Emerging threatsU.K.: Economic costs from flooding could reach £1.5bn, reduce GDP growth

Published 28 December 2015

Economic losses caused by the flooding which has devastated parts of Britain in the past few days could exceed 1.5 billion pounds, and shave 0.2-0.3 percent off GDP growth overall in the first quarter of 2016. Insurers will likely shoulder the bulk of the burden after first Storm Desmond and then Storm Eva saw waters swamp large swathes of the country.

Flooding of the Swan Hotel // Source: commons.wikimedia.org

Economic losses caused by the flooding which has devastated parts of Britain in the past few days could exceed £1.5 billion, experts believe.

The accounting firm PwC said that insurers will likely shoulder the bulk of the burden after first Storm Desmond and then Storm Eva saw waters swamp large swathes of the country. PwC’s Mohammad Khan told the Telegraph that, “We would give a very initial estimate of economic losses of between £900 million and £1.3 billion, with the insurance industry bearing between £700 million to £1 billion of this.

If rain continues to fall in large quantities, and the areas with warnings in place do indeed flood significantly, it could well be that the total economic losses could breach £1.5 billion with an additional significant increase in insurer losses from our initial estimate.”

Howard Archer, chief U.K. and European economist at IHS Global Insight, said the floods could also hamper wider economic growth.

He said: “The floods could well shave 0.2-0.3 percent off GDP growth overall in the quarter that it occurs in terms of businesses not being able to open, loss of agricultural output, people not being able to get to the shops, travel, etc.

There is also the cost to insurance companies. There is also the loss of work from those people not actually able to get to work,” he told the Telegraph.

Arrangements have been made to put in place emergency financial assistance for areas affected by the floods. Homes and businesses damaged by flooding caused by Eva will have access to the same package of support announced for those affected by Storm Desmond.