Swine Flu - What is the risk to your supply chains?

Swine Flu – As WHO raises alert to pandemic level, what risks to global supply chain?

The World Health Organisation (WHO) has recently raised its Swine Flu pandemic alert to phase 6, meaning a pandemic is underway.

When the WHO raised its alert to phase 4 in April this year, the media heralded £3 trillion in global losses and disaster in the supply chain should the disease reach pandemic level.

While figures are fluctuating daily, the latest numbers show 52,000 cases of Swine Flu have been recorded in 99 countries worldwide, with 230 deaths across the globe. However, the pandemic level indicated by the WHO reflects the geographical spread of the disease, not its severity.

Here in the UK, there have been 2905 confirmed cases. One woman in Scotland has died, although doctors have said she also had other underlying health conditions. Very few of the cases have been severe, with the majority of those affected not requiring hospital treatment.

So in reality, now we find ourselves in the midst of a global pandemic, what is the risk to the global supply network? Mexico itself, and the pork and travel industries are likely to suffer. These effects are likely to be significant, but temporary. Outside of these directly affected industries, however, there should only be a major impact on trade if Mexico’s borders were to close completely. As even at the height of the 2003 Severe Acute Respiratory Syndrome (SARS) outbreak health officials didn’t close Asian borders, this is unlikely to happen.

The £3 trillion losses forecast by the media are unlikely to happen. If we look at the study by the World Bank in 2008 that these figures were derived from in more detail, we can see there were actually 3 different scenarios described.

The first ‘mild’ scenario is modelled on the 1968/1969 Hong Flu pandemic that killed 1 million people worldwide. If this level were repeated with Swine Flu, they estimate global GDP would be reduced by 0.7%, costing $400 billion.

The second ‘moderate’ scenario is modelled on the 1957 Asian flu that caused 2 million deaths worldwide. If this were repeated today, they forecast a 2% loss in global GDP, costing $1.2 trillion.



The final ‘severe’ scenario is based on the 1918 influenza pandemic that killed over 50 million people worldwide. If this mortality rate were repeated with the current outbreak of swine flu, only then do they forecast a 5% loss, costing £3 trillion.

To get this into perspective, so far we have seen 230 deaths from Swine Flu across the globe. This equates to 0.02% of the number of deaths referred to in the ‘mild’ scenario described by the study, and 0.0005% of number of deaths the ‘severe’ scenario that the £3 trillion losses were based on.

It is noteworthy that in the World Bank study, as we move from the mild to severe models, we also move further back in time to find examples to base them on. The ‘severe’ model is based on an example of a pandemic that occurred almost 100 years ago.

In the modern day, swine flu is unlikely to reach the 50 million deaths the $3 trillion global losses are based on. Since the SARS outbreak in 2003, contingency planning and technology have significantly improved around the world, and sophisticated monitoring systems are already in place. Also, the flu virus is treatable. The 2 major flu drugs, Tamiflu and Relenza, are effective in combating the illness in all but the late stages of the disease.

These factors, combined with the borders of Mexico being unlikely to close, mean the impact on the global supply chain is likely to be negligible. While these numbers will be of little consolation to the families of those who are struck down by the virus, it seems the headlines were scaremongering just a little. This just maybe why the media have gone a little quiet on the economic effects of Swine Flu.

Sally Pearce 2009
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