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Last Updated: Thursday, 7 August, 2003, 08:15 GMT 09:15 UK
Heatwave winners and losers
By Myles Neligan
BBC News Online business reporter

Beer sales peak when the sun shines
The current spell of hot weather presents a golden opportunity for some British businesses, but the wider economy could lose out.

"The impact is hard to quantify, but weather like this creates winners and losers," said John Butler, UK economist at HSBC bank.

The biggest winners by far are the major food retailers, who are cashing in on bumper sales of summer goods.

Armed with long-range weather forecasts from the Met Office, the supermarkets are able to boost their revenues by stocking up in advance on barbecue materials, beer, salads, and sun cream.

By correlating the weather forecasts with historical data tracking changes in consumer spending patterns during previous heatwaves, the supermarket chains are able to anticipate precisely which products will be most in demand.

"It's very difficult to think of a single item sold on the High Street that has no correlation with the weather," says Steve Noyse, marketing director at the Met Office.

"We forecast the heatwave to last into next week, and we're telling retailers to gear up their supplies of items like hot dogs, rolls, and lettuce."

Summer sales

Anticipating weather-induced changes in consumer demand has paid dividends for retailers already this summer.

In June, retail sales posted their biggest monthly rise in a year, helped by a week-long spell of sunshine towards the end of the month.

The heatwave has disrupted train journeys
And the sales bonanza looks set to continue.

Asda expects sales of burgers and rolls to double this week, and predicts that demand for salad ingredients and summer fruit such as melons and strawberries will jump by 40%.

Power companies are also set to receive a boost, as greater use of air conditioning units prompts a surge in demand for electricity.

The extra electricity output prompted by a two-week spell of hot weather in June is thought to have boosted total industrial output by 0.7% from the previous month, the biggest gain in nearly a year.

Elsewhere, the heatwave can seem more like a curse than a blessing.

The most obvious losers are rail operating companies, which have been forced to cancel some trains and impose speed limits on others as tracks threaten to buckle in the blazing heat.

Some leisure businesses which thrive in cold weather - such as cinemas - also do less well when the sun shines.

The net economic effect of the heatwave remains a matter of debate.

"We're a country that isn't prepared for extreme weather.
Richard Greenwood, Centre for Economics and Business Research
HSBC's John Butler believes it is positive overall, arguing that stronger retail sales and industrial output will outweigh the drag on growth caused by, for instance, higher rates of absenteeism on hot days.

But other economists believe that disruption caused by this week's near-record temperatures will take their toll on businesses across all sectors.


The Centre for Economics and Business Research, a London-based think tank, has calculated that the current heatwave could cost the British economy up to 280m a day.

"We're fairly confident that the overall impact is negative" said CEBR analyst Richard Greenwood.

"We're a country that isn't prepared for extreme weather. It always catches us by surprise."

The bulk of the losses stems from lost productivity as workers swelter in stifling heat, according to the CEBR.

Drawing on research from the National Institute of Occupational Safety and Health in the US, the think-tank estimates that the productivity of the average British worker drops by 8% when the temperature edges above 80 degrees Fahrenheit.

But if the mercury hits 100 degrees - which some forecasters believe could happen this week - productivity slumps by a massive 62%, depriving the economy of 270m's worth of output every day.

And while supermarkets may cash in by stocking up on summer goods, the CEBR believes the retail sector as a whole could be losing out to the tune of 1.7m a day as shoppers stop buying more expensive items such as outdoor clothing.

"Food retailers may be busy, but if you look at central London, there's no one out shopping today," said Mr Greenwood.

The final drain on the economy comes in the form of disruption to the country's transport infrastructure.

According to the CEBR, increased commuting times and extra road congestion costs the economy an extra 3.9m a day if the temperature reaches 90 degrees, rising to 8.7m a day at 100 degrees.

Heatwave chaos on the trains
05 Aug 03  |  England
Summer boost for UK retailers
24 Jul 03  |  Business

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