Though we often perceive other nations to be more prone to natural disasters, fire remains a devastating force in UK business. Wildfires are on the rise, but structural and accidental fires are still the primary concern, making mandatory fire signs and strict protocols more important than ever.
It’s estimated that fire has an annual economic and social cost of £12 billion in England. Despite an overall decline in incidents, with fire services called out for 594,384 cases last year, the financial implications for businesses continue to be severe.
Retail establishments are particularly at risk, as are restaurants and manufacturing. However, the ripples through the supply chain can make costing the overall economic damage quite challenging – particularly the social costs from events like Grenfell.
Direct Financial Impact on UK Businesses
The immediate financial consequences of business fires are troublesome. Analysis of major UK fires reveals an average loss of £657,074 per incident, which is clearly an existential threat to smaller firms – and even some medium-sized ones. This figure encompasses many critical areas of loss, with building damage accounting for around 43% of costs, while business interruption represents 18% of the total impact (i.e. loss of sales).
The breakdown of direct costs shows that contents damage accounts for 7% of losses, and both stock and machinery damage each represent 5%. Of course, it’s higly dependent on the sector, with manufacturing being more at risk than services. But the figures really show that the building damage isn’t the half of it, and there are other firms in that supply chain that lose out, even if they’re the other side of the world.
Data shows that faulty electrical systems are one significant risk, with over 4,000 business fires attributed to electrical faults over three years. The manufacturing and industrial processing sector has been particularly hit hard, suffering total losses of over £800 million. This makes it the most severely impacted sector financially, though retail establishments face the highest frequency of incidents, at 15% of all major fire cases, and are also prone to suffer inventory losses.
Insurance claims reflect this substantial impact, with UK businesses making fire property claims of around £940 million in a single year. However, these figures only represent insured losses of course, suggesting the true financial impact being well over a billion!
Broader Economic Consequences
The ripple effects of business fires isn’t only the company’s surrounding stakeholders. Each year, fires result in a GDP loss in the hundreds of millions through reduced productivity and supply chain disruptions. On the one hand, the GDP impact of a given fire is smaller than the financial impact of that company. This is because customers may quickly find alternatives, and the cost of fixing the fire, to some extent, counts as economic activity. However, productivity still takes a hit, and cost-push inflation may occur if the damage is great enough.
The Grenfell Enquiry found that over the past five years, the UK economy lost a billion in GDP and around 5,000 jobs due to preventable fires in warehouses. Clearly, this only scales up when factoring in other sectors. It also has a negative impact on the government budget, with a decrease in tax revenue and an increase in firefighting expenses). The Enquiry found a £160 million loss in tax receipts.
Hidden Costs and Long-term Effects
There are even more hidden costs, beyond structural damage, inventory, supply chains, and the broader economy. Particularly since the Grenfell disaster, there has been a loss of trust, and this loss of confidence can hinder investment and consumption. Brand damage is consequential too, with many firms struggling to outlive their preventable fire disasters.
There is also an impact on the environment. Fires themselves contribute to air and water pollution, particularly when plastics, chemicals, and other hazardous materials are burnt. Entire ecosystems can be shifted when flora and fauna is burnt down, hurting the biodiversity of a local environment, as well as the soil itself. Property values in the affected areas can often depreciate too, with neighbouring businesses suffering as a result.
Fire Safety
Research continuously shows the importance of signage in minimising the impact of fire damage, from personnel safety fire signage to highlighting hazardous areas in the first place. Workplace fire safety signs should be standardized across a single location, but adaptive in their size to the context (larger font for larger rooms). Fire safety sign compliance is important, but so is taking a proactive approach. Sprinkler systems have become one the most effective investments a business can make, and insurance is a must. However, training and education cannot be understated in its role of detecting fires early, responding to them effectively, and minimising damage.
Conclusion
The repercussions of fires in the UK demand a far more serious consideration. While the Grenfell Enquiry was, without a doubt, profoundly important, it failed to capture the wider public’s attention as it should have. The financial implications alone are staggering, with total costs soaring into the billions. Then there’s the undeniable damage to our environment. Ultimately, it’s down to the business to hedge against future damages, seeing as government regulation enforcement is failing.
Featured photo by Vladimir Shipitsin, Pexels.