The UK economy could face losses equivalent to around 10% of gross domestic product (GDP) by the end of the century if global temperatures rise by 4°C, according to new research highlighting the potential economic consequences of climate change.
The study warns that continued high greenhouse gas emissions could significantly reduce economic prosperity, with climate-related impacts affecting productivity, trade, infrastructure, and household welfare. Researchers said that existing levels of global warming have already caused measurable economic damage, with losses expected to increase substantially if governments fail to implement stronger emissions reduction policies.
James Rising from the University of Delaware, who led the research, said current warming had already reduced UK welfare by approximately 2% of GDP. Under a high-emissions pathway, this figure could rise to around 10% by 2100, with nearly half of the projected damage linked to catastrophic climate risks and currently underestimated consequences.
The findings add to growing evidence that climate change represents not only an environmental challenge but also a significant long-term economic threat for governments, businesses, and financial institutions worldwide.
Existing Climate Impacts Already Affect Economic Performance
The research highlights that the UK is already experiencing economic consequences associated with rising global temperatures.
According to the study, current warming levels are estimated to have caused economic damages equivalent to between 1% and 4% of GDP. Without stronger climate mitigation measures, these losses could increase dramatically, potentially reaching between 2% and 20% of GDP by 2100.
Researchers noted that the UK provides an important case study because it has extensive economic modelling and climate impact research available, allowing scientists to examine the relationship between temperature increases and economic outcomes in greater detail.
However, the researchers stressed that many existing assessments of climate-related economic damage remain incomplete due to the complexity and uncertainty surrounding future climate scenarios.
Catastrophic Risks Could Drive Future Economic Losses
The study identifies several major factors that could contribute to future economic damage.
Approximately half of the projected losses under severe warming scenarios are expected to come from catastrophic climate impacts, including the melting of polar ice sheets and accelerated sea-level rise.
Such events could create widespread disruption by damaging coastal infrastructure, increasing adaptation costs, and placing additional pressure on public finances.
Researchers also highlighted the importance of “spillover effects” caused by climate impacts beyond the UK’s borders. Climate-related disruption in other countries could affect Britain through reduced international trade, supply chain instability, migration pressures, and declining labour productivity.
As a highly interconnected economy, the UK could experience significant indirect consequences from climate-related disruption occurring elsewhere in the world.
Strong Climate Action Could Reduce Economic Damage
Despite the scale of the risks identified, the research suggests that stronger climate policies could substantially reduce future economic losses.
If global emissions are significantly reduced and temperature increases are limited to below 2°C, climate-related damages in the UK could remain considerably lower, estimated at between 1% and 7% of GDP by the end of the century.
The findings reinforce the importance of international efforts to reduce carbon emissions and accelerate the transition towards cleaner energy systems.
Researchers noted that the economic impact of climate change will depend heavily on future policy decisions, investment strategies, and adaptation measures designed to strengthen resilience against environmental risks.
However, the study acknowledged that it did not fully account for potential adaptation efforts that could help businesses, governments, and communities prepare for climate impacts.
As a result, the researchers said it remains uncertain whether current estimates represent an overstatement or an underestimate of future economic losses.
Financial Institutions Increasing Focus On Climate Risks
The economic risks associated with climate change have become an increasing concern for financial regulators and central banks.
The Bank of England has recently adjusted its approach to account for climate-related risks within its financial framework, following similar measures introduced by the European Central Bank.
Central banks worldwide have increasingly recognised that climate change could create financial instability by affecting asset values, insurance markets, investment decisions, and the resilience of economies.
The Network for Greening the Financial System (NGFS), an international group comprising 143 central banks and financial regulators, has warned that climate-related disasters could reduce global economic growth by up to 3% over the next five years.
The organisation has also projected that climate change could reduce global GDP by as much as 30% by 2100 under current policy approaches, with extreme scenarios suggesting potential losses of up to 50%.
The latest research highlights the growing recognition that climate change is a fundamental economic issue requiring long-term planning and investment.
While environmental consequences such as extreme weather events, rising sea levels, and ecosystem disruption remain major concerns, the economic implications are increasingly shaping government policy discussions.
For the UK, limiting future economic damage will depend on the ability to reduce emissions, strengthen climate resilience, and support investment in sustainable infrastructure.
The study’s findings underline that delaying climate action could create significant financial costs in the future, while stronger mitigation strategies could help protect economic stability and reduce the scale of potential losses.
As governments worldwide continue to balance economic growth with environmental commitments, climate change is expected to remain one of the defining economic challenges of the coming decades.
