Up to one-third of shops and offices affected by the explosion may receive only limited compensation because they did not have the insurance cover needed in the event of terrorist attack.
Meanwhile, businesses throughout Britain may be called on to pay a levy of at least pounds 100m in extra insurance premiums to Pool Re, the Government-backed re-insurer set up in the aftermath of the 1992 Baltic Exchange bombing in the City of London.
Alan James, associate director of Harris Claims Group, a firm of assessors, said: "The effect could be absolutely devastating. It could be disastrous for the small-business community. It may indeed force some out of business."
Some of those worst affected by damage and loss of business may never re-open, while hundreds of jobs may be lost as insurers demand that even shopkeepers with cover "mitigate their losses".
Details of the heavy costs to be borne by Britain's businesses came as police investigators and insurance assessors both began their separate tasks of sifting through the rubble of Saturday's explosion near the Arndale Centre, Manchester's shopping mall.
More than 400 businesses could be affected in a half-mile radius of the city centre, while many more outside that area suffered smashed windows and damaged fittings.
Alan Harris, chief executive of Harris Claims Group, said 20 of his staff were now in Manchester to assess the damage. "It is hard to say exactly how much the cost will come to, but it may amount to pounds 100m for rebuilding costs and for fixtures and fittings," he said. "Business interruption may come to that amount again.
"You have to remember that a lot of shops, hotels, clubs and restaurants had been geared up for the Euro 96 games at Old Trafford."
Unlike the most recent large blast, at Docklands in London, where damage is being estimated at pounds 150m, this time it is mainly shops that have been affected.
"If you are dealing with offices, it is possible to move staff into new premises which prevents too much interruption. With shops, that is not so easy," Mr Harris said.
He added that serious problems could arise where a business decided in the aftermath of the IRA's ceasefire in August 1994 that special terrorism insurance was no longer needed.
The extra premiums are collected by all UK insurers and passed on to Pool Re, which then meets claims against it. Without this cover, which can costs thousands of pounds, any compensation for a terrorist attack is limited to a maximum pounds 100,000 each for structural damage, replacing stock and business interruption. Up to a third of the damage caused in the Docklands blast was not reclaimable because the owners of buildings had not paid into Pool Re.
"Even if you do have the Pool Re cover, it may not be possible to hold on to your staff because you have a duty to the insurer to `mitigate your losses'," Mr Harris said. "A restaurant owner could argue that it is vital to keep paying a chef's wages because he is an essential employee. But he may not be able to keep the waiters."
Tony Baker, deputy director general at the Association of British Insurers, the industry's trade body, said many thousands of businesses insured through Pool Re will also face an immediate levy.
After the IRA ceasefire, Pool Re agreed to charge only 60 per cent of annual premiums unless terrorist-inspired claims reached more than pounds 75m a year. Although the levy has not yet been announced, the Docklands blast alone caused more than that amount of damage. Saturday's explosion is certain to lead insurers to demand the remaining 40 per cent from their clients, Mr Baker said.
One insurance source said that while the exact figure is not known "for security reasons", it could easily reach pounds 100m.Reuse content