A new report by Professor David Crichton, of Benfield Hazard Research Centre has highlighted the significant threat posed by climate change to UK small businesses.
According to AXA, which commissioned the report, the average claim for business interruption soared by almost 60% in the four years up to 2005, when it reached £35,000.
AXA's own research indicates that 90% of businesses are under-insured, with one in three having no business interruption cover to pay wages and other costs if the business cannot operate.
The Crichton report reveals that just 8% of UK businesses have received any form of flood risk warning and that while most businesses are aware of climate change, only 26% see it as a real threat to them, with 46% believing climate change is blown out of all proportion.
Both the Conservatives and Liberal Democrats have welcomed the report and its findings and agree it highlights the need for urgent Government and business action to ensure that companies are adequately protected from the risks posed by climate change.
Peter Ainsworth MP, Conservative Shadow Secretary of State for Environment, Food and Rural Affairs, said: “This is a worthwhile and well-researched report, which scuppers the myth that tackling climate change is bad for business.
“The insurance industry can help SMEs recognise the obligations posed by climate change. However, it is up the Government to make clear the opportunities.
“The insurance industry is at the frontline of the battle against climate change. If we weigh up the environmental, social and economic costs of doing nothing about climate change, it becomes clear that we have no choice but to take action now.”
Chris Huhne MP, Liberal Democrat Shadow Secretary for the Environment and Rural Affairs, said: "This report sets out starkly and persuasively the sharp rise in costs that will be imposed on small businesses over the next decades if we do not tackle climate change.
The report points to government research figures showing that average flood damages for UK businesses could increase to between £5.5bn and £42bn each year by 2080 and that around a third of these losses would be from urban drainage problems.
He suggests that many small businesses in flood hazard areas will suffer future flood damage which threatens their survival particularly if they do not have adequate insurance.
On the back of the report, Crichton has called on the Government and local government to have a closer dialogue with the insurance industry on flood hazard, exposure and vulnerability issues.
Crichton said: “Recent research reports show we are reaching a 'tipping point' with climate change. Even if global agreement can be reached on reducing greenhouse gas emissions, it is too late to prevent a rapid growth in extreme weather and sea level rise this century. This means that we have to adapt our buildings and cities now for the climate change impacts which are projected.”
Peter Hubbard, Chief Executive of AXA Insurance UK said: “SMEs are the backbone of our economy, employing some 12 million people. Climate change poses a real threat to their existence and this is a problem that to a great extent has been overlooked. The insurance industry, government and other relevant parties must work much more closely together to ensure that businesses understand the scale of the threat posed to them, and what actions they can take to reduce these risks.”
Crichton added: “In the meantime there are grounds for optimism. The insurance industry and WWF are already doing effective work on issues such as sustainable flood management and advising many local authorities on planning issues and sustainable drainage systems. There is a worry, however that sometimes new environmental regulations may be misused as an excuse to avoid restoring wetlands and rivers to cope with the increased severe rainfall events expected in the future.”
In addressing these issues, Professor Crichton has made the following recommendations:
