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Join today<\/a><\/p>\n \n Already a member? This year\u2019s El Ni\u00f1o, the natural weather phenomenon that drives variations in temperature and winds across the Pacific, has prompted the UK government<\/a> to pledge \u00a315 million to help vulnerable countries such as Malawi, Kenya and Zambia prepare for droughts, floods and food shortages.<\/p>\n But the UK\u2019s economic response will go beyond international aid. The Bank of England<\/a> has identified El Ni\u00f1o as one of the key factors that could increase food inflation in 2027.<\/p>\n This connection between a climate pattern in the Pacific Ocean<\/a> and supermarket prices (and possibly interest rates) in the UK is a clear demonstration of how extreme weather is an economic issue as well as an environmental one.<\/p>\n Environmentally speaking, the effects of El Ni\u00f1o can be devastating, bringing severe drought to some regions and severe flooding to others. And a stronger El Ni\u00f1o has a larger influence on global weather patterns than a weaker one.<\/p>\n This year\u2019s event, already the strongest on record, is expected to peak later this year, and could cause global economic problems if it has a negative effect on major agricultural producers or transport routes.<\/p>\n Poor harvests can cause international agricultural prices to rise. Higher energy costs can simultaneously make fertiliser, processing and transportation more expensive.<\/p>\n The UK is particularly exposed to climate-related disruptions because of the international nature of its food supply (about 42% of its food is imported).<\/p>\n But these effects are rarely immediate. Many food manufacturers and retailers use risk management techniques to limit their exposure to sudden changes in prices, which can initially shield consumers from international shocks.<\/p>\n The Bank of England made this point explicitly, saying the potential effects of El Ni\u00f1o are likely to emerge gradually, rather than causing widespread food shortages or dramatic price rises.<\/p>\n And the central bank of Spain found that the effect of El Ni\u00f1o varies according to commodity, time period and agricultural policy.<\/p>\n For the most part, disasters with regard to food supply can be avoided with the right kind of human intervention.<\/p>\n Businesses adapt. Farmers change production decisions. Trade shifts towards alternative suppliers. Governments intervene.<\/p>\n El Ni\u00f1o should therefore be viewed as a potential source of risk and volatility, rather than as a confident prediction that UK food prices must rise.<\/p>\n Everything everywhere<\/p>\n But what happens when several external shocks occur together?<\/p>\n The Bank of England has considered this possibility too, warning that a strong El Ni\u00f1o alongside renewed energy disruption could put much greater pressure on UK food prices.<\/p>\n If extreme weather also affects major shipping routes, the effects on import prices could become stronger still. This is where a climate event potentially becomes a monetary policy problem, as central banks treat El Ni\u00f1o as a factor that may cause them to raise interest rates.<\/p>\n Narmin Nahidi is an Assistant Professor in Finance at the University of Exeter.<\/p>\n This article is republished from The Conversation<\/a> under a Creative Commons licence. Read the original article<\/a>.<\/p>\n
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The effects of El Ni\u00f1o can bring severe drought to some regions and severe flooding to others (PA Wire)<\/p>\n![\"A](\"https:\/\/www.newsbeep.com\/uk\/wp-content\/uploads\/2026\/10\/Screenshot-2026-10-20-at-14-50-53.png\")
A global heat map illustrates areas of sea warming caused by the El Ni\u00f1o on 18 October (NOAA\/El Nino live)<\/p>\n
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Many food manufacturers and retailers use risk management techniques to limit their exposure to sudden changes in prices (Getty)<\/p>\n