Power cuts and burst pipes cost SMEs nearly £600m a year

38% of SMEs hit by a 'business breakdown' last year, according to new survey.

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Last Updated: 31 Aug 2010

As if the recession, the budget deficit and VAT weren’t enough to worry about, it seems the nation’s SMEs are in the midst of another expensive – if rather less well known – crisis, too. ‘Business emergencies’ are apparently costing smaller firms some £598m a year in repairs and lost earnings. Ouch.

Top of the list of ‘emergencies’ is power failure, followed by blocked drains and lighting failure, burst pipes and broken-down heating systems. Apparently some 38% of SME’s were hit by at least one of these problems in the last year (we have to say that we would feel sorry for any firm which copped all of them at once. ’Elf ’n’ Safety would have a field day).

Of the aflicted firms, 24% suffered loss of earnings as a result, 16% had to close their premises (temporarily, we hope), 9% lost customers and 3% even think their reputation has taken a knock as a result. Crikey.

But the real cost, it seems, isn’t the ‘emergency’ itself so much as opportunity cost of the clear-up – the average wait for a tradesperson to arrive and fix a problem is a hefty 13.4 hours, amounting to a collective loss of 17.4m working hours in total. But then we all know that plumbers  take a long time to turn up, don't we?

Now we don’t doubt that all these calamities do occur out there in SME land, and on a fairly regular basis. But do they really cost nearly £600m a year? Unsurprisingly, the survey comes from an outfit called Home 3, which offers Business Emergency Assistance (that’s insurance to you and me) to SMEs. What a coincidence. So they would say that, wouldn’t they?

Surely of more interest to the average entrepreneur is what each incident is likely to cost them in isolation, and here the small print reveals a rather less gasp-inducing £1,039.

The survey’s basis also seems a little confused –  official stats from DBIS are used to extrapolate the rather bold expense figures, but there is also a phone survey of 504 SMEs carried out for Home 3 by a market research agency. And while the phone survey comes up with that aforementioned 38% figure, the DBIS numbers seem to suggest that a more modest 12% of SMEs suffer a business emergency annually....

Having said all that, Home 3 does go on to make the eminently sensible point that SMEs should make like Boy Scouts (or Girl Guides) and be prepared.

After all, if you have got a plan B, then when the lights go out or the toilets flood when you’re half-way through fulfilling that vital new order, you will know what to do. You will, won’t you?

In today's bulletin:

Dancing in the dark: What's St Vince up to?
Small business lending crisis not ending yet
Editor's blog: are we in for more fat cat protests?
Reducing fear top of the manager's to-do list
Power cuts and burst pipes cost SMEs nearly £600m a year

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