Insurance · 22 February 2016

Flooding: Government urged to find better solutions for small firms

Around 75,000 of small firms at risk of flooding have had an issue getting insurance
Around 75,000 of small firms at risk of flooding have had an issue getting insurance

Small business stakeholders have warned of “flood blight” in response to government comments about relocating small firms in flood-vulnerable areas, suggesting that uprooting small businesses could cause longer-lasting damage to local economies.

In advance of a ministerial roundtable on flood responses hosted by the Department for Environment, Food and Rural Affairs (Defra), the Federation of Small Businesses (FSB) has said that local authorities should tackle flood risks by improving defences and ensuring flood insurance schemes are in place so that businesses don’t need to relocate and can remain central to local community life.

In a statement, FSB vice chairman Sandra Dexter said: “A framework should be put in place to support small firms rather than encouraging them to move. For many businesses at risk from flooding – particularly those with high fixed structural assets like farm and restaurants – relocation is not a solution.”

The statement comes after comments made earlier this month by parliamentary under-secretary of state at Defra, Rory Stewart, suggesting local businesses could consider relocating to avoid flood-related risks.

“We do not want to encourage businesses to locate themselves in flood-vulnerable zones if they have a high fixed structural asset cost,” said Stewart.

In the imminent roundtable, ministers are expected to be asked to back plans to reassure small business owners affected by recent flooding that they should focus on rebuilding rather than moving to lower-risk areas, and that local economic growth should not be limited to low flood-risk areas of the UK.

“Discouraging businesses from these areas could lead to flood blight – a situation where whole communities are damaged because the small business infrastructure that holds them together disappears as quickly as the flood waters recede,” added Dexter.

A sixth of all UK property is located on land where flooding can occur. The FSB recently estimated that around 75,000 smaller businesses at risk of flooding have found it difficult to secure flood insurance.

Recognising the importance of insurance, the FSB has urged the government to work with the insurance sector to find solutions that will enable firms to increase resilience to flood damage. Linking investment in resilience and flood defences with reduced insurance premiums, for example, could be a workable option.

In response to the severe winter flooding experienced across the UK since 2013, the government has provided millions of pounds’ worth of recovery grants to affected businesses. According to the FSB, it would be better and more cost effective for these business owners to adequately protect themselves from flooding with affordable insurance.

Dexter went on to say: “Firms need to adapt and the government must provide workable pathways to help reduce risk and protect against the worst of the financial damage. Flood risk is going to increase in future, with many more communities and businesses facing greater risk of damage or disruption.”

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ABOUT THE EXPERT

Fred Heritage is deputy editor at Business Advice. He has a BA in politics and international relations from the University of Kent and an MA in international conflict from Kings College London. He previously worked as a reporter at Global Trade Review magazine.

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