THE COST OF RIOTING:
WILL THERE BE A QUICK RECOVERY FOR BUSINESS?
Renee Horne-London 17 August 2011
Images shocked the world last week, as businesses and homes were looted, destroyed or set alight. Consequently, numerous businesses suffered losses, with more bad news that they cannot open their doors due to police cordoning off the area, while investigations are underway. Indeed, the three day riots in various parts of England may take such a toll on some businesses that they may never recover. The aftermath of the riots is a massive bill as there is no profit from mayhem. The cost of the riots range from one hundred million pounds to a shocking half a billion pounds and there is a huge debate as to who will foot the bill.
THE ‘TAINTED’ BUSINESS IMAGE
While big business may make a recovery after the riots, it is the small businesses that are the hardest hit. One could only feel sorry for the owners of the family-run Croydon furniture business, Reeves established in 1867, they saw more than a century of their hard work disintegrate into flames. Stephen Robertson, Director-general of the British Retail Consortium, said: “Inevitably, some businesses which have been attacked will never open their doors again.” Mark Prisk, Business Minister, told the Financial Times (FT) that there are long term repercussions for the riot -hit areas, “The sad part of this is the economic prospects for these areas are damaged. Those thinking of starting a business in London over the next couple of years – would they choose Tottenham? I don’t think they would,” said Mr Prisk. “Do I think it is bad for local economies and prospects for jobs for people in those areas? Yes I do.” Indeed with London hosting the 2012 Olympics, who would visit riot - hit areas to support local businesses? Ultimately who would want to start up a business in a ‘tainted’ area? FT reported that the “The food company Nestlé cancelled its London roadshow, last week – which typically attracts 60-100 investors – because of the riots. The Swiss-based group said the decision was taken mainly for reasons of logistics, transport and personal safety”.
THE RIGHT TO CLAIM
Since the riots there has been controversy about who will foot the massive bill. There is uncertainty over whether the incidents are classified as riots. If so, the police are liable for damage caused to property. Under the 1886 Riot Damages Act insurance companies, individuals and businesses can reclaim their losses from local police authorities by notifying authorities of an intention to claim within 14 days. The massive bill spells disaster for the police and the public finances at a time of substantial reductions across government; consequently, taxpayers could be forced to fork out millions to some businesses and households that were uninsured. If businesses are insured, experts advise that they will be covered but the extent of cover, how much excess is payable, depends on the terms and conditions of the policy. Some businesses may claim for interruption to trade and entrepreneurs who were holiday only to return home at the advice of police to inspect their property can claim from their travel insurance for the extra costs incurred.
FUNDS TO KICK-START RIOT- HIT AREAS
It may be a long wait for insurance companies and government to pay out, so banks are offering immediate funds. The British Bankers' Association said that banks had special arrangements in place to assist businesses affected by offering short-term loans. RBS and NatWest will provide interest free loans of up to £25 thousand to small business customers directly impacted by the riots across the East Midlands for up to 6 months. The intention is to assist viable businesses, who would face an uphill struggle accessing short term loans; moreover this is to fund businesses so they can start trading as quickly as possible. At the end of the 6 month period, businesses can either repay the loan from these funds or transfer any outstanding amounts onto one of a range of flexible loan products. For cash strapped businesses in Tottenham and Croydon that cannot access bank loans, £20 million of investment is to be spent over the next three years to boost local businesses and job opportunities. Despite the funds available, damage can be irreversible …… what will be the future business image for the riot-torn areas of England? Have your say?