What Europe's heatwave is costing now, and what may come next

Immediate costs in power markets

Europe’s late-June heatwave is already producing a visible economic bill in electricity markets. Prices have jumped to multi-year highs in parts of the continent as demand rises and some power plants lose efficiency in the heat.

In Great Britain, the National Energy System Operator said it needed extra electricity for Friday evening peak demand and paid about £200 per megawatt-hour to import power from the continent. Neso said the system was under “tight margins” because of extremely high temperatures across Britain and continental Europe, although it said supply was not at immediate risk.

Reporting on June 23 put German electricity prices above about €545 per megawatt-hour and French prices above about €268 per megawatt-hour. The numbers show how quickly a weather event can feed through to wholesale power costs when demand and supply are both under pressure.

The heat has also hit generation itself. Hot weather reduced output from some gas plants in Britain, while nuclear plants in France faced cooling constraints because river water was too warm to absorb as much heat as usual.

Disruption across the economy

The first economic effects are not limited to power bills. In France, reporting from Le Monde described disruption to work, schooling, transport and construction as temperatures climbed.

Those are among the sectors economists say are most exposed. Construction, agriculture, manufacturing, retail and hospitality all rely heavily on workers who cannot easily avoid hot conditions, which makes them vulnerable to lost hours and slower output during extreme heat.

Oxford Economics estimated that a four-day heatwave could reduce quarterly labour productivity growth by about 1.5 percentage points in the UK and by as much as 2 percentage points in the rest of western Europe. That matters because even a short spell of extreme heat can hit output before the broader economy has time to adapt.

Why economists see a bigger risk ahead

The larger concern is not just this week’s disruption, but what repeated heatwaves could do over time. Allianz researchers described extreme heat as a structural economic risk and projected that France could lose about $240 billion in output between 2026 and 2030 under a stress scenario, with Italy and Spain also heavily exposed.

Banque de France has said the short-term effects of heat are ambiguous, but the medium- and long-term effects are clearly negative. That gap reflects the difference between temporary disruption and a recurring drag on productivity, investment and infrastructure.

Adaptation and the next phase

Some of the response is already shifting from emergency management to adaptation. EDF said it would allocate €80 million to equip schools, nurseries and daycare centres with cooling systems to help them cope better with future heatwaves.

That kind of spending is likely to grow if severe heat becomes more common. Governments, utilities and companies are being pushed to think about building design, cooling, transport resilience and grid flexibility, not just short-term crisis response.

What to watch next

The immediate questions are whether grid operators in Britain and continental Europe need further balancing actions as temperatures change, and whether more outages or transport disruptions emerge as the heatwave shifts east.

It is also unclear how much of the power-price spike will be passed through to household and business bills. Economists and central banks are likely to refine their estimates of the labour-market and GDP impact once the heat subsides.

For now, the story is less about a single emergency than a cost pattern that is becoming easier to measure. The bills are showing up first in power markets and working hours, but the bigger economic impact may be the recurring price of doing business in a hotter Europe.