Insurers leave small businesses to sink after floods hit

Flooding has wreaked havoc on companies all over the country in recent weeks, leaving owners unable to get cover to repair the damage

"A nightmare," is how Nicky Goringe Larkin describes the impact flooding has had on her business.

Goringe Accountants' premises on the western outskirts of Reading are dry. But the River Kennet's flooding has meant she and her staff can't get there. All three roads leading to it are under water.

The 10-strong team has effectively been shut out since last Thursday, and they had problems over the festive period too, the worst-possible time with the deadline for tax returns looming.

"It's been very disruptive. It's cost time and money. We've had to cancel a training course for clients, relocate meetings, rent other venues…"

The firm has all the relevant insurance – but business continuity cover, for example, won't pay out because the premises aren't under water.

Ms Goringe Larkin hopes the business rate relief, part of Prime Minister David Cameron's Question Time announcement of assistance for flood-affected businesses, will help. He also offered businesses the ability to defer tax along with grants of £5,000.

But with floods becoming more common we'll be back here again before too long.

A spokeswoman for the Federation of Small Businesses describes the insurance situation generally as "a major issue for businesses and our members in flood-hit areas".

"Because members can't get insurance they have to pay out of their own pocket. That means there's going to be less money available to invest in their businesses, which is what they want to do.

"We want to see government and insurance-industry action so businesses in these (flood-risk) areas are protected."

The federation regularly polls its members and did so last April on the issue of snow. However, it also included a question about flooding.

"One in five had been affected," the spokeswoman says. "In 2012 there were really severe floods in November, and December.

"We spoke to members in York who were particularly affected. One said he'd been hit 18 times in 2012 and had to pay £10,000 for repairs each time. He just couldn't get adequate cover."

The federation believes the simple answer is to bring small businesses into Flood Re, the Government and industry-backed scheme that so far only covers householders in properties up to council tax band G.

The issue of insurance is also raised by Adam Marshall, director of policy at the British Chambers of Commerce.

He doesn't specifically mention Flood Re but he does say "we would hope that any new arrangements that help homeowners to get insurance where the market will not go would also assist small and medium-sized businesses where they can't get the cover".

Mr Marshall, who has been involved in discussions with the Government over the issue, says that physical damage to property and the ability of staff to get to work are causing huge problems.

But just as damaging to businesses coping with the floods right now is the issue of perception: "In many areas where companies are open, they are finding custom is down or they can't transact," Mr Marshall says.

He wants to see fast assistance from insurers and government, as well as forbearance from creditors together with cheap or interest-free loans to help businesses with relocation.

But he is also concerned about the issue falling down – or even off – the agenda once media attention surrounding the issue has ebbed away.

"I think businesses would be hugely unhappy if that happened. There is a need to take action for the long term so we don't get a repeat of this. We need to make sure the transport network is as resilient as possible as well as making sure that businesses can get insurance cover that is as broad and deep as it can be."

As for the CBI, Katja Hall, chief policy director, says: "The CBI is working with its members and government to assess what now needs to be done in the short and medium term to ease the recovery.

"The announcement that affected businesses will receive 100 per cent business rate relief is welcome, and we await further detail on the new affected-business support fund," she adds.

Government moves to alleviate short-term issues have been followed by at least some banks, perhaps scenting a much-needed PR opportunity for the embattled sector which has been savagely criticised for failing to help business with finance needed to pull the country out of recession.

Santander, for example, said that it would extend "current facilities" for up to 12 months on the same terms for farmers, with small businesses getting six months. It also said it would "consider additional support on a case-by-case basis".

Meanwhile, Royal Bank of Scotland, which is in sore need of some positive publicity, said that it was sending "specialist business support teams" to affected areas to help small and medium-sized businesses with short-term, financial problems.

Last month the state-backed bank also announced a £250m UK Storm Business Fund to provide short-term, interest-free financing to help speed recovery for businesses which have been affected by recent floods and gales.

The insurers are not so keen to play ball, at least when it comes to Flood Re. A spokesman for the Association of British Insurers said: "Flood Re aims to address the area where issues around affordable and available flood insurance is most acute – hence why flood premiums for flood-risk homeowners who would be least able to afford flood insurance will be capped.

"We are not aware of any evidence that shows similar problems arise in the commercial sector. Businesses should be able to obtain flood insurance through an insurance broker. The Government felt it would be unacceptable for flood-risk householders on lower incomes to subsidise businesses, which would have been the case had commercial risks been included within Flood Re."

Privately, business groups are hugely frustrated at insurers' stance. This is one situation where the banks, for once, aren't necessarily being seen as the bad guys – unless they own insurers.