Business Confidence Among SMEs Falls Dramatically in Wake of Riots

Significant number of SME businesses in riot impacted areas remain unprepared for further civil unrest

Nearly half of SMEs in Manchester and Croydon still remain ill prepared

Business confidence has fallen significantly among small and medium-sized enterprises (SMEs) in the wake of the recent riots, research* from NIG, the broker-only commercial insurer has found.

The research, which canvassed 95 leading SME insurance brokers in two riot-affected areas (Croydon, Manchester) and one that was not (Newcastle), found that brokers in the three conurbations all recognised that business confidence among SMEs had fallen dramatically in the wake of the riots, with 97%, 97% and 93% in Croydon, Manchester and Newcastle respectively stating that business confidence has been impacted to some degree.

Despite this, a significant number of SMEs in riot-hit areas still have insufficient insurance cover and remain unprepared for further civil unrest. According to 53% and 44% of brokers in Croydon and Manchester respectively, their SME clients are still not taking adequate measures to protect their companies against criminal damage. This is not the case with all SMEs in these areas: 44% and 53% in Croydon and Manchester respectively are, in the view of brokers, now better prepared for a similar event in the future.

However, these two urban areas lag behind Newcastle. Brokers in the north-east city - which was almost completely unaffected by the recent riots - said that nearly seven in ten (68%) of their clients were now better prepared in terms of appropriate insurance following the disturbances.

SMEs in Newcastle were also much more pro-active in their demand for better commercial insurance in the wake of the riots, with over three-quarters (77%) of the brokers in the city saying that business enquires from their SME clients had increased by 25% or more. In contrast, half of Croydon and 63% of Manchester-based brokers claimed the same - surprisingly less than the relatively sheltered North Eastern city. These figures were registered despite nearly one fifth and over half of intermediaries in Manchester and Croydon respectively reporting that their client businesses were directly impacted by the August events.

Martin Hall, Director of Commercial Underwriting at NIG, said:

"Despite Newcastle being barely impacted by the riots, it appears that the scenes of destruction provided a powerful impetus to businesses to start reassessing their insurance needs. The fact that Newcastle appears to be experiencing a higher level of enquiries is unexpected particularly as Croydon and Manchester were among the worst hit areas.

"We would urge all businesses to seek advice from their broker and check what cover they have and whether or not this needs to be reviewed. While lightening does not necessarily strike twice, we would still urge SMEs to check that their cover is adequate for all eventualities."

1) Since the civil disturbances of August 2011, have you noticed an uptake in new enquiries around commercial insurance?

2) Of your current client base, how many in percentage terms were impacted by the riots?

3) Do you believe that SME business confidence ** has been impacted in the wake of the riots?

Notes to Editors:

* The research was conducted between 26-30 September 2011 among 32 commercial brokers in Manchester and Croydon each, and 31 commercial brokers in Newcastle. Broker respondents were from a panel of commercial operators - the criteria used to choose relevant respondents were based purely on location and a commercial insurance offering.

** The term "business confidence" was explained to respondents as how business owners in the area feel about business prospects both in terms of their own business and those of others. The impact of the riots on business confidence was understood in the context of the overall economic situation.

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Notes to Editors:

NIG provides insurance solutions to small to medium sized businesses throughout the UK. Established for over 100 years, NIG provides its insurance exclusively through a network of over 3,200 brokers.

By working closely with our selected brokers, NIG provides a wide range of insurance products for commercial needs protecting businesses.

NIG is part of The Royal Bank of Scotland Group's Insurance Division, the second largest general insurer in the UK.