Winter storms take their toll

Published at 13:53 PM on 09 December 2011

The strong winds battering Scotland could be cooling the Scottish economy by around £100m[i], according to estimates by business advisers, PwC.

School kids may love it, but for Scotland’s pub, restaurant and hotel owners, retailers, hauliers, Christmas tree growers and turkey-breeders, winter storms and the risk of even more snowfall on the horizon will not be welcome.

PwC warns that closing doors early, power outages, encountering road closures that delay or halt deliveries as well as employees taking time off to care for children sent home from school, certainly isn’t making life any easier for the country’s business leaders. Although these conditions aren’t unprecedented with last year’s snow falls causing similar disruption.

It says that, even if the aggregate cost of bad weather over the winter does not significantly impact national and regional GDP, daily productivity losses are a direct cost to business.

Head of private business at PwC in Scotland, Caroline Roxburgh, says that while £100m a day seems a lot, there is some evidence that the historic impact of extreme weather on the economy has been relatively small:

“In the past, harsh winters tended to impact on manufacturers, but were compensated for elsewhere in the economy. Historic data also suggests that in even extreme weather much of the productivity lost is actually made up fairly soon after.

“In 1963 for example- the worst winter in living memory - manufacturing output fell 7 percent in February, but there was actually no net negative impact on GDP because consumers and industry spent much more on heating making up the difference.

“For some businesses however, the losses they experience will be permanent – if someone has cancelled a restaurant booking, not gone to the theatre or to the cinema, then that money will be lost. Retailers, who are already facing arguably the toughest trading conditions in recent history, will be particularly badly hit as Christmas shoppers stay at home at the most profitable time of the year for them.

“While some businesses may be robust enough financially to take the hit, others may well be teetering on the edge, and for them, a winter like last year may well push them over the edge.”

James Crask, PwC business continuity expert, said:

“Extreme weather looks set to increase in Scotland and the north of England. Preparation is everything. Businesses that have failed to prepare will find it difficult to keep their operations running smoothly throughout the disruption. With key transport links closed, power lost, and the potential for large parts of the workforce and key staff to be absent for several days, businesses need to act now to ensure they can continue to deliver their most critical services. 

“Businesses that have made plans will be in a much stronger position but for others, there are things that can be done to reduce the impact. A focus on the safety, welfare and availability of staff are likely to be key considerations. Maintaining contact with staff will be important to ensure they remain safe and are aware of how the business is reacting to events, forming a crisis management team of senior decision makers will also help along with flexible working arrangements to allow employees to work from home if possible."

Commenting on the insurance impacts of the storms, Mohammad Khan, insurance partner at PwC, said:

"It is hard to put a value on the potential cost of the damage as there have been few recent storm losses in Scotland to benchmark against. However, the buildings and structures in Scotland are generally more resilient to high wind speeds than in the rest of the country, so this should help reduce any potential costs. As is the case with most windstorms, the full extent of the damage can take a long time to unfold as it tends to be high volumes of low value claims.

“The insurance industry should step in to take most losses to household policies. These tend to come from damaged roofs, when tiles are displaced from high winds. Tree fall damage has also been a driver of losses in past events but this has predominantly been the case earlier on in the season.”

 



 

1 Economic impact: The figure is based on analysis that for every day the UK grinds to a halt, the economic impact is £1bn a day, which for Scotland, equates to around £100m.

 

 


For more information contact:

Lynn Hunter
Media relations 
Tel:0141 355 4015 
Mobile:07841 570 487 
 

Amy Tiernan
PR Manager - pensions, pay and HR, PwC 
Tel:020 7804 0556 
Mobile:07852 941 236 
 

Elizabeth Faulkner
Business Recovery and Student Recruitment PR, PwC 
Tel:020 7213 1018 

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