A company earning EUR 1 million in annual revenues could lose around EUR 70,000 for every 1 degree C increase in the average summer temperature, according to research by Slovakia’s central bank.
The finding comes as businesses increasingly face costs from extreme heat that go well beyond employees simply working more slowly.
Researchers at the National Bank of Slovakia (NBS) compared meteorological records with company financial data for 2013 to 2023. They found that a 1 degree C increase in average summer temperatures was associated with an almost 7% fall in revenues, alongside declines in earnings and profits.
Agriculture, construction, manufacturing and transport are particularly vulnerable. Together, these sectors account for around 40% of the value added by Slovakia’s economy.
Outdoor work may have to be shifted to early mornings, employees require more breaks and machinery can overheat. Businesses also face additional cooling costs and disruptions to normal production.
“At first glance, it might seem that the problem is mainly lower worker productivity,” NBS analysts Roman Vasil and Vladimir Otrachshenko wrote. “Our results, however, show that the consequences of heat go further.”
The researchers found that high temperatures could reduce efficiency even when companies maintained the same workforce and kept production lines operating.
Recent problems on Slovakia’s transport infrastructure illustrate the physical effects of extreme heat, the daily SME reports. High temperatures were linked to two tram derailments in Bratislava earlier this summer, while the country’s state railway infrastructure operator has reported buckled tracks and heat-related damage to a platform.
Despite the financial impact, relatively few companies appear to be investing proactively in measures such as better cooling or technologies designed to withstand higher temperatures.
Heat-sensitive businesses are more likely to cut costs and take out short-term loans to cover summer losses, according to the NBS research.
“This suggests that many businesses respond to heat only once they experience its negative consequences themselves,” the analysts said.
Agriculture is already confronting that problem. Slovakia’s main farming association is monitoring damage from this year’s drought, while livestock farmers estimate that drought and lower milk revenues could leave primary milk production with losses exceeding EUR 95 million.
Animal feed has meanwhile become scarce in parts of Europe. Hay prices in neighbouring Czechia have reportedly risen from around EUR 20-EUR 25 a bale last year to as much as EUR 103, with supplies being brought in from Poland. French buyers have also reportedly looked into buying surplus hay from Slovakia, according to SME.
The Agriculture Ministry recently announced eight measures to support farmers, including access from mid-September to advance payments from a EUR 200-million support package.
The NBS warns that reacting only after losses occur will become increasingly difficult as extreme heat and drought become more frequent.
Europe is warming at roughly twice the global average, while Slovakia is also facing growing risks from drought, floods and extreme rainfall.
“With temperatures, companies’ losses will also increase,” the analysts wrote.
They argue that helping businesses invest in heat-resistant production, adaptation technology and protection for particularly exposed industries could reduce the future cost to the Slovak economy. (The Slovak Spectartor)