The looters' legacy: Misery – and insurance claims of over £200m

Insurers, banks – even the taxman – pledge help for retailers wrecked by last week's violence, but it will be a long haul

Kanagaratnam Paramanathan has run his jewellery and sari shop, JK Gold House & Fashion House, on Croydon's London Road for eight years, sourcing gold and fabrics from India and working in his shop and workshop to make the intricate saris that retail for between £100 and £400.

But on Monday night he saw his business pulled apart by looters – and hundreds of delicately embellished and expensive saris and a great deal of gold jewellery disappear into the night.

Now he is attempting to put his business back together and has called on the services of Paul Lawrence, a partner at insurance adviser Harris Balcombe, to help him structure his insurance claim.

Mr Lawrence has been working 14 hours a day since last Sunday, when he took the first desperate call from a businessman in Tottenham needing help on where to start with his insurance claim for damage caused by looters. He has since travelled to businesses across the capital, from Hackney to Peckham and Croydon.

The Association of British Insurers expects claims to top £200m, but Mr Lawrence said it could be more.

"This is the worst I have seen in 30 years in business," he said, speaking in Croydon, outside the remains of JK Gold House & Fashion House. "It was just so widespread. We will see the business-interruption claims continue for weeks, and overall claims could run into a few hundred million."

Over 48,400 shops, pubs, restaurants and clubs have been directly or indirectly affected by the disorder, according to research by Local Data Company.

Mr Paramanathan also owns a restaurant and another business in Croydon. The Sri Lankan businessman set up from scratch on arriving from Africa in 1986, but lost almost everything in a few hours on Monday night.

Not only was his expensive stock looted but his till system, his shelves and store fixtures were ransacked, and his laptop with all his banking details and inventory records are gone. Even his chequebooks are being fraudulently used.

He was forced out of his shop by violence on the street outside in the early evening on Monday. He locked up, pulled down the shutter and took his family to a first-floor flat. He ventured out at around 11pm and found more than 20 youths ransacking the shop. In fear for his safety, he hid until around midnight when he finally saw the first signs of police on the London Road. But by this time hundreds of thousands of pounds worth of goods had been taken.

Mr Paramanathan said: "Cameron should have got the Army in. I had to hide as I saw boys steal the Domino's Pizza delivery bikes from the staff and use them to transport goods away from our shops. When I came back the next day at 10am everything had been taken. I have broken glass cabinets, windows broken, my CCTV is gone, I can't even open my restaurant as the road has been closed. I had no help. I heard that police said they were in the area but protecting the shopping centre. We were left to suffer."

Last Thursday, the Government took steps to alleviate some of the pain for businesses by allowing those affected to make claims for compensation under the Riot Damages Act 1886, which allows those even without insurance to claim for compensation for lost goods and property.

There has been a temporary suspension of business rates and National Insurance for those affected, together with flexibility in making VAT returns, and an extension for making claims from 14 to 42 days.

Mr Lawrence said: "The moves by government are extremely positive for those affected, but those claiming will have to ensure they stick to the exact processes of how to make their claims and should make sure compensation claims on the Riot Damages Act 1886 are filled in correctly to not make their own policies invalid. It is extremely complicated."

Those claiming compensation under the Riot Damages Act can claim for property damage, lost stock and lost business, but under indemnity cover, rather than "new for old". This means any claim will be assessed on the value of goods at the time they were lost, not on the cost of replacing them with new goods. The result is that the amount businesses will be able to claim will often be well below the actual cost of replacement.

Last Friday, Mr Lawrence spent all morning with Mr Paramanathan going through his inventory, helping him make his claim through the Riot Damages Act and his own insurance policy. But claims like Mr Paramanathan's can take days to compile, and then the loss adjusters will spend many days on the claim and it will be months before Mr Paramanathan can trade again.

Meanwhile, Britain's banks have said they would help riot-affected businesses by extending loans and offering repayment holidays. The British Bankers' Association said its members would "sympathetically and sensitively" consider the problems of businesses.

But Mr Paramanathan's problems seem to have been exacerbated rather than eased by his bank, Barclays. After telephoning three times to stop cheques that had been stolen, he realised that cheques were still being presented and money being taken from his account. He called again and was told he had insufficient funds.

"I have had no help from Barclays," he said. "They said they would visit me and they didn't turn up. I called again and they said they will now come on Tuesday. I have a £3,000 loan repayment due but because I have no income this will be difficult. My restaurant is closed and I will still need to pay my rent as my landlord has also been badly affected. One of his other premises was burnt down."

Mr Lawrence said: "The people I am meeting are distraught. In many cases they have lost everything."

Mr Lawrence and his team have many years' experience in this kind of problem – they advised online retailer ASOS on its £4m-plus insurance claim when its Hemel Hempstead warehouse was damaged by the explosion at the Buncefield fuel depot in 2005.

In last week's riots, Harris Balcombe has found the most common premises to be hit were sports, mobile-phone, electrical and fashion outlets.

But the damage to UK retailers, large and small, will take longer to repair than the time it takes to process the average insurance claim. Many of the high streets looted were already in decline and the riots have done nothing to encourage people back to their local shops.

The British Council of Shopping Centres has called on the Government to support the beleaguered towns and cities across the country. It sent a letter to Mark Prisk, minister at the Department for Business, Innovation and Skills, and called for the immediate introduction of measures to revive affected high streets.

The British Retail Consortium has stressed the need for "urgent and substantial action". Its director general, Stephen Robertson, said: "We stand ready to work with the Government on these matters, as well as the important work that will emerge from the Portas review, in order to make Britain's high streets great places for retail once more."

The retail guru Mary Portas is embarking on a government-backed review of the high street as part of a bid to halt its decline.

Our high streets, and retailers such as Mr Paramanathan, are in dire need of any help they can get.

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