Business News

With Britain's economic recovery,  there's the prospect of the fragile growth being thrown off course by the damaging impacts of recent flooding? Mark Carney, The Governor of the Bank of England, warned last week that farming and other businesses hit by floods could have a negative impact on Gross Domestic Product (GDP). In previous periods of bad weather such as heavy snow, this has reduced quarterly GDP by up to 0.2%. However, severe cold is more widespread whereas flooding tends to effect a relatively small area of floodplain and coastline.

Extensive snow makes it almost impossible for construction to take place - since construction accounts for around 7% of economic activity, a wide-scale pause in building works has a much bigger impact than flooding. If there is any possible 'upside' to natural disaster it is that, in purely economic terms, GDP tends to bounce back quite quickly. Japan for example has often experienced devastating earthquakes which produce an immediate hit to GDP as well as immeasurable human cost. However, once the reconstruction of houses, roads, bridges and other infrastructure takes place, the economy receives a tremendous stimulus and recovers quickly.

In the UK it will be the insurance companies who are amongst the first to count the cost of the wettest January on records by comparison, the 2007 floods cost insurers about £3 billion. Some economists have pointed out that repairs to roads and railway lines will probably help support the economic growth not to mention retailers of items like carpets and kitchens in affected areas. There will clearly be some negative statistical impact of this years floods on the UK's fragile economic growth. Although this is no consolation to people who have been severely affected, the flooding is unlikely to derail the recovery and could even provide a modest stimulus over the rest of the year. Richard Bloomfield is the website editor at The Workplace Depot

Update June 2016:

Figures released in January this year by the Association of British Insurers (ABI) predicted that losses caused by flood and storm damage during the winter of 2015 would far exceed those of two years ago resulting from the wettest winter on UK record. Insurance companies were expected to pay out around £1.3 billion for claims following a series of storms, flooding and heavy rainfall during the winter of 2015.The economic losses from the winter 2013-14 have been worked out by the Environment Agency but are yet been published by the Department for Environment, Food and Rural Affairs.

The ABI predicted that insurance claims would cost £1.1 billion, including £446 million for businesses and homes that were affected by heavy flooding. The bill for damages recorded this past winter is expected to exceed the roughly £600 million in losses caused by flooding during 2012, but will be much lower than what was claimed for the summer floods of 2007, which totaled around the £3.2 billion mark. The UK Climate Change Risk Assessment that was published in 2012, estimated that losses from coastal and river flooding in England and Wales could possibly rise from about £1.2 billion per year today to between £1.6 and £6.8 billion by the 2050s.

December 2015 was the wettest December for the UK since 1910 when Met Office records began. Climate change experts say that six of the seven wettest years on record in the UK have all occurred from the year 2000 onward. The UK has also experienced its eight warmest years on record. Climatologists are predicting that climate change is making the UK a warmer and wetter country overall. The UK Climate Change Risk Assessment estimated that about 6 million residential and non-residential properties in the UK are exposed to some level of risk of coastal, river or surface water flooding.

Individual insolvencies in England and Wales are at an all time low for over eight years. This is according to the latest government report. It is said that bankruptcy rates were the lowest rate since 2005.A reason to why the rate is falling is said to be due to people finding it harder to get credit due to lenders not willing to risk on individuals with lower credit ratings. However this can all change, the Bank of England is expected to raise its interest rate for the first time since 2009 due to the strengthening of the economy.

People will find it hard to repay mortgages due to the hike in interest and this can lead to further difficulty for people who are already stretched financially. So forecasters are expecting insolvency to rise in the near future. An insolvency partner at HW Fisher said: "These are the best insolvency figures we've seen in a while" "But with many of Britain's businesses still just 'hanging on', thousands of our weaker firms are far from out of the woods yet."" Sooner or later, interest rates will rise and bank forbearance will end - and when that happens the weaker firms will be in serious trouble," he added.

Update June 2016:

According to figures released in May this year by the Money Charity, UK personal debt statistics now topped £1.474 TRILLION at the end of March 2016. This rose from £1.434 TRILLION at the end of March 2015, which means an extra average debt of £793.13 per UK adult according to current population figures. The average borrowing per household, including mortgage loans, was calculated to be £54,597 in March, making the average debt per adult £29,190,which is around 111.9 percent of UK average earnings. Consumer credit levels still outstanding was shown to be £182.4 billion at the end of March 2016, up from £171.1 billion at the end of March 2015. This works out at an increase of £198.45 for every adult in UK, making average consumer credit borrowing per UK adult £3,613.Credit card debt in January 2016 accounted for £63.3 billion, an average of £2,381 debt per household held on 'plastic'.

Not good news for for many people with credit card debt who can only afford to pay the minimum rate each month. With average credit card interest rate at current levels, it would take 25 years and 6 months to repay by only making minimum repayments each month. The number of personal insolvencies declared now stands at an average of  222 people a day.  This is equal to one person going bankrupt every 6 minutes and 13 seconds. You can see the full breakdown of these and other figures on the Money Charity site here.

The trade deficit the UK faces has decreased to £3.2 billion in the November period. This can be directly associated with the higher exports of goods to Europe. The UK exports of products increased by 2% between October and November - the total being £25.3bn. The reason for this increase is mainly due to the increase of trade with the European Union.The main exports which have helped increase the exports to the EU are being attributed to Chemical Export. However the UK has also started to import more from the EU. The current amount imported is at an all-time high of £19.2 billion attributed to European car manufacturers.It`s not all good news; forecasters are predicting long term exports to fall over the coming years. This will result in a widening trade deficit something the government will want to tackle.

Update June 2016:

UK trade deficit falls after record rise in exports

2016 is proving to be a good year for reducing the UK trade deficit according to recently released figures. In fact the volume of goods exported from Britain climbed by a whopping 11.2% in April this year - that is the biggest monthly recorded increase since records began back in 1998.Due to this increase in goods export, the country's trade deficit fell to a lower level than was predicted for April. This is good news too as it has also been revealed that the UK high street, as well as the manufacturing business sector, have both seen healthy figures reported. Business analysts are now saying the the UK economy has steadied since January, despite the announcement of the EU referendum.While the growth in exports from the UK mainly came from other EU countries, there was also a small rise in sales from countries outside of the EU. Compared with last year, UK exports have increased by 10.3% inside Europe, and 1.9% outside of Europe.Despite the rise in exports to the EU, during April alone our exports to the rest of the world saw a rise of £1.3bn to a new record level of £14bn. That is not bad at all when compared with a £900m rise in exports to the EU.According to the figures from the Office for National Statistics, the trade deficit in goods fell to £10.5bn from a downwardly revised £10.6bn in March. Our increased exports to the EU comes after a general rise in economic growth in other member states, and in the face of previously fast growing economies such as South Africa, Russia and Brazil falling into recession.Despite the heightened uncertainty of the European Referendum, the figures give a lot of hope to exporters and the rise in industrial production in April, along with good retail sales growth, has certainly helped them to achieve decent levels of export rates.