Mohammed Khan from PwC suggested the current storms have triggered more non-insured losses when compared to total economic damage. Small businesses contend that the costs of emergency insurance are prohibitively high, coming in at around £20,000 per year with excess of £10,000.
However, as the recent floods have shown the most expensive emergency insurance is still far cheaper than not having cover in the event of floods. Too many small and family-run businesses have lost everything during the latest storm cycles that hit the UK and they will continue to lose as their doors remain closed while repairs are carried out and new stock purchased.
There have been calls for the government to come up with an affordable solution – and they did. Unfortunately, Flood Re only launches in April, so businesses that have waited and hoped for the best have been horribly affected.
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It never rains but it pours
According to the Environment Agency, December was one of the worst periods of extreme weather conditions and flooding for the UK – and it’s not over with weather forecasts predicting heavy rain through Wednesday. Public Service Announcements warning of continued heavy rains and severe flooding will keep the British public aware of the risks and of any changes in the situation.
In many of the flood-hit communities the spirit of camaraderie and good neighbourliness has shone despite the dark clouds, with some business owners describing the “people power as amazing” as help pours in from volunteers.
Emergency services have been deployed in many towns of the flood-ravaged regions – helicopters dropped sandbags in Tadcaster, North Yorkshire when an old stone bridge crumbled into the river. Cumbria and Yorkshire are expected to experience further flooding. Severe flood warnings remain in place, the danger to human life is of major concern to officials and emergency workers.
A fortnight ago river levels in northern England reached record highs, and around 6,700 properties were flooded. Businesses of Hebden Bridge have been hard hit by severe weather patterns since 2012, and on Boxing Day 2015 the town was flooded with 5ft. of heavy rain, a 2ft. increase in water levels from the flooding in 2012.
To make matters worse, many independent businesses that had insurance and claimed for damages after the 2012 storms were unable to get emergency insurance again.
Conservative estimates of the flood damage are around £3 billion, but according to KPMG, the cost of the damage is closer to £6 billion. This estimate is based on the immediate and longer term impact to households, businesses and insurers.
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To make matters gloomier there are widespread concerns that the devastating floods could seriously hinder economic growth. According to Howard Archer, chief economist at IHS Global Insight, the recent floods could shave 0.2 – 0.3% off GDP growth overall in the quarter with issues like businesses not being able to open, loss of agricultural output, people not being able to get to the shops, travel and also the cost to the insurance companies. Archer anticipates the impact to be spread between the fourth quarter of 2015 and the first quarter of 2016. However, there is a silver lining because the repair work which will be carried out during the first quarter of 2016 may well result in an economic boost.