HSBC is ready - but could everyone else cope with an $800bn flu pandemic?

When Franklin D Roosevelt famously said "The only thing we have to fear is fear itself" he highlighted an important economic truth. The main harm to the world economy from crises often comes from the uncertainty and speculation that accompanies them rather than the events themselves.

In which case HSBC, the UK-based global bank, certainly did its bit to add to panic over the impact of bird flu with a warning that half its staff could fall ill or be absent from work in the case of a pandemic.

The bank, which has major operations across Asia, stressed this was a "worst case scenario" but admitted it was double the contingency level advised by the World Health Organisation. HSBC, which has 235,000 employees, is assuming some will fall ill, some will care for family members and others will be prevented from travelling by government bans or work from home to avoid infection.

"Clearly we have to take any major health threat extremely seriously," Karen Ng, a spokeswoman for HSBC, said. "Fortunately, our scale means we have the necessary resources to maintain a reasonable level of service even in the face of very serious threats."

Although it is almost certain the 50 per cent figure is boosted by a heavier in impact in, for example, Hong Kong, than the UK, the bank declined to give regional breakdowns.

Where HSBC treads, thousands of smaller businesses are likely to follow in terms of making contingency plans, because sooner or later bird flu will hit the UK's business world.

Some firms have started supplying staff travelling to Asia and other affected areas with anti-viral drugs effective against the deadly H5N1 strain. Several businesses are preparing plans for how and when staff travel should be limited.

As Roosevelt's quote indicates, there are two issues for economists - the direct cost from the outbreak, and the impact from the wider uncertainty and the cost of taking measures to prevent an outbreak.

The September 11 attacks had a direct cost of $27bn (£15m) according to the US Navy's Centre for Contemporary Conflict, a figure dwarfed by the indirect impact, estimated as being $500bn. The Millennium Bug is an example of a crisis that triggered billions of pounds of expenditure but never materialised.

In the case of bird flu, the fear will arrive before the virus. "It's one to watch but there's no need to panic," says Julian Jessop, the chief international economist at Capital Economics, a London-based consultancy. "You have to be a young child or an old person to have an outside chance of catching it."

So far 76 people are reported to have died from bird flu, out of a global population of 6 billion, since October 2003. But Mr Jessop acknowledges that as the disease moves closer to Europe, the greater the psychological impact.

The outbreak of bird flu among humans in the autumn was confined to China and South-east Asian nations such as Thailand, Cambodia and Indonesia.

But on New Year's Day a teenage Turkish boy died of the H5N1 strain. By yesterday 15 had tested positive for the strain, two had died, and the number of patients hospitalised with symptoms climbed to 70.

Bulgaria launched a national bird flu prevention campaign amid fears that outbreaks in Turkey will breach its borders.Japan says up to 77 people may have been infected with a mild form of the disease - what could be the world's first case of human infection of the H5N2 virus.

The real issue is what happens when a human case is confirmed in the UK. Last year reports that a parrot had died from the virus while in quarantine triggered media panic.

"I don't claim to be an expert on migratory birds but I'm pretty sure it's inevitable it will crop up in the UK. That could have a knock-on effect on tourism because Americans and others stay away," Mr Jessop said.

So far the economic and market impact in other countries has been limited. Thailand's stock market has risen more than 9 per cent over the past 12 months, despite 14 deaths in the country from bird flu. But shares in the German travel companies TUI and Lufthansa fell yesterday after the latest bird flu news. Shares in the insurance companies Munich Re and Allianz also dropped. But hedge funds are reported to have taken "long" positions in life assurers on the basis that a human pandemic would cut their pensions liabilities.

The World Bank estimates a human flu epidemic could kill 200,000 people and wipe $800bn off economic growth. Experts such as Peter Power, the managing director of the crisis management specialists Visor Consultants, say it is essential that businesses take the threat seriously. "We are beginning to see companies coming out a bit more on this issue - and quite rightly," Mr Power said. "This is broadly similar to terrorism."

He said that companies should include a pandemic under the category of business continuity - the management term for managing the risks to the smooth running of an operation in event of a disruption. But he insisted this had to go beyond just assuming, for instance, that its key employees would be able to work from home.

"All the research we have done shows working from home can be stressful when someone is trying to work on a laptop on the kitchen table with the children running around and without a proper modem. Contingency plans that have not been tested cannot be trusted.."

UK Resilience, a unit run from the Cabinet Office, highlights a five-point plan proposed by the Business Continuity Institute that includes assessing the risks and developing a response. The CBI, the employers group, also said it is vital companies put proper contingency plans in place.

Not all companies are following the example of HSBC. A spokeswoman for Hilton Group, the hotelier, said: "It's not something you can plan for. Our main focus is to keep applying stringent health and safety policies."

Planning ahead

HBOS

Like most financial groups, HBOS has a detailed contingency plan should a pandemic reach Britain. The country's fifth-biggest bank would combat widespread absences among its workforce by pooling staff to make sure at least one branch in any region remained open. It would provide travel to branches for staff and allow some to work from home. Back-office systems and call centres would be combined to maintain a service for customers.

MARKS & SPENCER

The retailer has "contingency plans in place" in the event of a pandemic hitting the UK. It says it is monitoring the poultry situation with the company's suppliers. The scare did not put consumers off their Christmas lunch, the chief executive, Stuart Rose, said yesterday.

PRUDENTIAL

The UK's second-largest insurer, says it has contingency plans in place for any major shock to its business, covering the fallout from a pandemic. It says it keeps a close eye on levels of sickness and absenteeism, and ensures all members of key personnel are set up to work from home. This enables it to almost completely close down the office if people have to stay quarantined. Pru says it has reinsurance in place to cover potential debts. Although it does not yet have any specific contingencies in place for bird flu, it says it is reviewing the situation.

CBI

The employers' federation said: "We have got a comprehensive continuity plan in place which deals with a variety of scenarios." He said he did not know if that included a specific plan for a bird flu pandemic but said it was monitoring all the current advice.

DOMINO'S PIZZA

Britain's largest home- delivery pizza chain said it could make more money if there was a flu pandemic because people might be afraid to go out and would order pizza from home. It did not comment on contingency plans to deal with staff absenteeism. Regarding food safety, a spokesman said: "It's not an issue, because all the chicken on the toppings is cooked at source. Any form of avian flu would be killed at the point of production."