Extreme weather events threaten small businesses
The recent flooding events in Cumbria and elsewhere have caused a lot of personal hardship. TV screens were filled with images of families and individuals hit hard by damage to property and personal belongings, but many small businesses have felt the impact too.
In response to the scenes of devastation, the Government announced a £51 million emergency aid package for those affected. According to the minister for small business, Anna Soubry, only £5 million of this is earmarked for businesses.
That works out to around £2,500 for each business affected, but data supplied by the Federation of Small Businesses (FSB) suggests that the average cost of a serious adverse weather event to SMEs over the past three years was around £7,000, nearly three times more than the amount of emergency funding due.
An event like the flooding in Cumbria is almost certain to leave casualties in the shape of small businesses that fail to reopen, or that struggle on for a while but never manage to recoup their losses. According to the Association of British Insurers, as many as four in five small firms that are forced to close for a substantial period because of an event such as flooding cease trading altogether within 18 months.
Businesses that have been flooded once may be prone to suffering from repeat flooding as extreme weather events look set to become more common. Many are also struggling to find essential insurance to help them recover their losses. The FSB estimates that 10% of small businesses may be at risk of flooding but warns that 50,000 struggle to obtain adequate insurance.
The Flood Re scheme brokered between the Government and insurers is supposed to ensure that all householders can access appropriate insurance. Small businesses were excluded from the deal however and some small businesses are either turned down altogether or offered unaffordable premiums. Businesses that are struggling may benefit from the help and advice provided by business recovery professionals and may need to think about restructuring or following a business rescue plan.
By Phil Smith
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