs (2020s, 2050s, 2080s),
emissions scenarios (high, medium, low) and probability levels (p10, p50, p90). The
UKCP09 temperature variables, used to scale Tmax and Tmean, were adjusted by
0.5°C for all epochs, to address the fact that baseline conditions are for the period
1960-90 (with the period post-1990) has experienced temperature increases of 0.5°C.
The results using a 26 ºC threshold are presented in Table A2.22 and those for a 28 ºC
threshold in Table A2.23.
The results suggest a potential doubling in lost productivity as an upper bound by 2020
(p90 values), with little change at the lower bound (p10 values). By the 2050s, the
central estimate is for an average 3-fold increase, rising to an average increase of 8-9
times for the high emission, p90 case. This pattern continues into the 2080s, with
roughly a 50% increase in lost productivity for the p10 case, and an increase of
between 10-50 times for the high emissions, p90 case.
The values derived from the observed data using a 26°C threshold are typically double
the values based on a 28°C threshold. For the 2020s, this reduces to an 80%
difference and continues to fall to a difference of around 20% by the 2080s. The
reason that the lower threshold produced higher values is simply that a far greater
number of days exceed the lower threshold and therefore make a contribution to the
summed value of lost productivity.
86
Business, Industry and Services
Exposure of sections and divisions of industries
This analysis makes use of the Standard Industry Classification (SIC) data, described
in Section 4.2.5, to relate the exposure of sections and selected divisions of industries
to overheating in factory or office work spaces. For each SIC section, the results were
summed on a 10 km grid to provide a high-level indication of the spatial distribution
(e.g. Figure A2.9) and to the UKCP09 regions for spatial climate change maps (e.g.
Figure A2.10) and tabular summaries (e.g. Table A2.24). The regional changes in lost
productivity are used to factor the staff numbers of those businesses in each group
examined.
The 2010 SIC data indicates that the present day turnover of businesses (summed
over sections A-R) amounts to £3.8 trillion, employing over 23 million staff. Currently
the annual average days lost, using the 26°C threshold, is some 5 million, which is
0.1% of the staff time available. Using the 28°C threshold, this reduces to 3 million or
0.06% of the staff time available. Using the lost staff days and an average staff cost of
£150 (average wage, plus social costs), this equates to a value of £770 million, which
is 0.09% of payroll costs and 0.02% of turnover for the 26°C threshold (£460 million,
0.05% of payroll costs and 0.01% of turnover for the 28°C threshold).
Scaling the costs in a similar manner to the lost production estimates above, this
produces an estimated increase in costs to £3.6 billion by 2080 (medium emissions,
central estimate), with a range of £1.1 to £15.2 billion (low emissions, lower estimate to
high emission, upper estimate). Summary results, summed across sections A-R and
compared across the 26°C and 28°C threshold, are given in Table A2.25.
Similar to the results for flooding-induced loss of staff time (Section 4.2.6), wholesale
and retail is the most exposed section, with the health and education sections next, due
to the high staff numbers employed in these sections.
Key assumptions and limitations
 There are a number of key assumptions and limitations with this
methodology:
 The metric response function needs is based on US studies and therefore
needs to be validated for UK conditions.
 It is likely that productivity is not simply a function of temperature, with other
factors such as humidity, ventilation and building solar gain also important.
 Some researchers have suggested that temperatures can be much closer
to the physiological tolerance curve before there is any significant
impairment of mental capacity (Hancock, 1981); this would suggest that the
curve in Figure 4.6 may be overly pessimistic.
 The range of results generated by the two temperature thresholds (26°C
and 28°C) provide an indication of the uncertainty associated with this
methodology. A better understanding of the impact of high temperatures on
worker efficiency would provide more accurate estimates of potential
impacts for business turnover and profitability.
 Worker acclimatisation has been excluded from the analysis. It is
suggested that after 7-10 days of sustained exposure, workers start to
develop some degree of acclimatisation, although they still do not work as
efficiently as in cooler environments (NIOSH, 1986). As a consequence, the
estimates for the 2050s and 2080s are likely to be an overestimate.
 Adaptation measures, such as improvements in building design, ventilation
(including air conditioning), and potentially adaptive work practices to avoid
Business, Industry and Services
87
working in the heat of the day, have been ignored. Such adaptations will all
reduce the impact, whereas loss of green space and any increase in the
urban heat island effect (see Built Environment sector report) are likely to
exacerbate the problem.
Conclusions
The implications on workforce productivity due to overheating in the work place have
the potential to have serious consequences for the Business, Industry and Services
sector, unless suitable adaptation measures are introduced. At the upper bounds and
using the 26°C threshold, the results suggest that the cost of loss in productivity due to
building temperature could increase from a baseline of £770 million in 2010 to between
£850 million and £1.6 billion in the 2020s; between £1.1 billion and £5.3 billion in the
2050s and between £1.2 billion and £15.2 billion in the 2080s.
88
Business, Industry and Services
5.
Socio-Economic Change
5.1
Introduction
Step
10
It is recognised that many of the risk metrics in CCRA are influenced by a wide range
of drivers, not just by climate change. The way in which the social and economic future
of the UK develops will influence the risk metrics. This chapter provided a high-level
discussion of how different changes in our society and economy may influence the
risks and opportunities identified in Chapter 4. The dimensions of socio-economic
change that were considered are:
Population needs/demands (high/low)
This dimension is intended to encapsulate drivers of population size and distribution
(geographically and demographically) and the pressure population creates in terms of
housing, education etc. One extreme is that there is a high degree of demand on
natural, economic and social resources (demand exceeds supply and more people are
exposed to risk); the other is that demand is very low (supply exceeds demand and
people are less exposed to risk).
Global stability (high/low)
This dimension describes drivers based on world events that would increase or
decrease global stability (e.g. war, natural disasters, economic instability). The
extremes are higher global stability (with little pressure on Governments and people)
compared to today, and lower global stability (with a high degree of pressure on
Governments and people that outweigh other priorities) compared to today.
Distribution of wealth (even/uneven)
This dimension considers the distribution of wealth amongst the British population; the
extremes being whether it is more even compared to today or more uneven (with a
strong gradient between the rich and poor) compared to today.
Consumer driven values and wealth (sustainable/unsustainable)
Globalisation and consumerism are the primary drivers here, specifically movement
towards or away from consumerism values. The extremes are that consumers
prioritise their time for working and the generation of wealth, with a focus on the
consumption of material market goods and services compared to today; and
consumers reduce the importance of work and wealth generation in favour of leisure
and less materialism, with a focus on the consumption of non-market goods and
services, such as conservation and recreational activities in green spaces.
Level of Government decision-making (local/national)
This relates to how centralised adaptation policy making is; the extremes being
whether there is a completely centralised policy compared to today; or whether there is
a very small central Government input and high degree of localism in decision-making
compared to today.
Land use change/management (high/low Government input)
These dimensions relate to aspects of urbanisation versus rural development. The
extremes are that looser planning restrictions might increase development in rural
areas (building on the green belt, power stations, etc.) compared to today, versus
Business, Industry and Services
89
tighter planning that might increase urban development (more brown field sites)
compared to today.
5.2
Estimates of changes in selected social and
economic futures
For each risk metric, a summary of relevant socio-economic drivers is provided in
Table 5.1. Arguably, the most important dimension of change to the Business, Industry
and Services sector is the level of Government decision-making, both in the UK and
internationally. The international nature of certain sub-sectors, for example financial
services, and individual companies, means that global stability has the potential to
have significant implications for these groups. Global stability is dependent upon
effective structures for global governance, legal instruments, and the maintenance of
international networks of trade and diplomacy (Foresight, 2011a). As such, it is
important for the UK to understand how these networks will be affected as the world
experiences changes in temperature, extreme weather, sea level rise and precipitation
from climate change in the decades ahead (Foresight, 2011a).
It is also worth noting that many of the risks have an assumed level of autonomous
adaptation, for example, policy relating to the development of new homes in areas at
risk of flooding. Activity in the various sub-sectors of the Business, Industry and
Services sector are often driven by changes in regulation, which again highlights the
sensitivity of this sector to the level of Government decision-making.
90
Business, Industry and Services
Table 5.1
Business, Industry and
Services sector risks
and opportunities
Socio-economic change summary, with extreme scenarios highlighted where applicable
Level of Government
decision-making
(local/national)
Land use
change/management
(high/low
Government input)
n/a
Global stability
(high/low)
BU1 Fund performance
Population size: n/a
Population distribution: With an
ageing population, there will a
greater volume of pension funds
and consequently an increasing
number of elderly people may
be exposed to negative fund
performance.
(High): This has a
major negative impact
on financial institutions.
n/a
Generation of wealth and
investment funding are
closely linked.
Depending on the level of
Government decisionmaking, support or control
of businesses in this subsector could be affected
(adversely or beneficially).
BU2 Tourism financial
Population size (High):
Increased demand for tourist
facilities will put pressure on
natural assets and
infrastructure.
Changes in tourism will affect
financial performance, including
both opportunities and threats.
This will affect the type of
tourism services
required.
Changes in tourism will
affect financial
performance.
This will affect the type of
tourism services required.
Changes in tourism will affect
financial performance.
Depending on the level of
Government decisionmaking, support or control
of businesses in this subsector could be affected
(adversely or beneficially).
(Low input): Less
restrictive planning
control may place
more tourism assets
in areas prone to
natural hazards,
which may be
exacerbated due
climate change.
BU3 Water availability
Population size (High):
Increased pressure on public
water supply, which could mean
that business may increasingly
be competing with communities
and other users for a limited
water supply and have
abstraction licenses adjusted.
Population size (High): May alter
flood management priorities. It is
possible that this shift in
priorities may affect industrial
flood protection policy.
(High): This affects the
willingness of people to
travel, and changes
tourist destination
choices.
Changes in tourism will
affect financial
performance of UKbased foreign
operators.
n/a
n/a
(Sustainable): Pressure on
water resources will reduce,
although this may be
counteracted by increasing
population, etc.
Depending on the level of
Government decisionmaking, support or control
of businesses in this subsector could be affected
(adversely or beneficially).
(Low input): Less
restrictive planning
controls may place
more properties in
areas with water
scarcity.
n/a
n/a
(Unsustainable): This will
increase the material impacts
of flooding.
Depending on the level of
Government decisionmaking, support or control
of businesses in this subsector could be affected
(adversely or beneficially).
(Low input): Less
restrictive planning
controls may place
more industrial sites
at risk to flooding.
BU4 Flooding &
industry
Distribution of wealth
(even/uneven)
Consumer driven values
and wealth (sustainable/
unsustainable)
Population needs/demands
(high/low)
91
Business, Industry and
Services sector risks
and opportunities
Population needs/demands
(high/low)
Global stability
(high/low)
Distribution of wealth
(even/uneven)
Consumer driven values
and wealth (sustainable/
unsustainable)
Level of Government
decision-making
(local/national)
Depending on the level of
Government decisionmaking, support or control
of businesses in this subsector could be affected
(adversely or beneficially).
(National): More
centralised Government
policy making may mean
that Government will
continue to reach
agreement with the ABI to
maintain insurability of
properties.
Land use
change/management
(high/low
Government input)
n/a
BU5 ICT
Population size (High): Demand
for ICT will increase, and the
impacts of disruption will be
greater.
(High): Important
international links and
networks could be
negatively affected.
n/a
(Sustainable): If working from
home is increased, there is a
greater risk of loss in
productivity due to ICT
failure.
BU6 Mortgage
provision
Population size (High): May
exacerbate the issue of
exposure of homes located in
areas of significant flood risk. If
unmanaged, house stock asset
value may be affected if
insurance becomes increasingly
difficult to obtain.
n/a
The housing market is
sensitive to the
distribution of wealth.
The loss of mortgage
provision could lead to
less affluent people living
in flood risk areas without
insurance, hence
increasing vulnerability.
(Unsustainable): Increasing
demand for homes and
wealth may exacerbate
issues around flood risk and
mortgage provision.
BU7 Insurance claims
Population size (High): Growth
of the insurance industry,
together with increased
exposure to weather-related
claims.
The results shown for the
“Principal” socio-economic
scenario show an increase of
about 30% compared with
climate change only results by
the 2050s (and 45% by the
2080s).
Population size (High) and
ageing demographic: May
increase opportunities for
domestic tourist industry. These
factors are likely to contribute to
an increased seasonal spread of
holidays, higher demand for
short breaks, and the need for
“time-efficient” access to
destinations (McEvoy et al.,
2006).
n/a
n/a
Levels of wealth affect
insurance claims.
Depending on the level of
Government decisionmaking, support or control
of businesses in this subsector could be affected
(adversely or beneficially).
(Low input): Less
restrictive planning
controls may place
more properties at risk
of natural hazards,
which may be
exacerbated due
climate change.
(High): There is the
potential for increased
revenues in the
domestic tourism
market, as people
change their choice of
destination.
This will affect the type of
tourism services required
as tourism expands to
meet future needs.
Values placed on
different types of tourism
activities may alter (e.g.
nature-based tourism).
(Unsustainable): Increasing
globalisation and wealth may
affect the demand for new
domestic holidays.
Depending on the level of
Government decisionmaking, support or control
of businesses in this subsector could be affected
(adversely or beneficially).
(Low input): Less
restrictive planning
controls may allow the
tourism sector to
expand without undue
control to meet
increasing consumer
needs.
BU8 tourism
opportunities
92
(Low input): Less
restrictive planning
controls may place
more properties at risk
of flooding.
Business, Industry and
Services sector risks
and opportunities
Population needs/demands
(high/low)
Global stability
(high/low)
BU9 Supply chains
Population size (High): May lead
to disruption, particularly in
terms of increased congestions
on road networks, for example.
(High): This has a
major negative effect
on suppliers, transport
and logistics and
retailers.
BU10 Overheating
Population size (High):
Increased competition for
energy in meeting local cooling
demands exacerbates risk in
commercial buildings. Demand
surges for cooling energy more
likely to cause short-term
interruptions in supply systems.
n/a
Distribution of wealth
(even/uneven)
Larger companies may
be able to secure
alternative suppliers and
become more resilient to
supply chain disruption
than SMEs.
More widespread
autonomous adaptation
in terms of retrofit
measures and targeted
programmes seeking to
improve thermal comfort
conditions but SMEs may
lag behind larger
businesses.
n/a = not applicable
93
Consumer driven values
and wealth (sustainable/
unsustainable)
(Unsustainable): Increasing
wealth and consumer
demand will increase the
number and potential
complexity of supply chains.
(Sustainable): A shift in the
balance of industries, to more
local-based manufacturing,
may result in increase the
numbers of manual workers,
who are more exposed.
However, a shift in the
balance from work to leisure
time may decrease exposure.
Level of Government
decision-making
(local/national)
Depending on the level of
Government decisionmaking, support or control
of businesses in this subsector could be affected
(adversely or beneficially).
(National): Coordinated
centralised efforts to
improve building
performance standards via
Building Regulations and
other drivers means risk of
overheating in buildings is
likely to be reduced via
adaptation measures.
Land use
change/management
(high/low
Government input)
n/a
n/a
6.
Costs
6.1
Introduction
Step
11
Climate change adaptation decisions that are designed to reduce climate change risks
inevitably involved making trade-offs concerning the use of scarce economic
resources. To the extent that economic efficiency is an important criterion in informing
such decision-making, it is useful to express climate change risks in monetary terms,
so that they can be:
 Assessed and compared directly (using £ as a common metric) and
 Compared against the costs of reducing such risks by adaptation.
For the CCRA, a monetisation exercise has been undertaken to allow an initial
comparison of the relative importance of different risks within and between sectors.
Since money is a metric with which people are familiar, it may also serve as an
effective way of communicating the possible extent of climate change risks in the UK
and help raise awareness.
Where possible, an attempt has been made to express the size of individual risks (as
described in this report) in monetary terms (cost per year) however, due to a lack of
available data it has sometimes been necessary to use alternative costs (repair or
adaption) to provide an estimate. A summary of the results is provided in Table 6.1.
A variety of methods have been used to determine the costs. In broad terms, these
methods can be categorised according to whether they are based on:
 Market prices (MP)
 Non-market values (NMV) or
 Informed judgement (IJ).
Informed judgement has been used where there is no quantitative evidence and was
based on extrapolation and/or interpretation of existing data.
In general terms, these three categories of method have differing degrees of
uncertainty attached to them, with market prices being the most certain and informed
judgement being the least certain. It is important to stress that the confidence and
uncertainty of consequences differs. Therefore, care must be taken in directly
comparing the results. Whilst we attempt to use the best monetary valuation data
available, the matching-up of physical and monetary data is to be understood as an
approximation only.
Further, it is important to highlight that some results are presented for a scenario of
future climate change only, whilst others include climate change under assumptions of
future socio-economic change. There are also some important cross-sector links, or
areas where there is the risk of double counting impacts: these are highlighted on
Table 6.1.
The basic approach to the costing analysis is, for each impact category considered, to
multiply relevant unit values (market prices or non-market prices) by the physical
impacts identified in earlier sections of this sector report. The total value to society of
any risk is taken to be the sum of the values of the different individuals affected. This
distinguishes this system of values from one based on ‘expert’ preferences, or on the
94
Business, Industry and Services
preferences of political leaders. However, due to the availability of data, it has
sometimes been necessary to use alternative approaches (e.g. repair or adaptation
costs) to provide indicative estimates.
There are a number of methodological issues that have to be addressed in making this
conversion (Boyd and Hunt, 2004; Metroeconomica, 2006b) including the compatibility
between physical units and monetary units and the selection of unit values that address
market and non-market impacts. As far as possible, physical and monetary units have
been reconciled. The selection of unit values is justified in the explanation of the
method used to monetise each risk metric. The aim is to express the risk in terms of its
effects on social welfare, as measured by the preferences of individuals in the affected
population. Individual preferences are expressed in two, theoretically equivalent, ways.
These are:
 The minimum payment an individual is willing to accept (WTA) for bearing
the risk or
 The maximum amount an individual is willing to pay (WTP) to avoid the
risk.
There are also other issues (beyond this scoping analysis) in terms of impacts that
have non-marginal effects on the UK economy, the treatment of distributional variations
in impacts, and the aggregation of impact cost estimates over sectors and time.
6.2
Economic impacts
A number of the risks analysed for the Business, Industry and Services sector (as
presented in Chapter 4) involved an assessment of the economic impacts. This is
largely because the end-point consequence for business is monetary loss or gain. As
a result, analysis of economic impacts utilises the Sector Risk Analysis data (Chapter
4) as a starting point.
A summary of the monetary estimates is provided in Table 6.1. BU6 and BU7
specifically do not seek to measure such costs and as a consequence they are
separately bordered in Table 6.1. Furthermore, since these values are derived from
analysis undertaken in other sector reports, they should not be seen to be additive to
the cost estimates derived.
The economic impacts are presented:
 In terms of constant 2010 prices, rather than as a present value or
equivalent annual cost. (It is recommended that if these values are used in
subsequent analysis, present values should be adopted – The HM
Treasury Green Book (2007) recommends 3.5% discount rates).
 For each of the UKCP09 climate scenarios (low, medium and high). For
each climate scenario, a probability density function (pdf) has been
generated; the CCRA has used data from the 10% (p10), 50% (p50) and
90% (p90) of this pdf, and results are presented for these three data points
on the climate scenario pdf.
 Assuming no specific mitigation scenario, in addition to the current
commitment from the UK Government.
 Across four population scenarios (current, low, principal and high).
 Against risk baselines (2008) and the climate baselines (1961-1990).
Business, Industry and Services
95
 Assuming no planned adaptation additional to what is in place at the
present time.
Table 6.1
Summary of results in £million per annum
(2010 prices, no uplift or discounting) – climate change signal only (current socio-economics) – relative
change from baseline period. Medium p50 scenario
Risk metrics
BU1 Reduced
returns for UK
financial
institutions’
investments due to
the absence of
mainstreaming
climate risk and
adaptation into
decision-making
processes.
BU2 An increase
in monetary losses
as a result of an
increasing
proportion of UK
tourist assets
(natural and built)
at risk from
flooding.
BU3 A decrease in
water
(groundwater and
surface water)
availability for
industrial usage.
BU4 An increase
in monetary losses
as a result of
interruption to
business from
flooding.
BU5 A decrease in
productivity and
revenues due to
ICT loss/
disruption.
BU6 Increased
exposure for
mortgage lenders.
BU7 An increase
in insurance
industry exposure
due to flooding.
BU8 An expansion
of new or existing
tourist destinations
in the UK.
96
2020s
-H?
-L
2050s
-H?
-L
2080s
-H?
-M
Estimation
Method
Informed
Judgement
Market
Prices
Confidence
ranking
LL
M
Notes
Likely to be double
counted with risks in
other sectors such as
floods, agriculture,
transport and health.
Should not be
interpreted as welfare
impact.
Maintenance costs
used, equating to
adaptation costs.
Therefore likely to be
lower bound of true
welfare costs.
Links with Flooding.
Double counting with
WA5. Links with Water.
-L
-H
-L
-
-VH
+H?
-L
-H
-L
-
-VH
+H?
-L
-VH
-L
Non-Market
Values
Market Price
Informed
Judgement
-
-VH
Market Price
+H?
Informed
Judgement/
Market Price
Business, Industry and Services
M
H
Double counting with
FL7. Links with
Flooding. Should not
be interpreted as
welfare impact.
Qualitative risk
assessment.
L
H
Double counting with
FL6. Links with
Flooding. Should not
be interpreted as
welfare impact.
H
Double counting with
FL6 and FL7. Links
with Flooding. Should
not be interpreted as
welfare impact.
L
Expenditure estimates
extrapolated from
literature. Should not
be interpreted as
welfare impact.
Risk metrics
2020s
BU9 A decrease in
output for UK
businesses due to
an increase in
supply chain
disruption as a
result of extreme
events.
BU10 Loss of staff
hours due to high
internal building
temperatures.
2050s
2080s
Estimation
Method
Confidence
ranking
Notes
Qualitative risk
assessment.
-M?
-H?
-M?
-H?
H - VH?
-H VH?
Informed
Judgement
Market Price
L
L
Underlying physical risk
assessment very
uncertain. This
overlaps with BE3 and
also involves double
counting with energy
for cooling.
Note: - signifies a negative impact or loss; + signifies benefits or cost reductions.
Impact Cost Ranking: L = £1-9m/pa M = £10-99m, H = £100-999m, VH= £1000m+, ? = not possible to
assess
Monetisation Confidence Ranking:
Ranking
High
Medium
Low
Description
Indicates significant confidence in the data, models and
assumptions used in monetisation and their applicability to the
current assessment.
Implies that there are some limitations regarding consistency
and completeness of the data, models and assumptions used in
monetisation.
Indicates that the knowledge base used for monetisation is
extremely limited.
Colour code
The following sub-sections review the monetary data available through the Sector Risk
Analysis (Chapter 4) and provide justifications for their adoption or reasons against
their use.
6.3
Presentation of results, uplifts and discounting
Consistent with other sectors, the results below are presented in terms of constant
current prices for the three time periods considered in the CCRA i.e. the 2020s, 2050s
and 2080s. The results are presented in this way to facilitate direct comparison.
At this stage, we have not presented the values below as a present value or equivalent
annual cost. However, the use of the values in subsequent analysis, for example in
looking at the costs and benefits of adaptation options to reduce these impacts, would
need to work with present values. For this, the values below would need to be
adjusted and discounted. For discounting, the Green Book recommends 3.5% discount
rates/factors (HMT, 2007) noting that for longer time periods as assessed here, this
requires the use of the declining discount rate scheme.
Business, Industry and Services
97
6.3.1
Reduced returns for UK financial institutions’ investments
due to the absence of mainstreaming climate risk and
adaptation into decision-making processes (BU1)
As discussed in Section 4.2.1, there is limited substantive evidence on the
consequences of changes in climate on UK financial institutions. The most significant
consequences are expected to occur if financial institutions fail to mainstream climate
change adaptation considerations into their investment decisions, through changes in
investment financial and/or credit performance. Furthermore, financial institutions are
exposed to reputational risks, investor pressures, legal liabilities and changes in
demand for finance.
Whilst reduced returns and/or increased risks to investments of UK financial companies
represent one of the largest climate change exposures for the UK industry as a whole,
it has not been possible to undertake quantitative analysis on the basis of the available
information. With no quantitative basis to work with, support is given to the speculative
conjecture that the size of this risk is potentially high. It should be noted, however, that
there are likely to be large overlap – and potential double counting – with risks in other
sectors such as floods, agriculture, transport and health. As highlighted in Section
4.2.1, opportunities are also likely to arise, with financial institutions responding to
adaptation needs.
6.3.2
An increase in monetary losses as a result of an increasing
proportion of UK tourist assets (natural and built) at risk
from flooding (BU2)
In Section 4.2.2, an estimate was made of the potential value of tourist built assets
(arts, theatre, museum and library) at risk from coastal and riverine flooding in England.
It is recognised that the costs to tourist activity that may be impacted by coastal and
river flooding are likely to be significant. Preventative expenditures in the form of the
cost of flood bunds around each of the building were used. These can be seen as
adaptation costs and can best be interpreted as lower bound estimates of willingness
to pay (WTP), assuming that they are implemented. Whilst there are likely to be
important impacts on local areas, however, it is not certain that the welfare loss will be
significant in aggregate since tourists are likely to change their destination.
Mid-point estimates for the 312 buildings listed in Table A2.4 generated annual climate
change attributable costs of £0.1 million by the 2050s and £0.2 million by the 2080s. In
order to derive an indicative estimate of the potential aggregate size of this risk,
estimates have been scaled-up over the 28,659 listed buildings and churches of
national or international importance located in England in Flood Risk Zone 3, and listed
in Table A2.2. This produces annual climate change attributable costs of £9 million by
the 2050s and £18 million by the 2080s. These can therefore be categorised as a low
cost ranking in the 2020s and 2050s and a medium ranking in the 2080s (Table 6.1).
6.3.3
A decrease in water (groundwater and surface water)
availability for industrial usage (BU3)
As discussed in Section 4.2.5, the amount of water that can be abstracted for public
water supply, agriculture and industry is sensitive to the annual water balance and
subject to changing licence conditions. One of the key findings of the Water sector
report is that water abstraction may become unsustainable in a large proportion of the
UK’s rivers due to low summer flows. A shift in seasonal and/or total availability of
water resources, as a result of climate change, has the potential to have significant
impacts on the Business, Industry and Services sector in the UK. It is, however,
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Business, Industry and Services
important to remember that industrial abstraction should be viewed in the context of
other abstraction sectors, particularly agriculture, which expected to become
increasingly important in a future where food security is emphasised in UK public
policy. The importance of water for agriculture is discussed further in the Water sector
report.
As described in the Water sector report, industrial users holding abstraction rights are
likely to be willing to pay to prevent licence withdrawal or be prepared to accept
compensation. To estimate WTP, abstraction charges may be used to generate
estimates of costs to industry. It is important to note that the findings of RPA (1999),
who undertook an informal survey of a number of sectoral users, suggest that the
charges are set below WTP levels.
The change in total value of industrial abstractions that may be prevented if catchments
switch from being sustainable to unsustainable is presented in Table A3.1 (for
abstraction from local catchments) and Table A3.2 (for abstraction from downstream
catchments). As might be expected, the costs increase across low to high emission
scenarios, and across time periods to the end of the century (relative to current day risk
baseline). Annual climate change attributable costs are under £3.5 million across all
emissions scenarios and time periods and can therefore be categorised as a low cost
ranking (Table 6.1). Furthermore, it is important to highlight that the scale of these
results is low compared with WA5 (supply demand deficits). This finding is consistent
with the conclusion drawn in Section 4.2.5, that the projected changes to industrial
abstractions coming from sustainable sources are relatively small in comparison to
agriculture.
It is possible that the extent of adaptive measures put in place by other sectors (e.g.
public water supply) or changes in regulatory controls could have more of a day-to-day
impact on industrial abstractors, than any absolute changes in water availability. Thus,
though constraints on supply as a result of climate change do have the potential to
effect industrial use, the wider constraints on water supply will possibly have a larger,
albeit more indirect, effect.
6.3.4
An increase in monetary losses as a result of interruption
to business from flooding (BU4)
This metric focuses upon the financial impact on industry arising from business
interruption, including damage to assets and lost staff time. The Floods Sector report
made estimates of Expected Annual Damage (EAD) relating to the Non-Residential
Property (NRP) in England and Wales resulting from fluvial and tidal flooding (Table
A3.3). The damage costs from flooding to NRPs are shown to increase across the
three time periods, so that by the 2080s under the medium climate scenario (p50)
annual costs are projected to increase by a factor of three, compared to the current
(2008) baseline.
In addition to damage costs, some businesses claim compensation from insurance for
disruption to businesses where flooding involves extra costs and lost income. It is
assumed that business interruption costs increase at the same rate as EAD and the
figures do not include socio-economic change. Estimated average annual cost to
businesses of disruption due to flooding: £24-50 million by the 2020s, £26-72 million by
the 2050s and £34-96 million by the 2080s (current figure: £20 million).
The cost ranking in Table 6.1 is based on the sum of the flood damages and business
interruption costs.
Business, Industry and Services
99
6.3.5
A decrease in productivity and revenues due to ICT loss/
disruption (BU5)
As discussed in Section 4.2.5, it is the ICT enabling infrastructure that is vulnerable to
the environmental conditions surrounding it. Whilst it has been acknowledged that
weather already has the potential to interrupt or reduce the quality of ICT services,
there is as yet very little prior work that specifically considers the potential impacts of
climate change on ICT 33 and its knock-on effects to business. As a consequence, it
has not been possible to provide an estimate of the number of days that might be lost
due to disruption to ICT owing to a lack of suitable information. It is judged, however,
that the risk of major ICT disruption due to climate change is likely to be relatively low
for large businesses. The risks for smaller companies (including SMEs) and remote
workers may be significant, particularly if they are located in relatively remote areas
where they may be dependent on single electricity and telecommunications
connections. On the basis of this assessment, an indicative judgement is made that
this risk has a low cost ranking across the three time periods (Table 6.1).
6.3.6
Increased exposure for mortgage lenders (BU6)
As presented in Section 4.2.8, this risk concerned with the impact of increasing flood
risk on mortgage lending revenues, as a function of market changes and the important
issue of asset devaluation in the event of the loss of insurance cover. The number of
properties at significant likelihood of flooding (coastal and fluvial) is used as an
indicator of the impact of flooding on the availability of insurance, and consequently on
the level of mortgage lending exposed. This risk metric is not concerned with a welfare
impact, which is presented in the Flood sector report (FL6: Properties at significant risk
of flooding). The risk to the Business, Industry and Services sector is the scale of the
mortgage fund value of properties at significant likelihood of flooding, where insurance
may become unaffordable or unavailable.
The results from Section 4.2.8 for the mortgage fund value at significant likelihood of
flooding are provided in Tables A2.16 and A2.17. The mortgage fund value at risk due
to insurance becoming unaffordable or unavailable is less that the total value at
significant likelihood of flooding; an 85 to 95% reduction in these costs is suggested as
a result the following reasons:

The gross value at risk (100%) is a large overestimation. RICS (2009)
found that only three years after a flood, in many cases, properties returned
to pre-flood values. Temporary devaluation ranged from zero to 30% of
market value.

Supply and demand of property (market effects) will have a greater
influence than climate change under the existing Statement of Principle.

The RICS study suggested that in general homeowners that experienced
difficulties usually obtained better terms by switching insurance company.

The gross value at risk estimates quoted assumes no management by
insurance and mortgage lenders other than what is currently applied.

Currently, only in extreme cases are mortgages declined on the basis of
flood risk. The RICS study suggested that insurance was currently available
in most instances and that flood risk was not a major factor in determining
premiums.
For the purposes of this report, ICT is taken to mean the whole of the networks, systems and
artefacts which enable the transmission, receipt, capture, storage and manipulation of voice and
data traffic on and across electronic devices.
33
100
Business, Industry and Services
It should be highlighted that the values given are total asset values, rather than annual
costs, and are therefore not comparable to results presented elsewhere in the risk
assessment.
6.3.7
An increase in insurance industry exposure due to flooding
(BU7)
As presented in Section 4.2.7, the baseline insurance claim data is taken to be the UK
average from between 2001 and 2009 (for commercial and domestic property). The
baseline number of properties deemed at significant risk of flooding (over 1 in 75 year
flood plain) is also calculated. The change in the number of properties at risk is then
determined according to the climate change scenario and the insurance claims are
scaled accordingly. Similar to risk BU6, this risk is not concerned with a welfare impact,
which is presented in the Flood sector report (FL6: Properties at significant risk of
flooding). The risk to the Business, Industry and Services sector is the scale of the
payout costs associated with flooding. Therefore, the results from Section 4.2.9 are
reproduced in this economic assessment.
The estimates suggest that the combined annual average domestic and commercial
claims could increase to: £250-400 million by the 2020s and £0.5-1 billion by the 2080s
(current figure: £200 to £300 million).
6.3.8
An expansion of new or existing tourist destinations in the
UK (BU8)
The assessment in Section 4.2.10 of the potential impacts of climate change on UK
tourism destinations did not provide quantitative estimates. Utilising the results from a
previously published study (Hamilton, Tol and Hunt, in Metroeconomica, 2006a),
however, the scale of the potential impacts can be gleaned. It is important to note that
this study considered the international dimension, through an assessment of the
comparative advantage for the UK as a tourist destination against other countries, and
domestic and international tourist flows.
The total change in tourism expenditure as a result of climate change across each of
the scenarios and time periods is presented in Table A3.4, Table A3.5 and Table A3.6.
These results do include the effects of population growth and use UKCIP02 climate
scenarios. Nonetheless, they are useful in highlighting that the changes in expenditure
attributable to climate change may be significant. There is a strong upward trend in
tourism expenditure compared to the baseline, due to rising numbers of international
tourists. The figures show the level of total tourism expenditure in each region, with on
average 80% being attributable to the increase in domestic tourism (Metroeconomica,
2006a). It is suggested that this opportunity has the potential to have high cost ranking
across the three time periods (Table 6.1).
6.3.9
A decrease in output for UK businesses due to an increase
in supply chain disruption as a result of extreme events
(BU9)
As discussed in Section 4.2.11, supply chain disruption can cause significant harm to
business operations. Retail supply chains are complex and dependent on a network of
interconnected, yet independent, elements. As a consequence, the risk assessment
above judges that it is not possible to develop a clear and direct causal link between
climate change and supply chain disruption across the whole of the Business, Industry
and Services sector. The risk assessment provides no quantitative assessment of the
Business, Industry and Services
101
potential supply side disruption due to extreme events and therefore it is difficult to
attach an economic estimate to such events.
There are a number of studies that derive estimates of the economic impacts of
extreme events on UK business. For example, the summer 2007 floods in England
were estimated to cause £740 million of damage (Environment Agency, 2010). On an
international level, climate change presents a number of risks to the UK food and drink
sector, through the sourcing of raw materials and foodstuffs. It is suggested that
climate change impacts may affect agricultural yields and their subsequent supply price
(Parry et al., 2000). This possibility is explored in Hunt et al., (2009), suggesting that
the production and preserving of meat and poultry meat, operation of dairies and
cheese making, and the manufacture of prepared feeds for farm animals are the most
vulnerable sub-sectors, with the potential to suffer profitability losses of 10-20% in the
2020s and by 20-40% in the 2080s. On the basis of this and similar evidence, an
informed judgement is that this impact may justify an indicative medium or high cost
ranking, though with a high degree of uncertainty (Table 6.1).
6.3.10
Loss of staff hours due to high internal building
temperatures (BU10)
As highlighted in Section 4.2.12, longer, drier summer periods may cause overheating
in naturally ventilated buildings and affect the capacity of low energy cooling systems to
provide comfortable conditions across all building types. These changes may have
knock-on implications for workers’ health and safety, their productivity and the quality of
the products they produce. The issue of overheating of buildings and the potential
effects on productivity have been considered in the Built Environment sector (BE3)
(Capon & Oakley, 2012).
The results presented in Section 4.2.12 suggest that climate change is likely to
increase the number of days above the temperature threshold significantly, particularly
in the south east of England and London, and especially in the later time periods
(2080s). This would lead to potentially high costs, from reduced productivity and lost
work time, potentially in the order of hundreds of millions or even billions of pounds
annually by later time periods. As a consequence, a high to very high cost ranking is
assigned to this risk (Table 6.1).
These figures assume no adaptation, which is unlikely, particularly in the private sector.
Faced with rising temperatures, companies are likely to adjust the working environment
to avoid falls in productivity and in direct response to occupational health
legislation/guidance. The indicative results above may therefore be an over-estimate of
the actual costs likely to occur.
There are cross-sectoral linkages with energy cooling costs, both in the current and
future stock of office buildings over time (including retrofit and refurbishment cycles).
Adding energy cooling costs to these productivity costs will involve double counting, as
both scenarios will not occur together.
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Business, Industry and Services
7.
Adaptive Capacity
7.1
Overview
Step 5
Adaptive capacity considers the ability of a system to design or implement effective
adaptation strategies to adjust to information about potential climate change, to
moderate potential damages, to take advantage of opportunities, or to cope with the
consequences (Ballard, 2009, after IPCC, 2007). This can be considered as having
two components; the inherent biological and ecological adaptive capacity of
ecosystems and the socio-economic factors determining the ability to implement
planned adaptation measures (Lindner et al., 2010). Considering adaptive capacity is
essential for adaptation planning and the CCRA project has included work in this area
that will contribute to the ongoing Economics of Climate Resilience study and the
National Adaptation Programme. The CCRA work on adaptive capacity focuses on
structural and organisational adaptive capacity and this chapter provides an overview
of the assessment approach. The subsequent sections of this chapter provide an
overview of the findings from other work on adaptive capacity in the business, industry
and services sector that has been carried out.
The climate change risks for any sector can only be fully understood by taking into
account that sector’s level of adaptive capacity. Climate change risks can be reduced
or worsened depending on how well we recognise and prepare for them. The
consequences of climate change are not limited to its direct impacts. Social and
physical infrastructure, the backdrop against which climate change occurs, must also
be considered. If such infrastructure is maladapted, the economic, social or
environmental cost of climate impacts may be much greater; other consequences could
also be considerably more detrimental than they otherwise might have been. Avoiding
maladaptation is one outcome of high adaptive capacity; high adaptive capacity lowers
the negative consequence of climate impacts. Conversely, low adaptive capacity
increases the negative consequences.
7.2
Assessing structural and organisational adaptive
capacity
The methods used for assessing structural and organisational adaptive capacity in the
CCRA are based on the PACT framework 34. The work included a preliminary literatureand expert interview-based assessment of all eleven sectors in the CCRA. This was
followed by more detailed analysis for the following sectors:
 Business, Industry and Services (focusing on the finance sector)
 Transport (focusing on road and rail)
 Built Environment (focusing on house building)
 Health
 Biodiversity and Ecosystem Services
 Water
34
PACT was developed in the UK as one of the outcomes of the ESPACE Project (European Spatial
Planning: Adapting to Climate Events) http://www.pact.co/home.
Business, Industry and Services
103
Structural adaptive capacity
The extent to which a system is free of structural barriers to change that makes it hard
to devise and implement effective adaptation strategies to prepare for future impacts.
This covers issues such as:
Decision timescales: This considers the lifetimes of decisions, from their
conception to the point when their effects are no longer felt. The longer this
period is, the greater the uncertainty as to the effects of climate change
impacts. Cost-effective adaptation becomes harder. Potential climate
impacts also become more extreme over longer timescales. This means
that a greater scale of adaptation may need to be considered, and that the
barriers to adaptation resulting from 'lock-in' to maladapted processes
become more pronounced (Stafford-Smith et al., 2011). Adaptive capacity
is therefore lower, and maladaptation more likely, when long-lasting
decisions are taken.
Activity levels: This considers what opportunities are there for adaptation,
and on what scale. The frequency with which assets are replaced or
created determines how many opportunities there will be to take action
which increases adaptive capacity. 35 In addition, when a lot of asset
replacement and/or new investment is expected, there will be more
chances to learn from experience, which increases adaptive capacity.
Maladaptation: This evaluates the effect of decisions already made on
adaptive capacity. Long-term previous decisions which have reduced
adaptive capacity are often difficult or expensive to reverse. Such decisions
were made either before climate change was recognised as an issue, or
more recently as a result of poor organisational capacity. Such
maladaptation makes implementing effective strategies much harder.
Sector (or industry) complexity: This refers to the level of interaction
between stakeholders within an industry, or with outside industries and
groups, that is required to facilitate effective decision-making. Complexity is
higher (and adaptive capacity lower) when many stakeholders are involved
in decision-making and when their agendas (e.g. their financial interests)
differ substantially.
Organisational adaptive capacity
Organisational adaptive capacity is the extent to which human capacity has developed
to enable organisations to devise and implement effective adaptation strategies.
Effective adaptation requires decision-making that takes account of an uncertain future
and avoids locking-out future options that might be more cost-effective if climate
impacts become more severe, or arrive more rapidly, than expected. The PACT
framework used to assess this recognises different levels of adaptation. This
framework is arranged in a hierarchy of ‘Response Levels’ (‘RLs’), as set out below, of
increasing capacity 36. These levels do not supersede one another; instead, each one
builds on the experiences and practices built up in the previous response level.
Organisations may need to be active on all levels for an effective adaptation
programme. An RL4 organisation focused on breakthrough projects still needs to be
stakeholder-responsive, for example.
RL1: Core Business Focused: At this level, organisations see no benefit
from adapting; if change is required of them, it should both be very
35
This differs from ‘Decision timescales’ because investment in a sector is not continuous but varies over
time, with periods of high investment being followed by periods of little or no investment.
36
The PACT framework contains six response levels: those cited are the most relevant to the adaptation
field.
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Business, Industry and Services
straightforward to implement and also incentivised, e.g. through ‘carrots’
and ‘sticks’.
RL2: Stakeholder Responsive: At early stages of adaptation,
organisations lack basic skills, information, processes and also skilled
people; they need very clear advice and information plus regulations that
are straightforward enough to help them get started.
RL3: Efficient Management: As organisations begin to professionalise
adaptation, they become more self-directing, able to handle short term
impacts up to 10 years (Stafford-Smith et al., 2011). They need
professional networks, best practice guidelines, management standards,
etc.
RL4: Breakthrough projects: When impacts beyond 10 years need to be
considered, organisations may need to consider more radical adaptation
options. As well as high quality support from scientists, they may need
support with the costs of innovation.
RL5: Strategic Resilience: Adapting a whole region or industry for longterm climate impacts of 30 years or more requires lead organisations to
develop very advanced capacity that is able to co-ordinate and support
action by a wide range of actors over programmes that are likely to last for
many years.
7.3
Adaptive Capacity in the Business, Industry and
Services Sector
A review carried out on responses to the Carbon Disclosure Project’s 2008 survey
(Acclimatise, 2009c) compared performance on adaptation among FTSE 350
companies. This gave some information on the extent to which business organisations
have begun the process of adaptation. The focus was on early stage adaptation
activities rather than on the much more sophisticated adaptation activities that would
be required, for instance at a period of major investment in long-lasting assets. This
means that low scores indicate with relatively high confidence that adaptation activity is
absent, but that relatively high scores do not necessarily indicate that adaptation
activities are sufficient, or even necessarily very far developed. The results indicated:
 A potentially low average take up of adaptation actions across the
FTSE350 companies reviewed.
 Sectors that scored relatively highly were water, chemicals,
pharmaceuticals, energy utilities, insurance and extractive industries.
However, for the reasons given above, it cannot be assumed that these
industries were then taking actions at a sufficiently advanced level to meet
the challenges that they are facing.
 Sectors that scored relatively lowly were healthcare equipment and
services (but note that this does not include NHS services), IT, aerospace
and defence, automobiles and components, commercial services and
supplies, and energy. For the reasons given above, this is likely to indicate
that these industries were not then taking much if any action on adaptation.
It is important to note that the impact of adaptation decisions made by one
organisation, or an industry as a whole, can have a major beneficial or detrimental
effect on the resilience of other organisations or sectors. As such, decision-making
needs to be cognisant of potential knock-on effects.
Business, Industry and Services
105
Innovation is also an important attribute in the adaptive capacity of UK businesses
(Acclimatise, 2009d). Those UK companies that are, by their very nature innovators
(both in terms of technology and process), are likely to be some of the most equipped
to deal with the risks, and exploit the opportunities, presented by climate change in a
global market. They are more likely to be skilled in conceptualising potential risks and
opportunities, and taking the advantages that may become available.
There are also a number of potential opportunities that may result as a consequence of
climate change. These are centred on: (i) exploiting market shifts, through repositioning and the development of new products and services; (ii) improving business
processes; and (iii) showing business leadership. These are discussed individually
below. For the UK, these opportunities may result from potentially having a global
advantage to respond to risks due to higher awareness of risks and leading
science/regulatory frameworks. As such, the UK is in a prime position to help others
adapt across the world.
As acknowledged in the International Dimensions of Climate Change report (Foresight,
2011a), business and financial services are key sectors of the UK economy, and
opportunities will arise in areas of UK strength: science and engineering, in insurance
and in climate forecasting, and where there is a need to reduce emissions or adapt to
climate change. Investment opportunities include a wide range of green technologies,
particularly in the energy sector, such as wind power, and carbon capture and storage
(Foresight, 2011a).
The most forward-thinking companies regard climate change as an opportunity reassess business processes and risk management procedures. For example, some
manufacturing companies are using the argument of climate change to get closer to
suppliers, to reduce both costs and carbon in their supply chain. They are actively
pursuing supplier chain management, whereby companies develop formalised and
robust ways of managing, monitoring and developing supplier performance (EEF,
2009).
There will also be opportunities for the businesses to influence on the global stage, by
playing a leading role as others grapple with the challenges of climate change. There
are business incentives for doing this; leading companies may directly reduce their
costs and also gain competitive advantage of the market based on their “green”
credentials. However, more importantly, their actions may also contribute to the
sustainable development of local communities and societies in adapting to the impacts
of climate change.
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Business, Industry and Services
8.
Conclusions
8.1
Key findings
Based on the analysis of key risks to the Business, Industry and Services sector, this
report concludes the sector is highly vulnerable to a changing climate, both extreme
(acute) events and incremental (chronic) climate change. Climate change impacts are
likely to be felt across the spectrum of sub-sectors and from SMEs to large multinational corporations.
The key climate change consequences identified for this sector relate to the potential
gains or losses in revenue, associated with the adverse and beneficial effects on fixed
assets, workforce, procurement (raw materials, supply chains and logistics), operations
(supply of services, customer demands and regulatory requirements) and
environmental and social performance.
Key climatic impacts identified include flooding and coastal erosion, which would have
negative effects on tourist assets (both natural and built) as well as industrial facilities.
Flooding also represents an important and ever present issue for insurance and
mortgage providers, with potential increased exposure to both lender and borrower in
the future. Increased levels of flooding, as well as more frequent extreme weather
events, could also have the potential to increase disruption to UK businesses’ supply
chains and ICT networks. Further impacts identified in this report include a potential
decrease in water availability for industrial and other commercial purposes. Warmer
temperatures may also increase the numbers of staff hours lost due to a likely increase
in high internal building temperatures.
In terms of major opportunities, warmer temperatures are likely to increase the
attractiveness of the UK as a tourism destination. This will increase revenues and
extend the tourist season providing a substantial opportunity within this sector, but only
if the sector is prepared this increasing demand and the UK has the necessary
infrastructure and resources.
8.2
Limitations of current methodology
This risk assessment has been hampered by a lack of publicly available quantitative
data. Information that is currently collected is often considered commercially sensitive
and remains undisclosed for confidentiality purposes. There are limited regulatory
requirements on the sector to report the current and future projected impacts of climate
change or its proposals for adapting to climate change, other than for those
organisations that will report under the Adaptation Reporting Power 37. Furthermore,
the consequences for business are usually economic, making the links between
climate impacts and consequences complex. Due to these factors, the development of
useful risk metrics was challenging, and not possible in some cases.
This lack of information is recognised by others; a recent report by the Adaptation Sub
Committee (ASC, 2010) stated that ‘in some cases, inadequate or insufficiently
accurate climate risk information is preventing organisations from building a business
case for adaptation, for example on surface water flooding risks’. While the authors do
not see this as a reason for delaying action, it is important to support the development
of better climate information.
37
For example, utilities such as water and energy companies, transport organisations such as
airport operators, harbour authorities, etc. For the full list see:
http://www.defra.gov.uk/environment/climate/documents/rp-list.pdf
Business, Industry and Services
107
Of particular concern is the lack of information in relation to how well climate risks are
being considered by fund managers, indeed the evidence suggests the primary climate
focus to date has been on carbon related risk. As a global market with direct
consequence for the UK economy and investors, the impacts of climate change could
be significant. Also within the financial sector, uncertainty in relation to flood risk to
homes, provision of insurance cover and hence mortgages presents a challenge, and
indications are that costs or loss of asset value could be significant.
A further limitation of the current CCRA methodology for the Business, Industry and
Services sector is the restricted geographical focus of the assessment, with emphasis
placed predominantly on the UK. The notion of a UK ‘only’ CCRA for business is not
representative of the global market in which the UK operates. The Business, Industry
and Services sector is influenced to a very large degree by international issues
including investments, supply of materials and international markets. Many of these
are influenced by present-day climate and future climate change to some degree. This
is a similar conclusion to that drawn by the recent Foresight (2011a) report:
“The consequences for the UK of climate change occurring in other parts of the world
could be as important as climate change directly affecting these shores... To address
the risks to the UK from climate change impacts overseas, it is crucial that government
departments work across existing boundaries between domestic and international
policy”.
The Foresight (2011a) study on international dimensions of climate change was carried
out as part of the CCRA. There is a lack of evidence for assessing climate change
risks at an international level, so the Foresight (2011a) report is at a higher level than
this CCRA report for the UK.
8.3
Challenges to overcome
The report has identified a number of important challenges the Business, Industry and
Services sector and Government needs to overcome. These are broadly aligned with a
recent publication from the CBI (2010), which identifies the following challenges for
business and industry:
 The challenge of mainstreaming climate change considerations into
standard business practices.
 Meeting adaptation goals whilst maintaining other corporate goals with
respect to sustainability.
 There will be an increasing expectation for corporate reporting to disclose
material climate-related risks.
 Some businesses will be challenged to ‘go it alone’ and the sharing of noncommercially sensitive climate change adaptation information within or
across should be encouraged.
 Challenges to business with cover six key areas – supply chains, assets,
operations, markets, regulatory compliance and business reputation.
To overcome these challenges and provide a robust link between the physical impacts
of climate change and the risks facing the Business, Industry and Services sector,
numerous actors will need to be involved, including climate scientists, risk analysts, the
private sector and Government. Uncertainty can no longer be used as an excuse for
inaction and a co-ordinated and collaborative approach is urgently needed.
108
Business, Industry and Services
9.
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http://www.dfat.gov.au/PUBLICATIONS/statspubs/rising_prices_for_agricultural_commodities.pdf (Accessed 05/02/2010).
WISE (Weather Impacts on Natural, Social and Economic Systems) (1999). Final
Report Contract ENV4-CT97-0448. University of East Anglia, Norwich, UK.
Woolf , D.K., Coll, J., Gibb, S., Challenor, P.G. (2006). Sensitivity of ferry services to
the Western Isles of Scotland to changes in wave climate. Proceedings of OMAE04
23rd International Conference on Offshore Mechanics and Arctic Engineering, June 2025, 2004, Vancouver, British Columbia, Canada.
World Bank (2008). Project Appraisal Document on a Proposed Credit in the amount of
SDR 21.7 million (US$35.3 million equivalent) to Albania for a Dam Safety Project
(Phase 5) in support of the South East Europe APL Program. World Bank.
World Bank (2010b). Climate Vulnerability Assessments: An Assessment of Climate
Change Vulnerability, Risk, and Adaptation in Albania’s Energy Sector. Energy Sector
Management Assistance Programme. Available at
http://siteresources.worldbank.org/INTECA/Resources/FINAL_CESVAP_AlbaniaClimat
eVulnerabilityAssmntEnglish.pdf (Accessed 14/01/2011)
Business, Industry and Services
117
Data sets:
Association of British Insurers, Property Claims Data 2010 (Qtr 2)
Chartered Management Institute (2008) for average length of disruption to businesses
from flooding https://www.managers.org.uk/sites/default/files/user35/CMI__Business_Continuity_Management_March_2008_-_Full_Report.pdf
English Heritage’s Listed Buildings database (2009) taken from DCMS (2010b)
Enjoy England monthly room occupancy data:
http://www.enjoyengland.com/corporate/corporate-information/research-andinsights/statistics/UKOS/UKOS.aspx
Environment Agency 2010, Water Resources GIS (WRGIS) September 2010
Environment Agency's Long Term Investment Strategy (LTIS) analysis:
http://publications.environment-agency.gov.uk/pdf/GEHO0609BQDF-E-E.pdf
Google Earth for beach lengths in Northern Ireland
Halifax (2011) UK House price value taken from the Halifax website, October 2011.
Also reported in the Financial Times.
Land Registry of England and Wales (2011). Average house prices (for metric BU6).
Crown copyright (for August 2011).
Met Office Hadley centre observation datasets web site:
http://hadobs.metoffice.com/index.html
Met Office temperature anomaly data:
http://www.metoffice.gov.uk/climate/uk/anomalygraphs/
Office of National Statistics for average staff costs
Ordnance Survey digital database for beach lengths in England, Wales and Scotland
Standard Industry Classification (SIC) 2007
http://www.statistics.gov.uk/StatBase/Product.asp?vlnk=14012&Pos=&ColRank=1&Ra
nk=224
UKCP09 web site: http://ukclimateprojections-ui.defra.gov.uk
Visit Britain’s National Tourism Products Database (2009) taken from DCMS (2010b)
118
Business, Industry and Services
Appendices
Business, Industry and Services
119
120
Business, Industry and Services
Appendix 1
Policy background, scoring of Tier 1 impacts and risk scoring explanation
Table A1.1 Policy Mechanisms Governing Climate Change Adaptation for the Business, Industry and Services Sector
Risk
Relevant subsector
UK Government
Policy &
Programmes
Further Information and Devolved Policy
BU1
Reduced returns
for UK financial
institutions’
investments due
to the absence of
mainstreaming
climate risk and
adaptation into
decision-making
processes
Financial
services
1. The Climate
Change Act (2008)
containing the
Adaptation
Reporting Power.
The Climate Change Act 2008 and the Adaptation Reporting Power is the
primary legislative means to influence behaviour on climate change adaptation.
It allows Government to direct organisations to report on their adaptation
progress. Reporting organisations are expected to highlight potential
opportunities as well as risks. Scotland has its own Climate Change (Scotland)
Act 2009, which contains an Adaptation Reporting Power for public authorities
although the Scottish Government has no plans to use it at the current time.
2. Departmental
Adaptation Plans
(DAPs)
Departmental Adaptation Plans (DAPs) have been undertaken by each UK
Government department in an effort to increase the mainstreaming of adaptation
into future policy. The DAP for BIS acknowledges the Government’s role in
helping businesses to incorporate climate change adaptation into their
management strategies.
3. National Indicator
188 (NI188)
Now revoked, NI188 was an adaptation performance indicator. It aimed to
embed the management of climate change risks and opportunities across each
local authority’s services. It required local authorities to assess and rate their
progress in identifying and managing climate change risks. Wales does not have
NI188 (Local Authority Adaptation Plans). Instead, adaptation is dealt with by
‘Outcome Agreements’ with Local Authorities.
4. UK Climate
Impacts
Programme
Soon to be integrated into the remit of the Environment Agency, the UKCIP has
developed a number of tools that help business mainstream adaptation into their
management plans. One such tool is the Business Areas Climate Assessment
Tool (BACLIAT), a simple checklist that can be used to assess the potential
121
Risk
BU2, BU4, BU6
& BU7
An increase in
monetary losses
as a result of an
increasing
proportion of UK
tourist assets
(natural and
built) at risk from
flooding
An increase in
monetary losses
as a result of
interruption to
business from
flooding
Relevant subsector
UK Government
Policy &
Programmes
(UKCIP)
impacts of climate change at an organisational level.
Food and
beverage,
1. The Planning Act
(2008)
chemical
manufacturing,
primary
extractives and
financial
services
2. Planning Policy
Statement 1 (PPS1)
The Environment Agency, along with local authorities, manages the physical
risks of coastal erosion and flooding. In Wales, the Environment Agency
manages the physical risks of both coastal erosion and flooding but overall
responsibility for coastal flood and erosion risk remains with the Welsh
Government. Sometimes work is shared with other organisations such as
internal drainage boards (IDBs). Flood risk in Scotland is managed by the
Scottish Environmental Protection Agency (SEPA). Flood protection in Northern
Ireland is overseen by the Northern Ireland Environment Agency and the Rivers
Agency as part of the Department of Agriculture and Rural Development DARD,
which has a statutory role as the drainage and flood defence authority.
3. Planning Policy
Statement 25 (PPS
25): Development
and Flood Risk
Increased
exposure for
mortgage
lenders
An increase in
insurance
industry
exposure due to
Further Information and Devolved Policy
4. Building
Regulations (2006)
The Planning Act (2008) outlines the planning regulations for England and
Wales and contains adaptation specific Planning Policy Statements (PPSs).
PPS1 requires all planning applications to consider climate change adaptation.
PPS25 sets out Government policy on flood risk and aims to ensure that flood
risk is taken into account at all stages in the planning process. In Wales, the
Welsh Government develops and manages planning policy. Technical Advice
Note 15: Development and Flood Risk includes advice on assessing flood
consequences and surface water run-off from new development. In Northern
Ireland, the Department of the Environment Planning Service implements
Planning Policy Statement 15 (PPS15), which performs the role of PPS25. In
Scotland, the Scottish Government and local authorities manage planning policy.
To reduce the risk of surface water flooding to infrastructure in England and
Wales the Building Regulations (2006) are designed to encourage new
developments to incorporate sustainable drainage systems (SUDS) to prevent
122
Risk
Relevant subsector
UK Government
Policy &
Programmes
sewers becoming overloaded during storms. Building Regulations will be
devolved to Wales in January 2012. In Scotland and Northern Ireland, the
Scottish Government and Northern Ireland Assembly have responsibility within
its jurisdiction respectively.
flooding
BU3
A decrease in
water
(groundwater
and surface
water) availability
for industrial
usage
Further Information and Devolved Policy
Chemical
manufacturing,
primary
extractives and
food and
beverages
5. UK Climate
Projections 2009
(UKCP09)
In order to help the insurance industry the UK Government produced UKCP09.
This gives probabilistic climate data. The Environment Agency is also helping
the industry acquire new data to help risk calculation for surface water flooding.
6. Flood and Water
Management Act
(2010)
The Flood and Water Management Act (2010) provides for lead local flood
authorities. Under the Act the lead local flood authorities have duties to develop,
maintain and apply a strategy for local flood risk management in their areas,
maintain a register of assets, and establish sustainable drainage systems
approval bodies.
7. Civil
Contingencies Act
(2004)
The Civil Contingencies Act 2004 (CCA) provides a single framework for civil
protection and sets out the practical actions that need to be taken in the event of
a flood.
1. Pricing
Mechanisms and
licensing
Pricing mechanisms and licensing are used to protect groundwater and surface
water resources. The Environment Agency oversees water abstraction licences
in England and Wales that regulate the amount of water industry can abstract;
these measures are helping to drive change, particularly in the agri-food sector.
2. Building
Regulations (2006)
3. Flood and Water
Management Act
The Building Regulations encourage new developments to incorporate
sustainable drainage systems (SUDS) to avoid overloading sewers during
storms and to recharge groundwater. Building Regulations will be devolved to
Wales in January 2012.
The Flood and Water Management Act (2010) and the Land Drainage Act (1991)
123
Risk
Relevant subsector
UK Government
Policy &
Programmes
(2010)
4. Land Drainage
Act (1991)
BU5
A decrease in
productivity and
revenues due to
ICT loss/
disruption
BU8
An expansion of
new or existing
tourist
destinations in
the UK
Further Information and Devolved Policy
provide for surface and groundwater abstraction management, led by lead local
flood authorities.
Tourism, food
and beverage,
chemical
manufacturing,
primary
extractives and
financial
services
1. The
Infrastructure and
Adaptation Project.
The Infrastructure & Adaptation project was set up by the UK Government’s
Adapting to Climate Change Programme in 2009. It examines how to improve
the climate resilience of infrastructure. One of the 4 areas it looked at was ICT.
The main threats identified were damage to infrastructure from flooding and
extreme weather. Protection against these threats can be seen in the policy
frameworks for managing flooding and planning.
Tourism
1. Shoreline
Management Plans
(SMPs)
The Environment Agency in England and Wales manages risks of coastal
erosion and flooding in conjunction with local authorities. It also oversees the
Shoreline Management Plans (SMPs). SMPs provide an assessment of the risks
associated with coastal processes and present a long-term policy framework to
reduce these risks. They are managed operationally at the local level by the
relevant local authorities.
2. UK Climate
Impacts
Programme
(UKCIP)
The UKCIP provides detailed information on possible climate scenarios for the
UK and is an important data source for understanding how tourism might be
affected by climate change.
Policy for the devolved administrations is overseen by the Scottish Government,
Welsh Government and Northern Irish Assembly in conjunction with their
respective tourist boards.
124
Risk
Relevant subsector
UK Government
Policy &
Programmes
Further Information and Devolved Policy
BU9
A decrease in
output for UK
businesses due
to an increase in
supply chain
disruption as a
result of extreme
events
Chemical
manufacturing,
food and
beverage, and
primary
extractives
1. The
Infrastructure and
Adaptation Project
The infrastructure and adaptation project, as well as the Departmental
Adaptation Plan (DAP) for the UK Department of Transport governs the risks
posed to supply chain infrastructure.
2. Planning Policy
Guidance 14
(PPG14)
Planning and flood risk policy is instrumental in protecting this infrastructure
against possible climate change risks. For example, Planning Policy Guidance
14 (PPG14) sets out the broad planning and technical issues regarding
development on unstable land.
3. UK Climate
Impacts
Programme
(UKCIP)
In Northern Ireland, the Assembly passed a Regional Transportation Strategy
(2002-2012) as part of the wider Regional Development strategy. The strategy
includes plans for increasing resilience to climate change, with particular focus
on the road network.
BU10
Loss of staff
hours due to
high internal
building
temperatures
1. The Climate
Change Act (2008)
– Adaptation
Reporting Power.
2. The Building
Regulations
(Approved
Document L –
2006)
3. UK Climate
Impacts
The Adaptation Reporting Power contained in the Climate Change Act (2008)
requires organisations to report on their adaptation plans. This incorporates the
possible risk of high building temperatures to employees.
The Building Regulations (Approved Document L – 2006) requires builders to
consider heat gains as well as heat losses in domestic buildings and to prevent
solar gain.
The UKCIP introduced the Adaptation and Resilience in a Changing Climate
(ARCC) programme, which provides funding to support engineering research on
125
Risk
Relevant subsector
UK Government
Policy &
Programmes
Programme
(UKCIP)
Further Information and Devolved Policy
adaptation options for buildings, infrastructure and utilities.
Health authorities in England, Scotland, Wales and Northern Ireland all have a
key role to play in supporting research into the health implications of heat waves.
In England, Defra produced the heat wave strategy in conjunction with the
Department of Health and the Health Protection Agency. The Welsh
Government has produced a Heatwave Plan for Wales. The responsible
authority in Scotland is Health Protection Scotland. In Northern Ireland, the
Department of Health, Social Services and Public Safety (DHSSPS) works
closely with the UK Government’s Department of Health to implement policy in
this area.
126
Table A1.2
Scoring of all the identified Tier 1 impacts.
Economic
Score
Environ.
Score
Likelihood
Score
Urgency
Score
Total
Score
Financial
3
1
3
3
2
51.85
An increase in monetary
losses as a result of an
increasing proportion of UK
tourist assets (natural and
built) at risk from flooding
Tourism
2
1
1
3
3
44.44
A decrease in water
(groundwater and surface
water) availability for
industrial usage
All industries
2
1
1
3
3
44.44
An increase in monetary
losses as a result of
interruption to business
from flooding
A decrease in productivity
and revenues due to ICT
loss/ disruption
All industries,
except
tourism
3
1
1
3
2
37.04
All industries
3
1
1
3
2
37.04
Increased exposure for
mortgage lenders
Financial
2
1
2
3
2
37.04
Change in bumblebee
disease affecting soft fruit
industry
Food/
Beverages
1
3
1
3
2
37.04
An increase in insurance
industry exposure due to
flooding
Financial
2
1
1
2
3
29.63
Incremental climate change
may mean that there is an
underestimation of
decommissioning liabilities
and end of life costs
All industries
3
2
1
2
2
29.63
Increased air temperature
leads to increased energy
usage for cooling systems
for machinery
All industries
2
1
1
3
2
29.63
Loss of staff hours due to
high internal building
temperatures
Disruption from flooding of
assets, transport links and
supply chain
All industries
1
1
2
3
2
29.63
All industries
2
1
1
3
2
29.63
Increased scrutiny of
investments and loss of
reputation due to interplay
between environmental,
community and climate
change pressures
Incremental climate change
may lead to higher risk of
conflict and environmental
incidents which could affect
environmental and social
licence to operate with loss
of consumer confidence
Financial
2
1
1
3
2
29.63
Extractives/
Chem/
Tourism
2
2
2
2
2
29.63
An expansion of new or
existing tourist destinations
in the UK (opportunity)
Tourism
2
1
1
3
2
29.63
Risk description
Sub-sector
Reduced returns for UK
financial institutions’
investments due to the
absence of mainstreaming
climate risk and adaptation
into decision-making
processes
Social
Score
Business, Industry and Services
127
Economic
Score
Environ.
Score
Likelihood
Score
Urgency
Score
Total
Score
All industries
2
1
1
3
2
29.63
All industries
3
1
1
2
2
24.69
All industries
3
1
1
2
2
24.69
Chemicals/
Food/
Beverages
2
2
1
2
2
24.69
Oil and Gas
3
1
1
2
2
24.69
Food/
Beverages
2
1
2
2
2
24.69
Food/
Beverages
2
1
2
2
2
24.69
Extractives/
Chem
2
2
1
2
2
24.69
All industries
2
2
1
2
2
24.69
All industries
1
1
1
3
2
22.22
All industries
1
1
1
3
2
22.22
Risk description
Sub-sector
A decrease in output for UK
businesses due to an
increase in supply chain
disruption as a result of
extreme events
Flooding (fluvial or pluvial)
affects leads to loss/
temporary failure of assets
and delays with increased
CAPEX/ OPEX
Reliability and security of
energy supply may be
impacts as a result of heat
wave, storms, flood, etc
Increasing temperature will
affect the storage and shelf
life of some products
leading to increased
storage management and
costs. May also affect
supply chains
Milder winters reduced
demand for energy
(including hydrocarbon
based fuels) and impact
profits
Climate change may affect
price and availability of raw
product used in food
manufacturing
Increased frequency of
extreme events may lead to
price volatility affecting
suppliers
Reduced precipitation and
increased evaporation
leads to stress on water
resources and declining
quality which creates
specific conflict with other
water users (public and
other industries). Important
for UK companies overseas
Extreme weather and
changes to rainfall patterns
impacts storage, supply
and disposal of volatile and
hazardous chemicals and
could cause environmental
compliance issues due to
accidental and increased
diffuse releases of
contaminants, changes to
pathways between
contaminant - receptor and
increased limitation on
disposal options. Potential
liability issues
Increasing temperatures
could affect outdoor
workers from heat stress.
Also UV exposure on
cloudless days
Flash flooding on
impermeable ground
around facilities may affect
local communities
downstream and
surrounding environmental
quality
128
Social
Score
Business, Industry and Services
Economic
Score
Environ.
Score
Likelihood
Score
Urgency
Score
Total
Score
All industries
1
1
1
3
2
22.22
All industries
2
1
1
2
2
19.75
Tourism
2
1
1
2
2
19.75
All industries
2
1
1
2
2
19.75
All industries
2
1
1
2
2
19.75
Tourism
2
1
1
2
2
19.75
Tourism
2
1
1
2
2
19.75
Tourism
2
1
1
2
2
19.75
All industries
2
1
1
2
2
19.75
All industries
2
2
1
3
1
18.52
All industries
2
1
2
3
1
18.52
All industries
3
1
1
3
1
18.52
All industries
2
2
1
3
1
18.52
Risk description
Sub-sector
Increased demand for air
conditioning leads to
additional CAPEX/ OPEX
Increase disruption to
transportation of people (air
and sea) due to change in
availability of calm weather
windows
Loss of natural resource
that attracts tourists leading
to loss of revenue and
requirement to shift assets
Damage to corporate
reputation from increased
scrutiny of lack of
management of climate
change risks
ESIA does not take into
account climate change,
either due to national or
lender requirements. Lack
of sufficient consideration
of climate change may lead
to negative reputation,
effects on lender/
proponent contracts and
increased CAPEX/ OPEX
Increased electricity
outages and increased
levels of competition for
energy resource compared
with other users demands
Increased frequency of
extreme events increase
disruption (i.e. road/rail)
and reduces opportunity for
transport (particularly air
and sea) affecting transport
of tourists
Long-term effects on
infrastructure that supports
tourism leads to disruption
and loss of revenue
Incremental climate change
leads to litigation between
contracted parties and
contracts do not adequately
foresee and manage
climate change risks
Increased opportunities for
transfer of goods due to
melting of arctic sea ice
(opportunity)
Extreme weather (including
storms, lightning, etc)
damaging assets leading to
increased CAPEX/ OPEX
Extreme events may affect
third-party infrastructure
and utilities that will lead to
reduced production
capacity, operational
disruption and delays in
returning to full production,
with potential for financial
loss
Increased air and sea
temperatures leads to the
opportunity of new maritime
routes which may provide
more economic routes for
bulk cargoes (opportunity)
Social
Score
Business, Industry and Services
129
Economic
Score
Environ.
Score
Likelihood
Score
Urgency
Score
Total
Score
All industries
3
1
1
3
1
18.52
Food/
Beverages
2
1
2
3
1
18.52
All industries
1
1
1
2
2
14.81
Increase in fire risk due to
drier conditions
All industries
1
1
1
2
2
14.81
Increased loss of revenue
for local tourism due to
changes in fish stocks
Tourism
1
1
1
2
2
14.81
Increased air temperature
leads to changes in
consumer demands with
increase in sales of
products that sell better in
warmer weather
(opportunity)
Water resource abstraction
licences revoked or
reduced during droughts.
May lead to closure or
reduced operations due to
secondary effects, such as
maintaining dust
suppression compliance
limits
Increased temperatures
could affect air quality (e.g.
Dust and GL ozone),
leading to respiratory
issues in exposed workers
Decreased energy costs
from reduced indoor space
warming in winter
(opportunity)
Incremental climate change
may exacerbate negative
impacts on neighbouring
communities, with litigation,
increased security risks
Increased regulation of
climate change risk in
investment delays
commercial arrangements
Warmers sea temperatures
increases non-native
marine species - hazard to
swimmers
Warmer sea temperature
promote algal growth
affecting coastal
destinations
Warmer sea temperature
benefits swimming/ coastal
tourism (opportunity)
Coastal Tourism increased
as temperature rises
(opportunity)
Increased opportunity (or
risk) and demand for
outdoor leisure, sport and
tourism
Food/
Beverages
2
1
1
3
1
14.81
Mining
2
1
1
3
1
14.81
All industries
1
1
2
3
1
14.81
All industries
2
1
1
3
1
14.81
All industries
2
1
1
3
1
14.81
Financial
2
1
1
3
1
14.81
Tourism
2
1
1
3
1
14.81
Tourism
2
1
1
3
1
14.81
Tourism
2
1
1
3
1
14.81
Tourism
2
1
1
3
1
14.81
Tourism
2
1
1
3
1
14.81
Risk description
Sub-sector
Extreme events may lead
to increased insurance
costs
For UK based multinational,
climate change may affect
workforce in developing
countries
Increased drying of
buildings leading to
damage and costs
130
Social
Score
Business, Industry and Services
Economic
Score
Environ.
Score
Likelihood
Score
Urgency
Score
Total
Score
Food/
Beverages
2
1
1
3
1
14.81
All industries
2
1
2
2
1
12.35
Financial
2
1
2
2
1
12.35
Extractives/
Chem/
Manufacturing
2
2
1
2
1
12.35
Food/
Beverages
2
1
2
2
1
12.35
Food/
Beverages
2
1
2
2
1
12.35
Tourism
3
1
1
2
1
12.35
Chemicals
2
2
1
2
1
12.35
Financial
3
1
1
2
1
12.35
Financial
3
1
1
2
1
12.35
Extractives/
Chem
1
1
1
3
1
11.11
Risk description
Sub-sector
Increased air temperature
leads to changes in
consumer demands with
reduction in sales of
products that sell worse in
warmer weather
Extreme weather causes
HSE and labour
compliance issues, with risk
of employer and public
liability cover being
compromised where
climate change not
included in HSE risk
assessments
Increase market for climate
resilient property may
increase (benefit) property
values (opportunity)
Increasing temperatures
leading to increased
maintenance costs
(CAPEX/OPEX), arising
from thermal stressing of
pipe work which leads to
leaks, storage tank
pressures, etc
Water scarcity leads to
effects on procurement of
raw agriculture inputs,
including animals-based
inputs through higher feed
prices
Cultivation of fish, shellfish
and aquatic plants, dairy
and poultry yields
particularly vulnerable to
climate change lead to
increased OPEX, loss of
market share through rising
costs and loss of revenue
Increased demand for
urban green/ blue space as
temperatures increase
leads to increase sales and
additional CAPEX
(opportunity)
Business opportunity to
develop new materials,
biotechnology, energy
efficiency and carbon
capture technology to aid
adaptation and transition to
low carbon economy
(opportunity)
Increased product demand
and financial gain from
increased range of
weather-related products
(e.g. weather derivatives)
(opportunity)
Increased opportunities for
reinsurance due to
increased likelihood of
weather related claims
(opportunity)
Migration of pests and
diseases into work area.
Potential to affect HSE
performance
Social
Score
Business, Industry and Services
131
Economic
Score
Environ.
Score
Likelihood
Score
Urgency
Score
Total
Score
Tourism
1
1
1
3
1
11.11
Food/
Beverages
1
2
1
2
1
9.88
Extractives/
Chem
2
1
1
2
1
9.88
Extractives/
Chem
1
2
1
2
1
9.88
Canal and river navigation
difficult to maintain during
drought
Increased awareness of
climate change means
products that are 'greener'
and have credible climate
change benefits will sell
better (opportunity)
Reduction in frost and snow
damage to infrastructure
affecting maintenance
requirements (opportunity)
Increased winter rainfall/
extreme precipitation and
soil moisture change
through the year may
cause subsidence, heave,
erosion and landslip with
risk to assets, supply chain,
etc
More intense rainfall
causes rain penetration in
buildings affecting
structural integrity and
value of property
Loss of assets and
increased maintenance due
to extreme precipitation
Extreme events may lead
to wholesale and retail
energy price volatility
Tourism
2
1
1
2
1
9.88
Food/
Beverages
1
2
1
2
1
9.88
All industries
2
1
1
2
1
9.88
All industries
1
1
1
1
2
7.41
All industries
1
1
1
2
1
7.41
All industries
1
1
1
2
1
7.41
All industries
1
1
1
2
1
7.41
Cloud cover increased
natural light in buildings
leading to lower OPEX/
CAPEX
Increased legal exposure
and food safety becomes
more on an issue in a
warmer climate
Increased frequency of
lightening strikes
All industries
1
1
1
2
1
7.41
Food/
Beverages/
Tourism
1
1
1
2
1
7.41
All industries
1
1
1
2
1
7.41
Acid mine drainage
scenarios become more
complicated to manage as
groundwater flow regimes
change both annually and
seasonally
Mining
1
1
1
2
1
7.41
Risk description
Sub-sector
Work force heat stress
leading to operational
inefficiency and potential
litigation
Seasonal precipitation and
water temperature effects
wastewater treatment
systems
Opportunity for reduced
equipment specification
and costs from reduced ice
loading or cold temperature
running requirements
(opportunity)
Reduced precipitation will
affect runoff and fluvial
flows. Insufficient dilution
may lead to pollution of
water courses and affect
local communities and
habitats
132
Social
Score
Business, Industry and Services
Economic
Score
Environ.
Score
Likelihood
Score
Urgency
Score
Total
Score
All industries
1
1
1
2
1
7.41
Oil and Gas
2
2
1
1
1
6.17
Chemicals
2
1
2
1
1
6.17
Extractives/
Chem
2
1
1
1
1
4.94
Climate impacts on
communities may lead to
more stringent controls
leading to increased risk of
litigation
Increased lightning strikes
affecting tourism and
personnel
Incremental climate change
leading to increased costs
of goods and services, and
reduced availability of
certain raw materials and
packaging leading to
decreased profit margins
Sea level rise and coastal
change may affect sector
businesses that rely on
marine transport and port
facilities leading to
downtime, loss of
productions and HSE
implications
Incremental climate change
may affect maritime
boundaries and enhance
geo-political risk to UK
companies working
overseas
Incremental climate change
may lead to an opportunity
for diversification of
businesses. Diversification
of energy mix (opportunity)
Decrease in indoor air
quality due to change in
outdoor air quality and
release of solvents from
drying of building materials
Decrease in tourism due to
increase in bacterial growth
in coastal areas, rivers and
lakes
Increased occurrence of
waterlogging on business
and industrial sites
Food/
Beverages
2
1
1
1
1
4.94
Tourism
1
1
1
1
1
3.70
All industries
1
1
1
1
1
3.70
All industries
1
1
1
1
1
3.70
Oil and Gas
1
1
1
1
1
3.70
Extractives
1
1
1
1
1
3.70
All industries
1
1
1
1
1
3.70
Tourism
1
1
1
1
1
3.70
All industries
1
1
1
1
1
3.70
Increased exposure of
workers to VOCs affecting
revenue
All industries
1
1
1
1
1
3.70
Risk description
Sub-sector
Reduction in building
damage and deterioration
due to condensation
(opportunity)
Sea level rise reduces air
gap on offshore assets
leading to closure or
CAPEX to raise asset
Incremental climate change
leads to regulatory regime
change in UK which may
make UK companies less
competitive than less
stringent countries. Industry
moves abroad.
During extreme events
emergency response could
be compromised leading to
evacuation times increased
and worker HS issues
Social
Score
Business, Industry and Services
133
Table A1.3 defines the magnitude classes used in the assessment. These were used
for scoring impacts in the Tier 2 selection process as well as for scoring risk levels for
the scorecards presented for each metric in Chapter 4. For the scorecard, the
risk/opportunity level relates to the most relevant of the economic/environmental/social
criteria.
Table A1.3
High
Class
Economic
Major and recurrent damage to 
property and infrastructure

Major consequence on regional
and national economy


Major cross-sector
consequences

Major disruption or loss of
national or international
transport links

Major loss/gain of employment
opportunities
~ £100 million for a single event or
per year

Widespread decline in
land/water/air quality

Major cross-sector
consequences
~ 5000 ha lost/gained
~ 10000 km river water quality
affected

Influence on regional economy
Consequences on operations & 
service provision initiating
contingency plans

Minor disruption of national
transport links

Moderate cross-sector
consequences
Moderate loss/gain of
employment opportunities
~ £10 million per event or year

Minor or very local
consequences

No consequence on national or
regional economy
 Localised disruption of transport
~ £1 million per event or year
134
Major or long-term decline in
status/condition of sites of
international/national
significance
Widespread Failure of
ecosystem function or services
Widespread damage to property 
and infrastructure

Major loss or decline in longterm quality of valued
species/habitat/landscape



Low
Environmental


Medium
Guidance on classification of relative magnitude: qualitative
descriptions of high, medium and low classes

Potential for many fatalities or
serious harm

Loss or major disruption to
utilities (water/gas/electricity)

Major consequences on
vulnerable groups

Increase in national health
burden

Large reduction in community
services

Major damage or loss of cultural
assets/high symbolic value

Major role for emergency
services

Major impacts on personal
security e.g. increased crime
~million affected
~1000’s harmed
~100 fatalities

Significant numbers affected

Minor disruption to utilities
(water/gas/electricity)
Medium-term or moderate loss
of quality/status of sites of
national importance

Increased inequality, e.g.
through rising costs of service
provision
Regional decline in
land/water/air quality

Consequence on health burden

Moderate reduction in
community services

Moderate increased role for
emergency services
Medium-term or Regional
loss/decline in ecosystem
services
Moderate cross-sector
consequences
~ 500 ha lost/gained
~ 1000 km river water quality
affected


Important/medium-term
consequences on
species/habitat/landscape


Social

Minor impacts on personal
security
~thousands affected, ~100s
harmed, ~10 fatalities
Short-term/reversible effects on 
species/habitat/landscape or

ecosystem services
Localised decline in
land/water/air quality

Short-term loss/minor decline in
quality/status of designated
sites
~ 50 ha of valued habitats
damaged/improved
~ 100 km river quality affected
Business, Industry and Services
Small numbers affected
Small reduction in community
services
 Within ‘coping range’
~1000’s affected
The levels of confidence used by the CCRA can be broadly summarised as follows:
Low - Expert view based on limited information, e.g. anecdotal evidence.
Medium - Estimation of potential impacts or consequences, grounded in theory, using
accepted methods and with some agreement across the sector.
High - Reliable analysis and methods, with a strong theoretical basis, subject to peer
review and accepted within a sector as 'fit for purpose'.
The lower, central and upper estimates provided in the scorecards relate to the range
of the estimated risk or opportunity level. For risk metrics that have been quantified
with UKCP09 and response functions, this range relates to the results that are given for
the low emissions, 10% probability level (lower); medium emissions, 50% probability
level (central); and high emissions, 90% probability level (upper). For the risk metrics
that have been estimated with a more qualitative approach, these estimates cover the
range of potential outcomes given the evidence provided.
The CCRA analysis uses three discrete time periods to estimate future risks up to the
year 2100: the 2020s (2010 to 2039), 2050s (2040 to 2069) and the 2080s (2070 to
2099).This is consistent with the UKCP09 projections.
Business, Industry and Services
135
136
Business, Industry and Services
Appendix 2 Response functions and the application of
climate projections
BU2- Supporting data
Figure A2.1
Map of beaches around England, Scotland and Wales.
Note: Northern Ireland was excluded from the digitisation phase,
but included in the calculations of beach loss.
Business, Industry and Services
137
Table A2.1
Estimated loss of UK beach area through sea level rise
Lower bound estimate
Year
Assumed beach slope
Sea level rise (m)
2020s
0.025
0.10
0.06
0.06
2050s
0.025
0.22
0.14
0.15
2080s
0.025
0.36
0.24
0.25
Loss of beach width (m)
4
2
2
9
6
6
50%
2020s
0
0
0
0
0
0
0
0
1
1
0
0
50%
Area lost (km2)
2050s
0
0
0
0
0
0
1
1
1
1
1
0
2020s
2
1
0
0
3
Area lost (km2)
2050s
5
3
1
0
7
Totals by UKCP09
Admin Region
Number of beaches
assessed
Assumed proportion of beaches affected
Total length of beaches
assessed (km)
Northern Scotland
Eastern Scotland
Western Scotland
North East England
Yorkshire and Humberside
East Midlands
Eastern England
South East England
South West England
Wales
North West England
Northern Ireland
36
55
36
18
7
3
18
31
91
96
23
16
Number of beaches
assessed
113
171
111
91
88
36
162
251
274
331
145
41
Total length of beaches
assessed (km)
191
96
127
16
430
1047
331
395
41
1814
Totals by Country
England
Wales
Scotland
Northern Ireland
Total UK
Upper bound estimate
138
15
10
10
2020s
0.01
0.10
0.06
0.06
10
6
6
2050s
0.01
0.22
0.14
0.15
22
14
15
2080s
0.01
0.36
0.24
0.25
36
24
25
50%
100%
100%
2080s
1
1
1
1
1
0
1
2
2
2
1
0
2020s
1
1
1
1
1
0
2
2
3
3
1
0
100%
Area lost (km2)
2050s
2
2
2
2
2
1
4
5
6
7
3
1
2080s
3
4
3
3
3
1
6
9
10
12
5
1
2020s
10
3
2
0
16
Area lost (km2)
2050s
23
7
5
1
36
2080s
38
12
10
1
61
2080s
8
5
2
0
12
Table A2.2
Listed buildings and churches of national or international
importance located in England in Flood Risk Zone 3 (by region)
East of England
Count in Flood
Zone 3
Grade 38
A
2
B
0
C
0
I
78
II
3124
II*
250
Total
3454
East Midlands
Count in Flood
Grade
Zone 3
A
0
B
3
C
2
I
120
II
2427
II*
162
Total
2714
London
Grade
A
B
C
I
II
II*
Total
North East
Count in Flood
Grade
Zone 3
A
0
B
0
C
0
I
37
II
911
II*
69
Total
1017
North West
Count in Flood
Grade
Zone 3
A
0
B
2
C
0
I
47
II
1558
II*
105
Total
1712
South East
Count in Flood
Grade
Zone 3
A
3
B
7
C
2
I
163
II
5069
II*
277
Total
5521
South West
Count in Flood
Grade
Zone 3
A
0
B
2
C
1
I
160
II
5813
II*
304
Total
6280
West Midlands
Count in Flood
Grade
Zone 3
A
0
B
0
C
0
I
43
II
1914
II*
139
Total
2096
Yorkshire & Humber
Count in Flood
Grade
Zone 3
A
0
B
0
C
0
I
18
II
3084
II*
141
Total
3243
Count in Flood
Zone 3
0
3
2
113
2301
203
2622
Source: English Heritage, 2009. Total listed building and churches in Flood Zone 3 = 28,659
The heritage buildings are based on the following classification: Listed Churches, grade A =
Exceptional Interest, often internationally important, grade B = Particularly important, of more
than special interest, and grade C = Nationally important, of special interest. Other Listed
Buildings, grade I = Exceptional Interest, often internationally important, grade II = Particularly
important, of more than special interest; and grade II* = Nationally important, of special interest.
(Source: English Heritage, 2009).
38
Business, Industry and Services
139
Table A2.3
Number of tourism buildings and assets located in England in
Flood Risk Zone 3
Facility
Count
Animal-Centred Attraction
99
B&B
734
Campus
5
Caravan and Camping
195
Entertainment, Eating or Drinking Venue
106
Food/Drink-Centred Attraction
12
Garden/Environmental Attraction
74
Historic Site/Structure
246
Holiday Village
5
Hostel
19
Hotel
401
Museum/Heritage/Visitor Centre
314
Natural Feature
130
Retail
84
Science & Technology
14
Self Catering
1328
Serviced Apartments
9
Sightseeing & Transport
135
Sport & Leisure
2
Sports, Health & Fitness
116
Themed Attraction
61
Workplace
9
Total
4098*
Source: Visit Britain’s National Tourism Product Database, 2009.
Table A2.4
Number of arts, theatre and museum, library and archive buildings
located in Flood Risk Zone 3
Arts buildings
116
Theatre buildings
119
Museum, library and archive buildings
Total
77
312
Source: The Arts Council’s Regionally Funded Organisations (RFO) database, The Theatres Trust, The
Museums, Libraries and Archives Council (MLA), 2009
140
Business, Industry and Services
Table A2.5
Projected Future Sea Level Rise Return Periods by CCRA region,
based on UKCP09 data
Future Sea Level Rise Return Periods
2020s
2050s
2080s
Baseline
Med
p10
Med
p50
Med
p90
Low
p10
Low
p50
Med
p50
High
p50
High
p90
Low
p10
Low
p50
Med
p50
High
p50
High
p90
East Midlands
East of
England
100
80.1
70.0
61.2
61.2
45.8
36.8
28.1
16.1
41.0
20.4
15.5
11.0
4.2
100
83.2
74.7
67.1
66.9
54.3
48.4
39.8
23.5
51.1
29.3
22.6
17.0
7.8
London
100
83.1
73.8
65.5
66.5
52.8
45.2
36.5
20.6
50.0
26.6
19.9
14.7
6.2
North East
100
88.6
79.6
71.4
75.8
61.6
55.9
47.4
27.8
61.6
40.4
30.3
21.9
10.2
North West
100
91.0
82.5
74.8
80.2
66.4
61.2
55.0
34.9
68.5
50.0
37.9
27.0
12.8
South East
100
83.9
75.0
66.9
66.9
53.8
48.1
38.9
21.6
51.9
28.4
20.9
15.4
5.9
South West
Yorkshire and
The Humber
100
72.6
61.6
52.2
50.0
29.7
23.1
18.0
9.3
23.4
12.2
8.2
5.1
1.4
100
79.7
69.1
59.9
60.2
42.9
34.3
25.0
14.1
39.7
18.8
14.0
9.4
3.1
Wales
100
80.4
69.0
59.2
61.0
42.9
35.1
27.0
14.1
42.9
19.4
14.0
9.1
3.1
Table A2.6
Projected Future Fluvial Return Periods by CCRA region, based on
UKCP09 data
UKCP09
Region
Future Fluvial Return Periods
2020s
2050s
2080s
Med
Med
Med
Low
Low
Med
High
High
Low
Low
Med
High
High
Baseline
p10
p50
p90
p10
p50
p50
p50
p90
p10
p50
p50
p50
p90
East Midlands
East of
England
100
99.5
64.1
39.8
100
55.8
50.0
46.4
26.9
89.0
45.9
40.3
33.7
16.0
100
100
79.7
53.4
100
71.0
65.4
62.0
37.7
100
60.5
54.7
46.1
23.5
London
100
10
77.5
48.0
100
72.3
62.0
58.5
31.3
100
56.8
49.5
39.3
19.3
North East
100
98.9
49.8
27.4
100
42.9
36.1
31.7
14.8
64.6
32.7
28.5
21.3
8.6
North West
100
76.3
47.3
31.9
100
50.6
34.9
24.6
16.4
59.3
33.4
28.5
19.0
9.5
South East
100
100
77.3
47.5
100
67.2
59.1
55.5
27.6
96.6
53.1
46.2
36.3
19.4
South West
West
Midlands
Yorkshire and
The Humber
100
100
56.7
34.5
100
51.5
41.1
39.7
19.6
75.1
36.4
30.9
22.9
11.8
100
99.5
59.8
35.6
100
50.2
43.8
39.3
21.3
84.1
38.2
33.7
25.6
11.8
100
99.2
48.2
25.5
100
40.8
34.4
30.6
15.4
78.1
31.0
25.5
20.7
8.2
Wales
100
84.7
51.5
32.7
100
47.9
36.8
29.7
18.0
64.9
32.9
28.2
20.4
10.3
UKCP09
Region
Business, Industry and Services
141
BU3- Supporting data
Table A2.7
Industrial abstraction distribution across RBDs based on the fully
licensed amounts in the September 2010 version of the Environment Agency
Water Resources (WRGIS)
RBD
Distribution of industrial abstraction
across RBDs as a percentage of total
industrial abstraction
Distribution of consumptive industrial
abstraction across RBDs as a
percentage of total consumptive
industrial abstraction
Groundwater
Surface Water
Groundwater
Anglian
12%
1%
2%
7%
0%
2%
Dee
1%
0%
0%
1%
0%
0%
Humber
26%
7%
9%
23%
5%
9%
North West
18%
76%
68%
19%
85%
73%
Severn
9%
2%
3%
18%
2%
5%
South East
5%
6%
6%
2%
0%
1%
Northumbria
1%
0%
0%
2%
0%
1%
South West
5%
1%
2%
6%
1%
2%
Thames
22%
1%
4%
20%
1%
5%
West Wales
1%
6%
5%
1%
4%
4%
1778
11544
13322
657
3111
3768
Total
Industrial
Abstraction
(Ml/d)
Total
Surface Water
Total
Table A2.8
Percentage change in industrial abstractions coming from
sustainable sources under three future emissions scenarios and considering
downstream catchment water availability
2020s
2050s
2080s
142
Low Emissions
p10
p50
p90
(wet)
(mid)
(dry)
1
-1
-2
-1
-2
-2
-1
-2
-3
Medium Emissions
p10
p50
p90
(wet)
(mid)
(dry)
1
-1
-2
-1
-2
-3
-2
-3
-3
Business, Industry and Services
High Emissions
p10
p50
p90
(wet)
(mid)
(dry)
0
-1
-2
-1
-2
-3
-2
-3
-3
Table A2.9
Percentage of total industrial abstraction within compliant water
bodies (water bodies in which there is resource available for future abstraction at
the Q95 39) under 3 flow reduction scenarios
39
Name
Baseline
Percentage reduction in low
flows
-10
-15
-25
Anglian
15%
14%
14%
11%
Dee
0%
0%
0%
0%
Humber
13%
12%
12%
11%
North West England
4%
3%
3%
3%
Northumbria
3%
3%
3%
3%
Severn
17%
12%
11%
4%
South East England
25%
20%
20%
1%
South West England
35%
28%
19%
18%
Thames
9%
9%
9%
8%
West Wales
6%
4%
3%
1%
A statistic indicative of low river flow rates during the summer season
Business, Industry and Services
143
Figure A2.2
The locations of industrial abstractions and their relative size distribution across England and Wales
144
Figure A2.3 Map showing the spatial distribution of the turnover equivalent to
the loss of water abstraction for Section C - Manufacturing. Data are for the
central estimate of the medium emissions scenario in 2050
Business, Industry and Services
145
Figure A2.4 Regional variation of the turnover equivalent (£million) to the loss
of water abstraction for Section C - Manufacturing and for the various climate
scenarios
146
Business, Industry and Services
Table A2.10 Regional estimates of the turnover equivalent to the loss of water
abstraction for Section C – Manufacturing (£m)
2020
Turnover (£m)
Region
Anglian
Annual Medium
p10
Turnover
21620
0
Medium
p50
15
2050
Medium Low Medium
p90
p10
p50
77
10
89
2080
High
p90
Low
p10
Medium
p50
High
p90
138
22
122
181
Dee
4282
0
0
0
0
0
0
0
0
0
Humber
47883
0
41
75
35
89
144
41
126
193
Northumbria
7081
0
0
0
0
0
2
0
1
4
North West England
32644
0
18
28
12
30
38
20
35
46
South East England
15363
0
53
156
28
223
295
62
294
296
Severn
15418
0
83
169
71
172
179
101
177
186
South West England
5985
0
74
86
32
90
108
76
102
124
Thames
West Wales
28209
0
0
0
24
26
47
0
13
35
55
73
56
5
25
61
55
106
57
13459
Business, Industry and Services
147
Table A2.11 Indicative loss in turnover based on lost staff time due to reductions in available water abstraction (£m). Based on
selected Groups within the SIC that are likely to be impacted and then summed by Section. Table (a) makes no allowance for adaptation
and Table (b) includes some provision for adaptation
Lost Turnover (£m)
(a)
No adaptation
SIC
Section
A
B
C
D
E
F
2020
2050
2080
Turnover
Medium
p10
Medium
p50
Medium
p90
Low
p10
Medium
p50
High
p90
Low
p10
Medium
p50
High
p90
Agriculture, Forestry and Fishing
Mining and Quarrying
Manufacturing
Electricity, Gas, Steam and Air conditioning supply
Water supply, Waste management and Remediation activities
Construction
41
22950
191944
65184
12268
1958
0
0
0
0
0
0
0
15
385
107
18
15
0
46
831
229
38
21
0
9
253
89
13
7
0
56
977
248
43
23
0
94
1291
316
58
28
0
21
439
127
21
16
0
82
1217
295
54
26
1
126
1491
372
71
31
Total all activities
294345
0
541
1166
372
1348
1788
625
1674
2092
Turnover
Medium
p10
Medium
p50
Medium
p90
Low
p10
Medium
p50
High
p90
Low
p10
Medium
p50
High
p90
Agriculture, Forestry and Fishing
Mining and Quarrying
Manufacturing
Electricity, Gas, Steam and Air conditioning supply
Water supply, Waste management and Remediation activities
Construction
41
22950
191944
65184
12268
1958
0
0
0
0
0
0
0
12
308
86
14
12
0
37
665
183
31
17
0
8
202
72
10
6
0
45
782
199
34
18
0
75
1033
253
47
22
0
17
352
102
16
13
0
65
974
236
43
21
0
101
1193
298
57
25
Total all activities
294345
0
432
933
298
1079
1430
500
1339
1674
Lost Turnover (£m)
(b)
Including adaptation
SIC
Section
A
B
C
D
E
F
2010
Annual
2010
Annual
148
2020
2050
2080
BU4- Supporting data
Table A2.12 Increase in Non-Residential Properties (NPR) at significant risk of
fluvial or tidal flooding (within the 1 in 75 yr flood plain). The values are given as
factors above the baseline
2020s
Medium Medium Medium
Low
2050s
Medium
High
Low
2080s
Medium
High
Measure
Baseline
p10
p50
p90
p10
p50
p90
p10
p50
p90
NRP (No.)
191,400
1.2
1.6
1.9
1.4
2.0
2.3
1.8
2.3
2.5
EAD (£m)
560
1.2
1.8
2.5
1.3
2.4
3.6
1.7
3.0
4.8
(Source: Floods sector report (Ramsbottom et al., 2012), based on Environment Agency’s Long Term
Investment Strategy (LTIS))
Table A2.13 Regional estimates of staff days lost due to flooding for Section G
– Wholesale and Retail Trade; repair of Motor Vehicles and Motorcycles
2020s
Staff days lost
Region
East Midlands
East of England
London
North East
North West
South East
South West
West Midlands
Yorkshire & Humberside
Wales
2050s
2080s
Medium Medium Medium Low Medium High
Low Medium High
Baseline
1000
800
700
200
400
2000
1400
500
p10
1000
800
700
200
600
2000
1400
500
p50
1400
1100
900
200
1000
2200
1600
900
p90
1700
1200
1000
200
1200
2400
1700
1300
p10
1000
800
700
200
400
2000
1400
500
p50
1600
1100
900
200
1200
2300
1600
1100
p90
1900
1300
1200
300
1400
2600
2000
1500
p10
1000
800
700
200
800
2000
1400
500
p50
1800
1200
1000
200
1300
2400
1700
1300
p90
2000
1400
1300
300
1600
2800
2100
1700
1400
1400
1900
2100
1400
2100
2200
1600
2100
2200
700
700
800
900
700
900
1000
800
900
1100
Business Industry and Services
149
Table A2.14 Indicative lost staff time due to flooding (days) sub-divided by Sections of the Standard Industry Classification (SIC)
Lost staff time (thousands)
SIC
A
B
C
D
E
F
G
H
I
J
K
L
M
N
O
P
Q
R
Section
Agriculture, Forestry and Fishing
Mining and Quarrying
Manufacturing
Electricity, Gas, Steam and Air conditioning supply
Water supply, Waste management and Remediation activities
Construction
Wholesale and Retail trade; …
Transportation and Storage
Accommodation and Food services
Information and Communication
Financial and Insurance activities
Real Estate activities
Professional, Scientific and Technical activities
Administrative and Support Service activities
Public Administration and Defence; …
Education
Human Health and Social Work activities
Arts, Entertainment and Recreation
Total all activities
2020s
2050s
2080s
Observed
Medium
Medium
Medium
Low
Medium
High
Low
Medium
High
Baseline
p10
p50
p90
p10
p50
p90
p10
p50
p90
0
0
4
0
0
2
8
2
2
2
2
1
3
4
2
2
3
1
0
0
4
0
0
2
9
2
3
2
2
1
3
4
3
2
3
1
0
0
6
0
1
2
11
3
3
2
2
1
3
4
3
2
4
2
0
0
7
0
1
3
13
3
3
2
3
1
4
5
4
3
5
2
0
0
4
0
0
2
8
2
2
2
2
1
3
4
2
2
3
1
0
0
7
0
1
2
12
3
3
2
3
1
4
5
4
3
5
2
0
0
8
0
1
3
14
4
4
2
3
1
4
6
4
4
6
2
0
0
5
0
0
2
9
2
3
2
2
1
3
4
3
2
4
1
0
0
7
0
1
3
13
3
3
2
3
1
4
5
4
3
5
2
0
0
9
0
1
3
15
5
4
2
3
1
5
6
4
4
6
2
39
40
150
50
58
39
55
66
42
59
70
Table A2.15 Indicative lost staff time due to flooding (days) sub-divided by Division of the Standard Industry Classification (SIC)
Lost staff time (to the nearest 100 days)
SIC
Division
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
36
37
38
39
47
Manufacture of food products
Manufacture of beverages
Manufacture of tobacco products
Manufacture of textiles
Manufacture of wearing apparel
Manufacture of leather and related products
Manufacture of wood and of products of wood and cork, …
Manufacture of paper and paper products
Printing and reproduction of recorded media
Manufacture of coke and refined petroleum products
Manufacture of chemicals and chemical products
Manufacture of basic pharmaceutical products …
Manufacture of rubber and plastic products
Manufacture of other non-metallic mineral products
Manufacture of basic metals
Manufacture of fabricated metal products, …
Manufacture of computer, electronic and optical products
Manufacture of electrical equipment
Manufacture of machinery and equipment n.e.c.
Manufacture of motor vehicles, trailers and semi-trailers
Manufacture of other transport equipment
Manufacture of furniture
Other manufacturing
Repair and installation of machinery and equipment
Water collection, treatment and supply
Sewerage
Waste collection, treatment and disposal activities; …
Remediation activities and other waste management services
Retail trade, except of motor vehicles and motorcycles
2020s
2050s
2080s
Observed
Medium
Medium
Medium
Low
Medium
High
Low
Medium
High
Baseline
p10
p50
p90
p10
p50
p90
p10
p50
p90
700
100
0
100
0
0
0
0
100
0
100
0
400
0
0
600
200
0
200
100
0
100
0
0
0
700
100
0
100
0
0
0
0
100
0
100
0
400
0
0
600
200
0
200
100
0
100
0
0
0
1000
100
0
200
0
0
0
0
100
0
100
0
500
100
100
900
200
100
500
100
400
200
200
0
0
1200
100
0
300
0
0
0
0
200
0
200
100
600
100
100
1100
200
100
700
200
400
200
200
0
0
700
100
0
100
0
0
0
0
100
0
100
0
400
0
0
600
200
0
200
100
0
100
0
0
0
1100
100
0
300
0
0
0
0
200
0
200
0
600
100
100
900
200
100
600
200
400
200
200
0
0
1300
100
0
300
100
0
0
0
300
0
200
100
600
100
100
1200
300
200
800
200
400
200
300
0
0
800
100
0
200
0
0
0
0
100
0
100
0
400
0
0
700
200
0
300
100
100
100
200
0
0
1300
100
0
300
100
0
0
0
200
0
200
100
600
100
100
1000
200
100
800
200
400
200
200
0
0
1400
100
0
400
100
0
0
100
300
0
200
100
700
100
100
1200
400
300
800
200
400
200
400
0
0
0
0
0
14
0
0
0
14
0
0
0
32
0
0
0
32
0
0
0
14
0
0
0
32
0
0
0
32
0
0
0
14
0
0
0
32
0
0
0
32
151
Figure A2.5 Map showing the spatial distribution of staff days lost due to
flooding for Section G – Wholesale and Retail Trade; repair of Motor Vehicles and
Motorcycles
152
Business, Industry and Services
Figure A2.6 Map showing the spatial distribution of turnover lost (£ millions)
due to flooding for Section G – Wholesale and Retail Trade; repair of Motor
Vehicles and Motorcycles
Business, Industry and Services
153
BU6 - Supporting data
Table A2.16 Estimated value of residential mortgage fund at significant likelihood of river flooding (£bn, England and Wales)
2020s
UKCP09
Region
East
Midlands
Average
Mortgage
Value*
£118,990
2050s
Med
p10
Baseline**
1.78
£
Med
p50
1.79
£
Med
p90
3.36
£
2080s
Low
p10
4.39
£
Low
p50
1.78
£
Med
p50
3.78
£
High
p50
4.05
£
High
p90
4.19
£
Low
p10
4.61
£
Low
p50
2.08
£
Med
p50
4.21
£
High
p50
4.38
East of
England
£84,714
0.85
£
0.85
£
1.29
£
1.77
£
0.85
£
1.48
£
1.61
£
1.66
£
1.88
£
0.85
£
1.68
£
1.76
London
£236,979
2.87
£
2.87
£
3.88
£
6.56
£
2.87
£
4.21
£
5.06
£
5.40
£
9.07
£
2.87
£
5.57
£
6.40
£
High
p90
4.52
£
4.76
£
1.83
£
1.94
£
7.69
£
11.97
North East
£69,159
0.31
£
0.31
£
0.49
£
0.56
£
0.31
£
0.51
£
0.53
£
0.54
£
0.63
£
0.44
£
0.54
£
0.56
£
0.59
£
0.68
North West
£76,665
0.54
£
1.54
£
2.41
£
2.57
£
0.54
£
2.35
£
2.55
£
2.61
£
2.65
£
2.16
£
2.56
£
2.59
£
2.64
£
2.70
South East
£140,813
4.02
£
4.02
£
4.65
£
5.47
£
4.02
£
5.00
£
5.23
£
5.32
£
5.63
£
4.05
£
5.37
£
5.49
£
5.58
£
5.64
South West
£117,670
1.78
£
1.78
£
3.32
£
3.49
£
1.78
£
3.38
£
3.44
£
3.45
£
3.60
£
2.94
£
3.47
£
3.51
£
3.57
£
3.68
£88,866
0.33
£
0.33
£
0.85
£
1.21
£
0.33
£
1.02
£
1.11
£
1.17
£
1.31
£
0.46
£
1.18
£
1.22
£
1.29
£
1.33
West
Midlands
Yorkshire
and The
Humber
£82,372
1.02
£
1.02
£
2.25
£
2.46
£
1.02
£
2.35
£
2.41
£
2.44
£
2.48
£
1.54
£
2.43
£
2.46
£
2.47
£
2.49
Wales
£79,880
1.04
£
1.25
£
1.74
£
1.90
£
1.06
£
1.78
£
1.88
£
1.92
£
1.96
£
1.57
£
1.90
£
1.92
£
1.95
£
1.99
Note this is without population growth and is in £ billion.
* Calculated by multiplying the national average mortgage ratio to value by the average value per region.
** calculated by multiplying the average mortgage value by the number of properties at significant likelihood and the % of properties with a mortgage
154
Table A2.17 Estimated value of residential mortgage fund at significant likelihood of tidal flooding (£bn, England and Wales)
2020s
UKCP09
Region
East
Midlands
Average
Mortgage
Value*
£118,990
2050s
Med
p10
Baseline**
1.30
Med
p50
1.50
Med
p90
1.63
2080s
Low
p10
1.74
Low
p50
1.74
Med
p50
1.89
High
p50
1.95
High
p90
1.99
Low
p10
2.08
Low
p50
1.92
Med
p50
2.05
High
p50
2.08
High
p90
2.10
2.16
East of
England
£84,714
0.23
0.41
0.54
0.66
0.67
0.87
0.94
1.02
1.16
0.92
1.11
1.17
1.24
1.36
London
£236,979
0.49
0.67
0.83
1.01
0.99
1.38
1.60
1.87
2.69
1.46
2.27
2.72
3.30
5.00
North East
£69,159
0.08
0.08
0.09
0.09
0.09
0.10
0.10
0.11
0.12
0.10
0.11
0.12
0.12
0.13
North West
£76,665
0.13
0.28
0.46
0.62
0.48
0.77
0.88
0.97
1.12
0.73
1.03
1.10
1.16
1.25
South East
£140,813
1.66
2.45
2.99
3.49
3.42
4.24
4.54
4.84
5.34
4.37
5.13
5.35
5.53
5.81
South West
£117,670
1.16
2.16
2.47
2.66
2.70
2.83
2.86
2.88
2.91
2.85
2.90
2.91
2.92
2.94
West
Midlands
£88,866
Yorkshire
and The
Humber
£82,372
0.59
1.82
2.55
3.20
3.16
4.13
4.48
4.81
5.30
4.29
5.12
5.31
5.45
5.60
Wales
£79,880
0.68
0.88
1.01
1.11
1.08
1.21
1.25
1.29
1.37
1.22
1.33
1.37
1.42
1.52
Note this is without population growth and is in £ billion.
* Calculated by multiplying the national average mortgage ratio to value by the average value per region.
** calculated by multiplying the average mortgage value by the number of properties at significant likelihood and the % of properties with a mortgage
155
BU7 – Supporting data
Table A2.18 Average proportional increase in number residential properties at
significant risk of flooding (percentage)
a) Fluvial flooding
Medium
2020s
Medium
Medium
Low
Low
2050s
Medium
High
High
Low
Low
2080s
Medium
High
High
p10
p50
p90
p10
p50
p50
p50
p90
p10
p50
p50
p50
p90
21
103
147
0
116
132
139
167
57
139
147
158
183
High
Note: Based on CCRA Flood sector analysis of flood risk in England and Wales
b) Tidal flooding
Medium
2020s
Medium
Medium
Low
Low
2050s
Medium
High
High
Low
Low
2080s
Medium
High
p10
p50
p90
p10
p50
p50
p50
p90
p10
p50
p50
p50
p90
69
118
163
149
221
249
277
331
226
305
331
357
418
Note: Based on CCRA Flood sector analysis of flood risk in England and Wales
Table A2.19 Properties at significant risk of fluvial and tidal flooding (p50
Medium Emissions climate change scenario)
a) Residential properties
Epoch
2008
2020s
2050s
2080s
Properties at risk (thousands)
(climate change only)
366
691
868
962
Increase over present day (%)
(climate change only)
0
90
140
160
b) Non-Residential properties
Epoch
2008
2020s
2050s
2080s
Properties at risk (thousands)
(climate change only)
191
300
350
377
Increase over present day (%)
(climate change only)
0
60
80
100
c) Total number of properties
Epoch
2008
2020s
2050s
2080s
156
Properties at risk (thousands)
(climate change only)
557
991
1219
1339
Increase over present day (%)
(climate change only)
0
80
120
140
Business, Industry and Services
BU8 – Supporting data
Table A2.20 TCI scores for Grid Square 1690 (extreme SW) for the 1970s and
50% probability level for 2020s and 2050s
Month
1970s
2020s
2050s
Change 1970 to 2050
January
29.1
29.6
30.3
1.2
February
33.7
32.7
32.6
-1.1
March
40.7
42.6
42.8
2.1
April
51.2
51.5
53.8
2.6
May
55.3
59.5
63.1
7.8
June
63.2
70.4
78.8
15.6
July
72.2
76.7
81.7
9.5
August
69.7
77.3
82.4
12.7
September
57.3
63.5
71.5
14.2
October
43.4
46.4
48.6
5.2
November
35.7
36
36.4
0.7
December
31.2
32.1
32.2
1
(Source: South West Tourism, 2010).
Table A2.21 Serviced accommodation room occupancy figures from 2003 to
2008 for Bournemouth
Bournemouth – August
Room occupancy
2003 Heatwave
2004
2005
2006
2007
2008
87
75
82
78
69
72
(Source: South West Tourism, 2010).
Business, Industry and Services
157
Figure A2.7 UK temperature anomaly data for the months of June, July, August
and September and room occupancy data for serviced accommodation,
averaged over the same period
72
3
71
June
2.5
70
2
1.5
69
1
68
0.5
July
UK room occupancy (%)
Difference in temperature from 1971‐2000 average (˚C)
3.5
August
Sept
Average room occupancy (June‐
Sept)
67
0
2001
2002
2003
2004
2005
2006
2007
2008
2009
‐0.5
‐1
66
65
Year
(Source: Met Office and Enjoy England).
3.5
57
3
56
2.5
55
2
54
1.5
53
1
52
0.5
51
50
0
2001
2002
2003
2004
2005
2006
2007
2008
49
‐0.5
‐1
Year
(Source: Met Office and Enjoy England).
158
2009
Business, Industry and Services
48
June
UK room occupancy (%)
Difference in temperature from 1971‐2000 average (˚C)
Figure A2.8 UK temperature anomaly data for the months of June, July, August
and September and annual room occupancy data for serviced accommodation in
seaside locations
July
August
Sept
Seaside
BU10 – Supporting data
Table A2.22 Lost production days per year per employee for days exceeding
26oC with an adjustment to take account of the underlying changes since the
time of the baseline period (1960-90)
2020s
2050s
2080s
Medium Medium Medium Low Medium High
Region
East Midlands
East of England
London
North East
North West
South East
South West
West Midlands
Yorkshire &
Humberside
Wales
Low Medium High
Baseline
0.25
0.33
0.53
0.05
0.13
0.27
0.11
0.25
p10
0.29
0.36
0.58
0.05
0.15
0.31
0.12
0.28
p50
0.37
0.47
0.77
0.09
0.21
0.43
0.20
0.38
p90
0.49
0.65
1.03
0.15
0.30
0.61
0.32
0.55
p10
0.36
0.47
0.74
0.08
0.20
0.41
0.19
0.36
p50
0.64
0.87
1.33
0.21
0.38
0.83
0.46
0.71
p90
1.55
2.08
3.05
0.63
0.97
2.21
1.51
1.75
p10
0.37
0.48
0.77
0.08
0.20
0.43
0.20
0.39
p50
1.09
1.44
2.14
0.43
0.67
1.45
0.92
1.21
p90
4.36
5.50
7.47
2.39
3.14
6.25
5.35
5.22
0.16
0.18
0.25
0.33
0.24
0.42
1.05
0.25
0.72
3.05
0.08
0.09
0.13
0.21
0.12
0.29
0.89
0.13
0.59
3.47
Table A2.23 Lost production days per year per employee for days exceeding
28oC with an adjustment to take account of the underlying changes since the
time of the baseline period (1960-90)
2020s
2050s
2080s
Medium Medium Medium Low Medium High
Region
East Midlands
East of England
London
North East
North West
South East
South West
West Midlands
Yorkshire &
Humberside
Wales
Low Medium High
Baseline
0.15
0.18
0.36
0.01
0.08
0.15
0.06
0.14
p10
0.17
0.21
0.39
0.02
0.09
0.18
0.07
0.17
p50
0.24
0.31
0.54
0.03
0.13
0.25
0.10
0.24
p90
0.33
0.43
0.72
0.06
0.18
0.39
0.16
0.35
p10
0.23
0.30
0.51
0.02
0.12
0.25
0.09
0.23
p50
0.44
0.57
0.98
0.09
0.23
0.53
0.26
0.48
p90
1.14
1.55
2.46
0.37
0.67
1.61
0.99
1.29
p10
0.24
0.31
0.54
0.02
0.12
0.26
0.10
0.25
p50
0.73
1.00
1.64
0.23
0.45
1.00
0.56
0.86
p90
3.66
4.79
6.73
1.75
2.35
5.51
4.56
4.50
0.07
0.08
0.12
0.19
0.12
0.26
0.69
0.13
0.47
2.39
0.04
0.05
0.08
0.12
0.07
0.15
0.54
0.08
0.34
2.59
Table A2.24 Regional estimates of the lost productivity due to overheating
(employee days) for Section K - Financial and Insurance activities
2020s
2050s
Medium Medium Medium
Region
East Midlands
East of England
London
North East
North West
South East
South West
West Midlands
Yorkshire &
Humberside
Wales
Low
Medium High
2080s
Low
Medium
High
Baseline p10
p50
p90
p10
p50
p90
p10
p50
p90
9400 12200 16000 11700 21100 50700 12300 35600 142800
8000
19000 21300 27900 38600 27500 51300 123000 28100 84900 324500
154000 169700 225600 300400 215200 387600 891500 225700 626600 2184100
1200
2100
3300 1800
4500 13800 1800
9300 52000
1000
12000 12700 18500 25800 17400 32800 84400 17700 58200 273700
28000 32300 44100 63000 42800 85800 229600 44700 151000 649300
9100 14700 23400 14000 33700 111200 14900 67600 395000
8000
15000 17300 23900 34000 22500 44100 109000 24100 75500 324700
12000
13900
19500
2000
2400
3400
25800 18600
5500
3200
32900 82500 19700
7500 22800
Business, Industry and Services
3500
56400 240400
15000
89000
159
Figure A2.9 Map showing the spatial distribution of the employee days lost due
to overheating for Section K - Financial and Insurance activities. Data are for the
central estimate of the medium emissions scenario in 2050
160
Business, Industry and Services
Figure A2.10 Regional variation of the lost productivity due to overheating for
Section K - Financial and Insurance activities and for the various climate
scenarios
Business, Industry and Services
161
Table A2.25 Staff days lost and indicative cost using thresholds of 26C and
28C
2020s
2050s
2080s
Medium Medium Medium Low Medium High
Tmax >26C
Staff days lost
(x1000)
% of working time
Cost (£m)
% of turnover
Low Medium
High
p10
p50
p90
24290
101330
0.16%
0.21% 0.15% 0.28% 0.71% 0.16% 0.49%
2.02%
1170
0.03%
1120
1610
2130
5350 1170
3640
0.04% 0.03% 0.06% 0.14% 0.03% 0.10%
15200
0.41%
3480
4890
6970
17010
86610
0.06%
0.07%
0.10%
0.14% 0.09% 0.19% 0.52% 0.10% 0.34%
1.73%
460
0.01%
520
0.01%
730
0.01%
700
1050
1420 3940
740
2550
0.02% 0.01% 0.03% 0.08% 0.01% 0.05%
12990
0.25%
Baseline
p10
p50
p90
p10
5120
5690
7770
10750
7430
0.10%
0.11%
770
0.02%
850
0.02%
3050
p50
p90
14170 35680 7780
Tmax >28C
Staff days lost
(x1000)
% of working time
Cost (£m)
% of turnover
162
4650
9490
Business, Industry and Services
26270 4920
Table A2.26 Indicative lost staff time due to overheating (days), sub-divided by Sections of the Standard Industry Classification (SIC)
Lost staff time (thousands)
Baseline
Medium
p10
2020s
Medium
p50
20
4
397
20
30
211
817
262
293
212
259
73
373
442
320
559
689
135
23
6
442
23
34
236
911
291
327
236
289
80
413
491
355
621
766
149
31
9
608
31
46
323
1245
396
446
320
392
109
559
666
485
849
1050
203
44
12
849
43
64
449
1729
545
617
439
536
150
768
916
672
1178
1460
280
30
8
581
30
44
309
1192
379
426
306
375
104
536
638
464
813
1004
194
59
16
1124
58
85
594
2284
716
813
577
701
197
1008
1204
885
1556
1928
369
153
42
2889
149
217
1510
5789
1782
2046
1420
1719
491
2488
2987
2231
3939
4901
926
31
9
609
31
46
323
1247
396
446
321
393
109
560
667
485
850
1051
203
102
28
1958
101
147
1025
3931
1218
1392
972
1180
336
1703
2044
1520
2676
3328
631
450
122
8555
441
629
4348
16573
4981
5787
3859
4676
1372
6815
8310
6384
11268
14152
2613
5116
5690
7767
10751
7431
14174
35678
7777
24292
101332
Observed
SIC
A
B
C
D
E
F
G
H
I
J
K
L
M
N
O
P
Q
R
Section
Agriculture, Forestry and Fishing
Mining and Quarrying
Manufacturing
Electricity, Gas, Steam and Air conditioning supply
Water supply, Waste management and Remediation activities
Construction
Wholesale and Retail trade; …
Transportation and Storage
Accommodation and Food services
Information and Communication
Financial and Insurance activities
Real Estate activities
Professional, Scientific and Technical activities
Administrative and Support Service activities
Public Administration and Defence; …
Education
Human Health and Social Work activities
Arts, Entertainment and Recreation
Total all activities
163
Medium
p90
Low
p10
2050s
Medium
p50
High
p90
Low
p10
2080s
Medium
p50
High
p90
Table A2.27 Indicative lost staff time due to overheating (days), sub-divided by Divisions of the Standard Industry Classification (SIC)
Lost staff time (thousands)
SIC
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
36
37
38
39
47
Division
Manufacture of food products
Manufacture of beverages
Manufacture of tobacco products
Manufacture of textiles
Manufacture of wearing apparel
Manufacture of leather and related products
Manufacture of wood and of products of wood and cork, …
Manufacture of paper and paper products
Printing and reproduction of recorded media
Manufacture of coke and refined petroleum products
Manufacture of chemicals and chemical products
Manufacture of basic pharmaceutical products …
Manufacture of rubber and plastic products
Manufacture of other non-metallic mineral products
Manufacture of basic metals
Manufacture of fabricated metal products, …
Manufacture of computer, electronic and optical products
Manufacture of electrical equipment
Manufacture of machinery and equipment n.e.c.
Manufacture of motor vehicles, trailers and semi-trailers
Manufacture of other transport equipment
Manufacture of furniture
Other manufacturing
Repair and installation of machinery and equipment
Water collection, treatment and supply
Sewerage
Waste collection, treatment and disposal activities; …
Remediation activities and other waste management services
Retail trade, except of motor vehicles and motorcycles
Observed
Baseline
60
6
0
7
5
1
8
9
22
2
17
7
25
14
11
44
22
15
34
24
19
12
12
19
5
4
21
0
525
Medium
p10
2020s
Medium
p50
66
7
0
8
5
2
10
10
25
2
18
8
29
15
13
50
24
17
38
27
21
13
13
21
5
4
24
0
586
164
90
9
1
11
7
2
13
14
34
2
26
11
39
21
18
69
34
24
52
37
29
18
18
29
7
6
32
1
802
Medium
p90
125
13
1
16
9
3
18
20
47
3
36
16
55
29
25
97
47
33
73
52
42
25
26
40
10
8
45
1
1114
Low
p10
86
9
1
11
6
2
12
14
32
2
25
11
38
20
17
66
32
23
50
35
28
17
18
28
7
6
31
0
768
2050s
Medium
p50
165
17
1
20
12
4
24
26
61
5
47
21
72
39
33
128
63
44
97
68
56
33
34
54
14
11
60
1
1472
High
p90
417
41
3
52
29
10
62
69
154
12
122
55
186
99
85
328
165
116
250
175
149
85
89
136
36
28
152
2
3731
Low
p10
90
9
1
11
7
2
13
14
34
2
25
11
39
21
18
69
34
24
52
37
29
18
19
29
7
6
32
1
803
2080s
Medium
p50
284
28
2
35
20
7
42
47
105
8
83
37
126
67
58
223
111
78
169
119
99
58
60
93
24
19
103
2
2534
High
p90
1223
117
9
155
83
29
183
206
439
36
367
160
553
295
267
978
484
344
737
526
459
252
263
392
107
80
435
7
10692
Appendix 3
Economic impacts
Table A3.1
Change in total value of industrial abstractions that may be
prevented if catchments switch from being sustainable to unsustainable in
England and Wales (from local catchments and assuming no socio-economic
change) (£m/annum, no uplift or discounting and compared to a 2008 risk
baseline)
Low
Emissions
Medium Emissions
High Emissions
p10
(wet)
p50
(mid)
p90
(dry)
p10
(wet)
p50
(mid)
p90
(dry)
p10
(wet)
p50
(mid)
p90
(dry)
2020s
0.91*
1.89
2.53
0.91*
1.96
2.59
0.78*
1.94
2.56
2050s
1.28
2.57
3.19
2.01
2.79
3.34
2.19
2.96
3.46
2080s
2.11
2.90
3.45
2.51
3.26
3.75
2.89
3.52
4.00
* Indicate economic savings under “wet” climate scenarios
Table A3.2
Change in total value of industrial abstractions that may be
prevented if catchments switch from being sustainable to unsustainable in
England and Wales (from downstream catchments and assuming no socioeconomic change) (£m/annum, no uplift or discounting and compared to a 2008
risk baseline)
Low
Emissions
Medium Emissions
High Emissions
p10
(wet)
p50
(mid)
p90
(dry)
p10
(wet)
p50
(mid)
p90
(dry)
p10
(wet)
p50
(mid)
p90
(dry)
2020s
-0.4
0.8
1.4
-0.4
0.9
1.5
-0.3
0.9
1.4
2050s
0.6
1.5
1.9
0.9
1.6
2.0
1.1
1.7
2.0
2080s
1.0
1.7
2.0
1.4
1.9
2.2
1.7
2.1
2.4
Table A3.3
Marginal increase in Non-Residential Properties in England &
Wales at significant risk of fluvial and tidal flooding due to climate change
(assuming no socio-economic change) (£million/year, no uplift or discounting
and compared to a 2008 risk baseline)
2020s
2050s
2080s
Med
Med
Med
Low Low Med High High
Low Low Med
High
High
p10
p50
p90
P10 p50 p50
p10 p50
p50
p90
p50
p90
p50
Climate multiplier
1.17 1.75 2.46 1.32 2.1 2.41 2.67 3.61 1.71 2.7 2.98 3.43 4.79
Baseline (£m) 560
655
980 1378 7391176 1350 1495 2022 9581512 1669 1921 2682
Climate attributable (£m)
95
420
818 179 616 790 935 1462 398 952 1109 1361 2122
(Source: Derived from CCRA Floods Sector Report)
Business, Industry and Services
165
Table A3.4
Total (absolute) regional tourism expenditure in the UK attributable
to climate change and socio-economic change (population and numbers of
international tourists) for the 2020s (£billion/year, no uplift or discounting and
compared to a 2005 risk baseline).
Region
North East
North West
Yorkshire and the Humber
East Midlands
West Midlands
Eastern England
London
South East England
South West England
Wales
Scotland
Northern Ireland
UK total
Low
0.08
0.46
0.27
0.19
0.11
0.20
-0.47
0.26
0.62
0.33
0.35
0.03
2.43
2020s
Medium Medium
low
high
0.05
0.06
0.29
0.34
0.17
0.20
0.12
0.14
0.05
0.06
0.12
0.14
-0.49
-0.64
0.12
0.13
0.36
0.43
0.20
0.24
0.19
0.22
0.02
0.02
1.18
1.33
High
0.13
0.75
0.45
0.31
0.18
0.34
-0.58
0.45
1.03
0.53
0.60
0.04
4.22
Table A3.5
Total (absolute) regional tourism expenditure in the UK attributable
to climate change and socio-economic change (population and numbers of
international tourists) for the 2050s (£billion/year, no uplift or discounting and
compared to a 2005 risk baseline).
Region
North East
North West
Yorkshire and the Humber
East Midlands
West Midlands
Eastern England
London
South East England
South West England
Wales
Scotland
Northern Ireland
UK total
166
Low
0.27
1.51
0.90
0.60
0.44
0.69
0.22
1.08
1.98
1.02
1.59
0.08
10.38
2050s
Medium Medium
low
high
0.20
0.23
1.13
1.33
0.67
0.78
0.45
0.51
0.34
0.33
0.52
0.56
0.16
-0.56
0.82
0.77
1.52
1.64
0.77
0.89
1.18
1.33
0.06
0.07
7.83
Business, Industry and Services
7.89
High
0.31
1.74
1.01
0.63
0.45
0.67
0.07
0.99
1.90
1.09
2.11
0.09
11.08
Table A3.6
Total (absolute) regional tourism expenditure in the UK attributable
to climate change and socio-economic change (population and numbers of
international tourists) for the 2080s (£billion/year, no uplift or discounting and
compared to a 2005 risk baseline).
Region
North East
North West
Yorkshire and the Humber
East Midlands
West Midlands
Eastern England
London
South East England
South West England
Wales
Scotland
Northern Ireland
UK total
Low
0.34
1.83
1.08
0.68
0.62
0.81
1.95
1.45
2.20
1.15
2.63
0.10
14.83
2080s
Medium Medium
low
high
0.29
0.35
1.57
1.85
0.92
1.06
0.58
0.59
0.47
0.49
0.66
0.60
0.82
0.95
1.08
0.93
1.83
1.60
1.00
1.05
1.99
3.03
0.08
0.09
11.28
Business, Industry and Services
12.62
High
0.72
3.77
2.22
1.37
1.19
1.58
2.86
2.63
4.38
2.39
5.61
0.21
28.93
167
168
Business, Industry and Services
Appendix 4
Social Vulnerability Checklist
Having reviewed the Social Vulnerability Checklist for the impacts themed as ‘Water
Availability’, ‘Legal’ and ‘Corporate’ (financial performance, reputation, governance, risk
management’, no social vulnerability factors have been identified.
All corporate impacts identified relate to corporate performance, governance,
reputation, risk management, etc and are thus high level and institutional. For this
reason no impacts on social vulnerable groups have been identified. Similarly, all legal
impacts relate to litigation against corporate structures so impacts on social groups are
highly unlikely. Water availability impacts relate to profitability of the industry or its
ability to maintain production so no social impacts have been identified, with the except
of international or food security (see relevant social vulnerability checklist below).
The impact upon wider society of changes to risk in the Business Industry and Services
sector is mediated by social vulnerability. Certain groups of people or organisations are
less able to withstand adverse impacts from one or a number of stressors to which they
are exposed. Equally, the estimation of the consequences of climate change is
determined by the ability of the sector and others to adapt (the “adaptive capacity”).
Social vulnerability defines the extent to which a system is susceptible to, or unable to
cope with, adverse effects of climate change including climate variability and extremes.
In this case, it is a measure of the impact change in the Business Industry and Services
sector may have on wider society, communities and individuals.
To address this issue, a social vulnerability check list was used to explore and highlight
any potential vulnerable populations related to the Business, Industry and Services
study impacts and consequences. The completed checklists for a range of themes
identified across the sub-sectors are presented below, with key observations
summarised below:
 Within the Business, Industry and Services sector, low income workers may
be disproportionately impacted by some of the areas of risk. More
specifically, those working outdoors would be affected most directly by
changes to operational patterns as a result of climate change. Potentially,
this is one group that could be impacted with negative health and welfare
implications. Geographically isolated people may be hit hard if transport
disruption means commuting to work becomes more difficult. Indeed, those
with a weak social support network may find it harder to cope with
disruption to employment, if businesses are affected by long term climate
change.
 Disruption within particular sub-sectors could expose the vulnerability of
certain groups. For example, food and beverage price fluctuations as a
result of weather disruption in the UK or abroad could push more people
into poverty. Elsewhere, elderly people are particularly vulnerable to rises in
energy prices, which are exposed to climatic variation. For example, a
potential increase in necessary investment in the utility distribution assets
(e.g. electricity power lines) could lead to a rise in energy costs for the
consumer.
 In a global market, the link between impact and consequence is not
straightforward, as there may be alternative supply routes available to meet
shortage of any one crop. However, as seen through the wheat crop
failures in Russia in 2010, a significant failure of crops in one country can
have global consequences on price. In addition, consequences of climate
change need not necessarily be negative for those currently vulnerable. For
Business, Industry and Services
169
example, a rise in winter temperatures may reduce energy demand and
cost. Business opportunities arising from a changing climate might also
help to create new jobs in socially deprived regions.
170
Business, Industry and Services
Sector
Cluster/Theme
Category of
social
vulnerability
factor
Place
Business (Extractives, Oil and Gas, Chemical, Food and Beverages)
Assets (fixed and workforce)
Questions to ask
Comment (general
answer)
Evidence (opinion, reports,
research)
Extent (specifics
including data
where available)
Most impacts identified in
this theme relate to
flooding (river, rain or
coastal) or heat, either of
which could occur
anywhere within the UK.
Heat related impacts are
more likely to be
significant in southern
and eastern UK (based
on UKCP09 projections).
Foresight coastal flood and defence
project identified coastal areas at risk
(see
http://www.foresight.gov.uk/OurWork/
CompletedProjects/Flood/index.asp).
National impact, see
UKCP09
How will people with poor health (physical or
mental) be affected by these impacts?
Limited impact on people
of poor health as impacts
relate to a workforce
assumed to be active (as
working outdoors or in
mainly active roles) or to
fixed assets.
n/a
n/a
How will people with fewer financial
resources be affected?
Low income workers may
be negatively impacted
as many of the risk areas
identified in relation to
workers arise from
outdoor working in
typically low income jobs.
This makes this
demographic the group
mot likely to be impacted,
Much of the work done in this sector is
within is held in house and client
confidential so opinions are based on
the professional experience of the
sector champion and sector analyst
and Entec project management team.
UKCP09 for
projected impact
severity
Which locations are affected by these
impacts?
Is it spread evenly across regions or not?
Social deprivation
171
Much of the work done in this sector is
within is held in house and client
confidential so opinions are based on
the professional experience of the
sector champion and sector analyst
and Entec project management team.
Sector
Cluster/Theme
Category of
social
vulnerability
factor
Business (Extractives, Oil and Gas, Chemical, Food and Beverages)
Assets (fixed and workforce)
Questions to ask
Comment (general
answer)
Evidence (opinion, reports,
research)
with negative health and
welfare implications.
Disempowerment
Other
How will people living or working in poor
quality homes or workplaces be affected?
Only identified impact is
the potential link between
low income and likelihood
of poor quality homes.
Impact then as above.
How will people who have limited access to
public and private transport be affected?
N/A
How will people with lack of awareness of
the risks be affected?
Risks are being identified
at a business level so
should have limited
impact on individuals
through lack of
awareness.
How will people without social networks be
affected?
N/A
How will people with little access to systems
and support services (e.g. health care) be
affected?
N/A
Are any other social vulnerability issues
relevant?
No
172
n/a
n/a
Extent (specifics
including data
where available)
Sector
Cluster/Theme
Category of social
vulnerability factor
Business
New markets
Questions to ask
Place
Which locations are affected by these
impacts?
Is it spread evenly across regions or not?
Comment (general
answer)
Evidence (opinion, reports,
research)
Potentially deprived areas
of the UK may attract more
tourism brought on by
changing trends in holidays
due to changing weather
patterns. (Acclimatise
(2010) Business and
Industry Services Sector
Phase 1 Report (Draft)).
Many coastal resorts are now
characterised by an out-migration
of business and a reduction in
investor confidence resulting in a
dilapidated built environment, high
crime and unemployment/
deprivation rates, low levels of
local economic activity (-8% below
the national average) and high
levels of part-time employment
(+25%). For some local authorities
notably in parts of south east
England, these problems have
been compounded by other
external pressures on resources
(e.g. asylum seekers).
Sea defences that integrate
with public realm and
regeneration projects could
have a powerful positive
impact on coastal
regeneration.
(See Appendix A and B)
Social deprivation
How will people with poor health (physical
or mental) be affected by these impacts?
In the poorer resort areas of
the East, North East and
parts of the North West of
England, the availability of
173
The map in Appendix C colour
codes the 2007 Indices of Multiple
Deprivation for England, which
illustrates how deprivation rings the
country. The map shows that many
northern resorts service large
urban areas that also experience
above average deprivation.
Extent (specifics
including data where
available)
Coastal Community
Alliance (2010)
Coastal Regeneration
in English Resorts –
2010
Local Government
Association ‘Coastal’
Special Interest
Group. Coastal
Economic
Development Report
Sector
Cluster/Theme
Category of social
vulnerability factor
Business
New markets
Questions to ask
Comment (general
answer)
Evidence (opinion, reports,
research)
Extent (specifics
including data where
available)
The dominant position of the lowwage tourism industry in most
resorts maintains a lower standard
of living for many coastal residents
and non-dynamic economies that
are unattractive to other business
sectors.
CLG (2007)
Government
Response to the
Communities and
Local Government
Committee Report on
Coastal Towns
cheap retirement homes
and caravans attracts
retirees who often have
health issues.
The in-migration of older
people to coastal resorts
can place significant
additional demands on
public services, particularly
health and social care.
The influx of tourism may
lead to overstretched public
health services as it gets
diverted to cater for tourist
related injuries.
How will people with fewer financial
resources be affected?
Low income workers and
the unemployed may be
positively affected as the
local economy brings in
more tourism.
Coastal Community
Alliance (2010)
Coastal Regeneration
in English Resorts –
2010.
174
Sector
Cluster/Theme
Category of social
vulnerability factor
Disempowerment
Other
Business
New markets
Questions to ask
Comment (general
answer)
How will people living or working in poor
quality homes or workplaces be affected?
It is expected that quality of
life would increase due to
rise in income from tourism.
This is the team’s
judgement.
How will people who have limited access
to public and private transport be
affected?
N/A
How will people with lack of awareness of
the risks be affected?
Those with lack of
awareness may miss out on
the opportunity to generate
income from changing
holiday trends.
How will people without social networks
be affected?
N/A
How will people with little access to
systems and support services (e.g. health
care) be affected?
N/A
Are any other social vulnerability issues
relevant?
No
175
Evidence (opinion, reports,
research)
Extent (specifics
including data where
available)
Sector
Cluster/Theme
Place
Business
Coastal erosion / Sea level rise
Which locations are affected by these
impacts?
Is it spread evenly across regions or not?
Social deprivation
How will people with poor health (physical
or mental) be affected by these impacts?
Coastal businesses and
communities (See Appendix
A and B).
There are around 3.5
million people living in
or near the 113
seaside resorts
(population >1,000)
spread around the
6,250 miles of English
coastline. The resorts
are administered by
49 district councils, 14
county councils and
23 unitary authorities.
Source: Coastal
Community Alliance
(2010) Coastal
Regeneration in
English Resorts –
2010.
In the poorer resort areas of
the East, North East and
parts of the North West of
England, the availability of
cheap retirement homes and
caravans attracts retirees
who often have health issues.
Coastal Community
Alliance (2010)
Coastal Regeneration
in English Resorts –
2010.
The in-migration of older
people to coastal resorts can
place significant additional
demands on public services,
particularly health and social
care.
176
Sector
Cluster/Theme
Business
Coastal erosion / Sea level rise
This may all be exacerbated
by climate change where
provision of coastal health
and public services may
already be overstretched.
How will people with fewer financial
resources be affected?
SMEs with limited revenue or
reliant on income from
inbound tourism to coastal
communities may struggle
with investing in capital and
operational and meeting
higher insurance premiums.
Low paid workers working for
SMEs or in remote
communities reliant on
tourism may face loss of
employment as SMEs are
unable to invest in capital and
operational expenditure to
stay in business.
In 2007, the Communities and
Local Government Select
Committee launched an inquiry into
coastal towns which concluded that
many coastal towns share common
factors including physical isolation,
significant levels of deprivation and
transience, and low-waged, lowskilled, seasonally dependent
economies. As older – and in some
cases vulnerable – people move in,
young people tend to leave. There
is a lack of affordable, suitable
housing, with large former hotels
and guest houses often converted
for multiple occupancy. All these
problems are exacerbated by the
declining and seasonal nature of
the coastal economy.
The dominant position of the lowwage tourism industry in most
resorts maintains a lower standard
of living for many coastal residents
and undynamic economies that are
unattractive to other business
sectors.
177
CLG (2007)
Government
Response to the
Communities and
Local Government
Committee Report on
Coastal Towns
Coastal Community
Alliance (2010)
Coastal Regeneration
in English Resorts 2010
Sector
Cluster/Theme
Disempowerment
Business
Coastal erosion / Sea level rise
How will people living or working in poor
quality homes or workplaces be affected?
SMEs and low income
workers working in coastal
businesses or reliant on
income from inbound tourism
will be affected by loss of
income due to business
interruption brought about by
sea level rise.
How will people who have limited access
to public and private transport be
affected?
N/A
How will people with lack of awareness of
the risks be affected?
Businesses and people with
lack of awareness will not
plan to protect against
coastal erosion and sea level
rise.
178
Resort housing is often
characterised by a dual economy of
high house prices and low-quality
private rental sectors. Coastal
houses in multiple occupation
(HMOs) provide cheap, short-term
accommodation that contributes to
the transience in many coastal
towns.
Overall, given the current
domination of the mitigation agenda
with respect to reducing
greenhouse gas emissions in the
tourism industry and their continued
almost singular focus on this issue,
the key barrier to effective decisionmaking has to be the lack of
awareness and knowledge of the
potential business risks and
adaptation responses to climate
change. This lack of awareness
prevails with the exception of
organisations that have already
experienced some fixed asset risk,
such as the obvious issues of
flooding or coastal erosion, or those
more progressive companies and
associations, such as the “Tourism
2023” vision group under Forum for
the Future, that are taking a
Sector
Cluster/Theme
Business
Coastal erosion / Sea level rise
potentially longer-term view of risk
and opportunity. (Acclimatise
(2010) Business and Industry
Services Sector Phase 1 Report
(Draft)).
Other
How will people without social networks
be affected?
Loss of coastal assets may
affect migrant workers
without social networks
available to support periods
of unemployment.
How will people with little access to
systems and support services (e.g. health
care) be affected?
Resorts suffer from the rural
problems of poor
communications, isolation,
poor access to services and
jobs, lack of opportunity,
recruitment issues, and
access to affordable housing.
This could be exacerbated
due to climate change.
Are any other social vulnerability issues
relevant?
Team judgement is that loss
of assets could potentially
affect service industries that
support tourism, with knockon effects such as loss of
earnings/ employment for
vulnerable work groups in
service industry (e.g.
cleaners).
179
Coastal resorts experience a higher
than national average level of
transience populations: inflows and
outflows of individuals and families
attracted by seasonal employment,
cheap rental accommodation
and/or the quality of resort life.
Coastal Community
Alliance (2010)
Coastal Regeneration
in English Resorts 2010
Sector
Cluster/Theme
Category of
social
vulnerability
factor
Place
Business (Extractives, Oil and Gas, Chemical, Food and Beverages)
Food security
Questions to ask
Comment (general
answer)
Which locations are affected by these impacts?
Is it spread evenly across regions or not?
Impacts are UK or
international in origin but
having a potentially UK
wide impact via change in
food prices (primarily).
Evidence (opinion, reports,
research)
Extent (specifics
including data
where available)
Opinions are based on the
professional experience of the
sector champion and sector analyst
and Entec project management
team.
National and
international impacts,
see UKCP09 and
IPCC 4AR
Unaware of published research or
evidence in the public domain.
Social deprivation
How will people with poor health (physical or
mental) be affected by these impacts?
Any volatility of food prices
may impact those in poor
health as it may lead to
deterioration in diet.
As above.
n/a
How will people with fewer financial resources
be affected?
Any volatility of food prices
may impact those with low
financial resource and
could then lead to
deterioration in diet.
As above.
n/a
How will people living or working in poor quality
homes or workplaces be affected?
Only identified impact is
the potential link between
low income and likelihood
of poor quality homes.
Impact then as above.
n/a
How will people who have limited access to
public and private transport be affected?
N/A
180
Sector
Cluster/Theme
Category of
social
vulnerability
factor
Disempowerment
Other
Business (Extractives, Oil and Gas, Chemical, Food and Beverages)
Food security
Questions to ask
Comment (general
answer)
Evidence (opinion, reports,
research)
How will people with lack of awareness of the
risks be affected?
N/A – reaction in public is
responsive. Awareness is
linked to better nutrition as
opposed to understand
there may be a bread
shortage if wheat crops fail
regularly.
As above
How will people without social networks be
affected?
Isolation may make an
individual more vulnerable
to volatility if food prices
but this is uncertain.
As above
How will people with little access to systems
and support services (e.g. health care) be
affected?
Unless there is a cost of
food within these systems
(i.e. paid meal on wheels’)
there will be no impacts.
As above
Are any other social vulnerability issues
relevant?
No
181
Extent (specifics
including data
where available)
NOTES ON USING THE SOCIAL VULNERABILITY CHECKLIST
1.1
When defining/scoring the magnitude of consequences, the impact on vulnerable
groups needs to be considered as part of the assessment of magnitude of
social consequences. This checklist can be used as a means of capturing the
answers to the key questions regarding social vulnerability.
1.2
The cluster/theme refers to the broad categories of impacts/consequences
identified for the sector. For the water sector these were water availability; water
quality and ecology; water company assets; and water use and recreation. It
would be impractical to complete an assessment using the above table for every
impact (or rationalised group of impacts). However, a Y/N check box is provided
in the ‘selection_of_tier_2_impacts_template’ to indicate whether the assessment
has identified vulnerable groups as being particularly affected by each
impact/rationalised group of impacts. It is important to capture this, so that
suitable risk metrics are identified.
1.3
In filling in the checklist, information can be drawn from the sector scoping
reports, current research and expert opinion. In the evidence column, it will be
important to note a) if there is evidence and b) what sort it is i.e. expert, published
research, modelled etc., and the same measures that are applied to the impact
evidence (e.g. pedigree) would be useful to apply here.
1.4
The extent column is where information on how many people might be affected
could be indicated. Initially, this will help with identifying suitable risk metrics.
Later on, when the selection of Tier 2 impacts is being revisited as part of the
DA/Regional assessments, these data might be available from the sector-based
Tier 2 assessment based on baseline socio-economic data, the use of
Government projections (for the near term) and scenarios (for the longer term).
1.5
The final row will capture any other social vulnerabilities not explicitly included
in the checklist.
1.6
The information from this assessment is designed to feed into the selection of
Tier 2 impacts, but it could also be updated during other stages of the project.
Further thought needs to be put into this yet.
182
Business, Industry and Services