Extreme weather is threatening more and more firms: they need better support

In this season of goodwill, let us commend the Federation of Small Business for showing so much of it. On Friday, the group’s chairman, John Allan, had nothing but praise for staff and volunteers at the Environment Agency who have helped many of his members cope with the flooding of the past week or so. That was big of the FSB, which could have spent the day complaining about the way small businesses have been so poorly served by the Government on this issue.

Let’s begin with the £51m emergency funding package the Government has announced for victims of flooding. Of that sum, businesses will received just £5m, according to the minister for small business, Anna Soubry. On her figures, that’s the equivalent of only £2,500 for each business affected. The FSB’s data suggests that the average cost to a small business of an adverse weather event over the past three years has been £7,000 – close to three times as much.

Ms Soubry points out that the Government is also announcing council tax and business rate relief for businesses affected by flooding. But this is hardly an act of charity – these levies are paid by businesses in possession of habitable and usable property; the flooded premises of many small firms clearly do not fit that description.

In any case, judging by what has happened after previous floods over the past couple of years, many small businesses will find it difficult to secure this redress: many report that it has been very difficult to get cash-strapped local authorities to look sympathetically at their situation.

Inevitably, there will be small businesses that do not make it through this crisis. The Association of British Insurers has previously said that as many as four in five small firms forced to close for a period because of a problem such as flooding cease trading altogether within 18 months.

Those that do survive, however, will know that there is a good chance of them going through exactly the same thing all over again during the next bout of damaging weather.

For one thing, there is little or no help available for businesses keen to invest in flood defences to protect themselves in the future – even assuming that it is possible to build defences that will be sufficiently robust.

Nor can small businesses depend on the insurance industry to protect them. The FSB reckons one in 10 small businesses is at risk of flooding, but warns that 50,000 of them are finding it difficult to obtain insurance. Insurers either refuse altogether to offer cover, or quote premiums that are unaffordable.

This impasse is why the Government has brokered a deal with the insurance sector: but while the Flood Re scheme due to come into force next year will ensure that almost all householders have insurance protection against future floods, ministers chose to exclude small businesses from these arrangements. It was unable to reach agreement with insurers on how their interests might be accommodated in the Flood Re deal, so it simply left small businesses out.

The result is that small businesses that aren’t currently able to obtain insurance still won’t be able to do so in the future. Moreover, their numbers are likely to swell: the Met Office has said for the first time following last week’s flooding that this was an event linked to climate change. As such adverse weather events become more common in our changing climate, greater numbers of small firms will find themselves unable to secure decent insurance against flooding.

Just 10 days ago, we saw MPs from every party, including the small business minister herself, take part in photo opportunities up and down the country as part of the fantastic Small Business Saturday initiative that promotes independent businesses. When it comes to putting their money where their mouths are – or at least forcing insurers to do so – policymakers have been found wanting.

What’s the toughest challenge in setting up and running a small business? Loneliness, research suggests. A survey of hundreds of owners by Axa PPP, the health insurance company, found that almost two-thirds worried about having to make key decisions on their own.

More than two in five said they wanted more support running their business, with many currently relying on friends and family for advice. Axa PPP suggested that mentoring networks might have more of a role to play, while 29 per cent of owners said they wanted the Government to do more.

“Owners are positive about the future and working hard to achieve their goals but we worry that they lack the right kind of support to make the success of their business sustainable,” said Glen Parkinson, a director of Axa PPP. “They have to lead their business, drive growth and ensure essential activities are well managed – the pressure is leading owners to put in long hours, which is impacting their home lives; this is unsustainable.”

The strong performance of shares in smaller companies continues to attract investors to the Alternative Investment Market (Aim). Companies listed on the London stock market’s junior exchange have raised £3.4bn from investors this year, more than in any year since 2011.

Allenby Capital, the specialist Aim broker, said that while the number of new flotations on Aim had slowed in recent months, secondary fundraisings continue to be strong. “October saw a continuation of the trends seen on Aim throughout 2015,” Allenby said. “We saw weakness in the IPO market but continued resilience of the secondary market – investor preference remains to invest in companies with a listed track record where they have had an opportunity to assess management.”

Overall, the number of companies on Aim fell by seven in October, as four new joiners were offset by 11 departures. As at the end of October, there were 1,056 Aim constituents, down 48 from 1,104 at the end of 2014.

“We launched just over a year ago. I’d spent 13 years in online roles, and wanted to launch a business of my own. We had a database of trade and wholesale buyers and we began to talk to auction houses. Many of these – there are 600 or so around the country – have little or no online presence. With one of our clients, we had to help them to connect to the internet for the first time.

“We realised that if we could build a technology platform these auction houses could use, that would be very attractive. These businesses know they need to move online, not least because many are seeing falling footfall, but the technical challenges are tough, given the need for real-time bidding, payment settlement and so on.

“We offer a platform through which they can run auctions online and in the room at the same time – so auctioneers can take physical bids from people who are there and online bids from people connected online, just as they’ve taken telephone bids in the past.

“We charge £200 a month for the platform, plus a 1.5 per cent commission on every item sold. That means it is in our interests to attract as many bidders as possible to the auction process, which would have been difficult without the databases we had when starting. In fact, too few people know about auctions, even though they can be an incredibly cheap place to buy.

“We’ve gone from nothing to selling 6,000 items a week through the platform. It’s a technology solution in a traditional market that hopefully works really well for buyers, sellers and the auction houses themselves.”