Was the Beast from the East just an economic storm in a teacup?

15 Mar 14:00 by Rayah Lindley


There are many things you can control in business, many factors affecting your profitability that your management team can have a direct impact on.

Beast from the East

But the weather?  It’s something we all talk about but can do absolutely nothing about.  And we’ve all been very clearly reminded of this recently, with the arrival of the ‘Beast from the East’. 

Gridlocked motorways, stalled building sites, empty cafes and cancelled trains were just some of the symptoms of the extreme weather that hit the country at the end of February.  And while fortunately short-lived, it is estimated that The Beast has cost the UK economy at least £1billion A DAY.  Indeed, The Guardian reports that it could halve the GDP growth for the first quarter of 2018.

Practically all market sectors have been affected in some way.  Possibly hardest hit is construction.  Sub-zero temperatures meant no working, and in this industry alone, it’s forecast that £2billion has been lost over the worst three days.  In theory, the work can be caught up once better weather arrives, but in practice, projects tend to get pushed back, so the money is lost forever.

Transport networks ground to a halt with multiple rail cancellations, motorway closures and flight postponements.  Transport is a consumable industry – once an airline seat has been missed, it can’t be resold.  

And with everybody being told to stay at home and not travel, our high streets and leisure facilities fell silent.  Experts do believe that this sector will probably recover their losses.  February tends to be a ‘belt tightening’ month anyway, and whilst in the short-term economic activity is affected, hopefully, spend will be recovered later in the year. 

It wasn’t all bad news

And it wasn’t all bad news for retail.  Whilst the John Lewis group saw sales drop by 5% over the week compared to last year, their grocery arm, Waitrose, saw an increase of 0.7%. It seems we bought more comforting food and drink, with canned soup sales surging by 50 percent and crumpets by 35 percent!

Of course, our energy suppliers saw a spike in demand.  One gas analyst calculated that the cost of same-day gas traded on 2nd March was £52.6m, compared to a daily average of £7.7m in 2017.

Whilst the headline losses are startling, maybe they aren’t quite what they seem. Certainly, economic activity stalls because of the weather but many economists believe this to be a transient effect. Looking at the greater picture, such losses are often little more than a glitch. Things do catch up, and when viewed over a longer time period, the event can barely be noticed.

Take this view to an extreme, and if we look at a century’s worth of GDP figures, we see even the Great Depression as being just a blip. By around 1960, the standard of living appeared to be exactly where it would have been if the 1930s had never happened.

Of course, when you are in the middle of a situation, stranded miles from home, or sitting at home with no water or heating, it doesn’t feel like a blip.  But it’s reassuring to think that the concerns are perhaps short-term ones.  Indeed, there is a view that over the long term, the only things that really matter are technological advances and productivity.