Two-thirds of small businesses do not see Brexit as a threat, new data from RSA shows
- 70% of SMEs said Brexit will either have no impact at all (43%) or will be positive (27%) for business, but identified other more significant threats that many aren’t protected against.
- If they were hit with an unexpected £50,000 bill as a result of these threats, 28% of SMEs said they would go out of business.
- 73% of SMEs identified new risks that were not present when they started, but 82% have not altered their insurance coverage to respond to technological change such as cyber.
Leading commercial insurer RSA has today (30 November 2016) released a report, titled Future Impacts, which assesses the effects of economic events such as Brexit on business growth, as well as the risks that businesses face and how they are managing those risks.
Future impacts: the changing nature of risk facing small businesses in the UK
The research found that Brexit is not perceived as a risk by the majority of businesses, with 70% stating that leaving the EU will either have no impact at all (43%) or will have a positive effect on their business (27%). However, SMEs identified a range of more significant threats which many companies are not sufficiently protected against.
Twenty-eight percent of SMEs in the UK say they would go out of business if faced with an unexpected bill of £50,000, yet 58% are not insured against any of their top three risks.
Top risks for UK SMEs
The top three risks businesses identified were:
1. Economic uncertainty (35%)
2. Increasing market competition (35%)
3. Cash flow (31%)
Additionally, almost nine in 10 (88%) insurance brokers see underinsurance as a problem for their SME clients, showing that businesses which do have insurance in place are at risk as well due to their coverage potentially not being sufficient enough to cover the full cost of repairing the damage caused by unexpected issues.
“Our research shows a significant disparity between the issues perceived by UK businesses to be a risk and the extent to which they are protecting themselves against them.”Russell White Schemes and deals director, regions and SME, RSA commercial
RSA’s Future Impacts report also investigates the emerging risks for UK businesses, with 73% of business owners stating that new risks have emerged since they first started their company. However, little is being done, for example, 82% have not altered or increased their insurance coverage as a result of technological change.
The threat of cyber-attacks, for example, is one of the most prominent emerging risks for businesses. However, while government figures show that two-thirds of large businesses and three-quarters of SMEs had experienced some form of cyber-attack, RSA’s research shows that only 9% of businesses have cyber cover in place, and only 26% said that they are concerned about the threat posed by a cyber-attack.
Businesses’ lack of protection against cyber threats is echoed by government data, which found that approximately one third of firms had formal written cyber security policies and only 10% had an incident management plan in place.
Russell White, schemes and deals director, regions and SME, commercial at RSA, said:
“Although the vast majority of SMEs are untroubled by Brexit, there are a range of risks that appear to have fallen under their radar. Our research shows a significant disparity between the issues perceived by UK businesses to be a risk and the extent to which they are protecting themselves against them. Many are putting themselves in a precarious position by not having anything to fall back on if they are hit with unexpected costs. Although not all risks are directly insurable, there are policies that businesses can take out that would alleviate the impact these risks could have, such as, for example, business continuity insurance which could cover loss of income in the event of a significant incident affecting their property.
“There are also risks facing businesses that they are seemingly oblivious to, particularly when it comes to emerging risks such as cyber-attacks. Businesses’ lack of awareness of emerging risks and the fact that only 14% of SMEs plan to increase their cover in the next 12 months suggests the scale of underinsurance amongst UK businesses is likely to worsen in the coming years unless significant action is taken.”
“The onus is not only on SMEs themselves to better manage their risks, but also on brokers and insurance providers to proactively raise awareness of the protection gap and help SMEs to better understand the risks they face, and what they can do to protect themselves against them. RSA has devised a number of recommendations demonstrating what insurers, brokers, government and SMEs themselves can do to subvert this trend and help strengthen UK businesses and their contribution to our economy.”
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