British aid workers have returned from the frontlines of a forgotten war with harrowing accounts: soldiers describing neighbours shot in the head, civilians living under constant shelling in a lakeside city. The reports, filed from field hospitals and refugee camps, paint a picture of trauma that no balance sheet can capture. Yet as the City of London goes about its business, the cost of this conflict is already being tallied in ways the markets cannot ignore.
The human capital destroyed in this war is a deadweight loss to the global economy. Every death, every displaced family, represents years of potential output erased. The British aid workers, trained to document psychological wounds as precisely as physical ones, estimate thousands of cases of PTSD among survivors. That is a future healthcare liability. It is also a drag on productivity. Traumatised populations do not work efficiently. They do not invest. They do not consume. They merely survive.
But the City’s attention has been elsewhere: on inflation, on gilt yields, on the next move from Threadneedle Street. The Bank of England has held rates, but the true risk premium is widening in ways that no central bank can control. The budget for foreign aid has been slashed, yet the Exchequer will still foot the bill for humanitarian relief. A government already straining under the weight of its own spending must now write cheques for a crisis that is not of its making. Fiscal reality is brutal. There is no such thing as a free lunch, and there is no such thing as a cost-free war.
Markets hate uncertainty. They abhor volatility. But what they fear most is the unknown unknown. A conflict in a lakeside city, far from the major trade routes, has minimal direct impact on FTSE 100 earnings. Yet the indirect effects compound. Supply chains fracture. Energy prices spike. Food inflation feeds into the consumer price index. The Bank of England’s job becomes harder. The bond market takes note. The yield curve steepens, and the cost of government borrowing rises. It is a tax on the prudent. A surcharge on the taxpayer.
The soldiers’ trauma is a microcosm. An economy propped up by cheap labour and cheap credit cannot absorb an endless stream of shocks. The aid workers’ reports are a reminder that the true cost of war is not the initial government expenditure. It is the lost decade that follows. The forgone growth. The deferred investment. The deadweight of human misery that no quantitative easing can lift.
We may be living in a world of low unemployment and resilient GDP, but beneath the surface, the fiscal foundations are cracking. The British aid workers see it in the eyes of the children they treat. I see it in the footnotes of the Treasury’s projections. The soldier’s neighbour was shot in the head. The markets will not weep. But they will pay.
