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Fez– The intense heatwave sweeping across Europe is creating growing economic challenges, affecting household incomes, businesses, agriculture, and public finances as several countries grapple with record-breaking temperatures.
France remains one of the most affected countries. According to the national weather service, 61 French departments were under the highest red heat alert on Friday, while another 22 were placed on orange alert.
Temperatures across much of the country ranged between 35°C and 39°C, with some areas expected to reach 40°C or 41°C.
The UK also issued red warnings for extreme heat across parts of central and southern England and Wales, with forecasters expecting June temperature records to be broken.
The Netherlands placed large parts of the country under red alerts as temperatures approached 40°C in some locations.
The heat has already disrupted daily life across Europe. Schools have closed in several areas, train services have slowed, power outages have affected thousands of homes in France, and some farmers have started harvesting grain during the night to avoid dangerous daytime temperatures.
Beyond the immediate disruption, researchers say the financial impact on households is becoming increasingly clear.
A study published in the journal “Global Environmental Change” in May found that heatwaves combined with drought increased the risk of poverty across Europe by around 1.1 percentage points between 2004 and 2022.
This is equivalent to an average of 5.6 million additional people facing poverty during that period.
The study, based on household income data and detailed climate records, found that the combination of extreme heat and drought causes greater financial damage than either event alone.
Researchers from Climate Analytics estimated that these climate conditions reduced average household incomes across Europe by around 3%.
The losses were even higher in some regions, reaching about 10% in Madrid, 9.4% in central Hungary, and 8.8% in central Spain.
Low-income workers are among the hardest hit because many are employed in agriculture, construction, transport, and other outdoor jobs where working from home or moving to air-conditioned offices is not possible.
The study found that the poorest 20% of households experienced income losses 2.7 percentage points greater than the wealthiest 20% when heatwaves and drought occurred together.
Extreme heat also reduces productivity even when businesses remain open.
Workers often need longer breaks, slow their pace, or face increased risks of heat stress, heatstroke, and heart-related illnesses, resulting in lower output and higher costs for employers.
The European Commission’s Joint Research Centre estimates that by the middle of the century, 22 European regions could lose more than 1% of annual labour productivity because of heat stress.
By the 2080s, that number could rise to 107 regions. Under the worst-case scenario, Spain’s Murcia region could lose as much as 6% of labour productivity, while several parts of southern Europe could see regional economic output decline by up to 4%.
A recent working paper by the Organisation for Economic Co-operation and Development (OECD), based on company and weather data from 23 advanced economies between 2000 and 2021, also found that more frequent hot days and longer heatwaves reduce labour productivity, particularly among smaller and less productive companies.
The impact becomes even greater when high humidity and weak winds accompany the heat.
Agriculture is also under pressure. According to the European Drought Observatory, drought conditions intensified across much of Europe in late May following prolonged heat in Spain, Portugal, France, the United Kingdom, Italy, and the Alps.
The European Commission’s Joint Research Centre reported below-average soil moisture and river flows in several regions, negatively affecting vegetation and crop production.
While some countries are expected to record above-average harvests, others are likely to produce below-average yields.
The wider financial burden is also increasing.
Reuters reported that the current heatwave caused power outages in France, while Bloomberg said the extreme temperatures were placing additional pressure on electricity networks and healthcare systems across Western Europe.
The European Environment Agency estimates that weather and climate-related disasters caused economic losses of around €822 billion across the European Union between 1980 and 2024.
More than €208 billion of those losses occurred between 2021 and 2024 alone, making the past four years among the costliest on record.
The agency also says heatwaves account for about 95% of weather-related deaths in Europe and place growing pressure on healthcare systems, water supplies, food production, infrastructure, and government budgets through emergency spending, disaster compensation, and support for affected households and businesses.
Meanwhile, the European Union’s Copernicus Climate Change Service says Europe remains the fastest-warming continent, with at least 95% of the region recording above-average temperatures during 2025.
Climate Analytics warns that limiting global warming to 1.5°C would help reduce future income losses.
Under that scenario, average household incomes in Europe could decline by around 7% by the end of the century.
However, if global temperatures rise by 2.7°C under current policies, average household incomes could fall by as much as 27%, with the largest losses expected in Greece, Spain, Romania, Bulgaria, and Cyprus.
