Prime Minister Andy Burnham is due to chair the government's emergency response committee on Wednesday as Britain faces its fifth heatwave of the year. Temperatures are expected to reach about 37°C across parts of southern and eastern England and the Midlands from Thursday, according to the Met Office.
The scale of the drought has moved the issue beyond a short-term weather event. The Environment Agency has declared more than 70% of England to be in drought, while government figures indicate that about 45 million people are living in drought-hit areas and 27 million face restrictions on water use.
England and Wales also recorded their driest July in 190 years, according to the Met Office. Fire chiefs have responded to 966 wildfires across England and Wales this year, including 185 during the first ten days of August.
The economic consequences are already becoming clearer. Farmers are warning of lower production, while prolonged pressure on water supplies could increase operating risks for businesses dependent on reliable access to water.
Agriculture is particularly exposed because drought can reduce crop yields, increase irrigation requirements and raise input costs. The effects can then spread through food supply chains, affecting processors, retailers and households.
Water companies are also under pressure to maintain supply while managing restrictions and infrastructure resilience. Prolonged dry conditions can increase the need for investment in reservoirs, leakage reduction, treatment capacity and alternative sources.
The government's emergency response therefore has implications for public finance as well as environmental policy. Greater spending may be required to manage immediate risks while longer-term investment becomes necessary to strengthen resilience against recurring extreme weather.
The government has said its response will focus on protecting communities, water supplies, farming and the environment.
For businesses and investors, the next indicators will be rainfall levels, water restrictions, agricultural output, wildfire activity and government decisions on infrastructure investment.
The immediate challenge is managing the current drought. The longer-term question is whether Britain's infrastructure and water systems are being adapted quickly enough for a climate in which extreme heat and prolonged dry periods may become more frequent.
