Devastating wildfires and costs for France and Spain

French President Emmanuel Macron has held a crisis meeting focusing on uncontrolled wildfires that have forced more than 250,000 people to flee their homes, amid a first glimmer of hope that the spread of the largest blaze may have slowed.

Susannah Streeter, chief investment strategist at Wealth Club, said: “While some heat is being taken out of energy prices, there’s no change in temperature for emergency services fighting the ferocious fires raging, particularly in France and Spain.

“The devastating wildfires are set to leave a deep economic as well as environmental scar.

“As firefighters battle to contain the blazes, businesses are also counting the cost, as immediate harm is being felt across tourism, agriculture and local economies.

“But the financial toll is set to mount rapidly through soaring insurance claims, disrupted transport links and supply chains, and a hit to consumer spending in some of Europe’s most popular holiday destinations.

“The timing could not be much worse given it’s at the height of the summer getaway season, and prolonged disruption and poor air quality threaten to take a big bite out of tourism, a cornerstone of both the French and Spanish economies.

“Hotels, restaurants and attractions in affected regions face cancellations and lost trade during what would normally be their busiest weeks of the year.

“Tourists are being urged to stay away from the Gironde in particular right now, as key routes to the beaches remain closed while the fight to contain the dramatic blazes continue.

“The flames are also threatening some of Europe’s most productive agricultural land. Vineyards in particular are at risk in Gironde, home to the famous Medoc wine route.

“While for now the flames are concentrated to the western side of the peninsula, even if vineyards escape the flames, they can still suffer from smoke taint, which can affect the quality and value of grapes.

“France’s public finances will also come under fresh strain, given the government faces the prospect of another hefty bill for emergency services, rebuilding infrastructure and supporting devastated communities at a time when it is already under pressure to rein in its budget deficit.

“Spain faces a similar challenge, with the major fires around Madrid adding another unexpected burden to public finances, forcing more spending on emergency response, reconstruction and longer-term climate resilience.

“As extreme weather events become more frequent and more destructive, governments and businesses will have to dig deep, diverting money from investment and growth towards recovery and rebuilding.

“However, for infrastructure companies and renewable energy developers, the intensifying focus on climate risks could create a powerful tailwind.

“It’s forcing governments to rethink how resilient their economies are, accelerating spending on everything from fire and flood defences and upgraded power networks to more efficient water systems and climate-proof infrastructure.”