Sinking feeling for small businesses excluded from flood insurance scheme

posted by 6 years ago in News

Small business leaders have expressed anger that they are to be exempt from financial support by a new scheme called ‘Flood Re’ which comes into force in April.

It’s after businesses in Northern England, Wales and Scotland were battered by Storm Desmond, Eva and Frank over the last few months leaving owners of small firms with more than their fair share of devastation to clean up and repair.

So what are the costs to small businesses?

The figure across the UK could hit almost £6 billion according to accountancy firm KPMG. They’ve highlighted that about £1 billion of this amount is being borne by those with no insurance or policies which will not pay out fully.

The aim of the not-for-profit Flood Re reinsurance scheme is to ensure that around half a million households in high-risk areas can get affordable cover. An annual levy of £180 million will be paid by the insurance industry to use the scheme. However, there is dismay that this assistance is not being extended to support owners of small enterprises hit by the floods.

The Federation of Small Businesses (FSB) are urging the Government and insurers to extend the scope of Flood Re to cover small firms.

According to FSB research published in July 2015, 9 per cent of smaller businesses in flood risk areas have reported difficulties accessing affordable flood insurance and 6 per cent state that they’ve been refused cover. These figures equate to around 75 thousand smaller businesses across the UK struggling to access affordable insurance and 50 thousand being refused.

John Allan, National Chairman for the Federation of Small Businesses, said:

“This is a longstanding issue. As Ministers and the insurance industry plan to bring in a new Flood Re scheme to back those refused cover, FSB has expressed its deep concern to Ministers and the insurance industry that the smallest businesses will now be excluded. Much like households, micro-businesses are those least able to negotiate competitive insurance. When the new scheme is introduced in April 2016, FSB now calls for the smallest businesses to be included.”

Earlier this week Small Business Minister Anna Soubry MP visited Lancashire to speak with local business owners affected by flooding from Storm Eva. Last week the Minister announced that up to £6 million is available to provide immediate support to businesses following the Boxing Day deluge – that’s on top of £5 million pledged after storm Desmond hit. Grants to support survival and recovery for non-farming enterprises (with up to 250 employees) can be applied for and farming assistance is being arranged separately through Defra. In addition to this growth hub advisers are being made available to offer free help drawing up action plans and assisting small business owners to put together funding applications. They also plan to make payments per property for flood defence work.

Head of Philip Brennan says it’s crucial that owners of small firms make sure that they’re covered for all eventualities,

“It can take years to build a successful business so to see the working environment you have cultivated suddenly destroyed by extreme weather is devastating. I can’t stress enough how important it is for owners of small firms to make sure that they have the right insurance package in place and to make themselves familiar with any additional support they may be eligible for. There are some very competitive deals on insurance and I would encourage business owners to use our site to compare them and find the best quotes around.”

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