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10 August 2011

Financial burden of riots will be crippling.

Recent widespread disturbances are placing a heavy financial burden on individuals, police and insur

By Tess Riley

As businesses in cities across the UK prepare for another night of chaos, figures are constantly under revision in an attempt to predict the cost of the riots.

On Tuesday, £100m was put forward as an estimate. That was before Manchester and Salford, amongst others, witnessed serious overnight disturbances. From looted shops and street fires to a massive increase in police numbers, the costs are escalating.

As it stands, legislation dictates that the police authorities must meet the costs of rioting under the Riots (Damages) Act 1886, which specifies that local police authorities must compensate victims where damage has been caused by people “riotously and tumultuously assembled”.

Although some police authorities are insured against such events, whatever costs not covered must be met by police budgets. In light of the policing budget reduction as part of the public spending cuts, this signals serious concerns for the Met in particular. Reassurances are now being sought to ensure that front-line services including policing, fire and ambulance services will have everything they require to deal with ongoing disturbances.

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As well as the immediate outcomes of the riots, longer-term impacts on services such as tourism should not be overlooked. Shadow business minister Chuka Umunna has said that the riots will have a seriously detrimental impact on Britain’s economic recovery, particularly on small businesses, many of whom will be forced into bankruptcy. The service sector, which makes up around three-quarters of total UK GDP, grew by just 0.2 per cent over the last quarter. It has been “massively dented” by recent events, according to the Labour MP.

The Association of British Insurers (ABI) have made it clear that insurers are working as quickly as possible to deal with claims, despite limitations such as access to dangerous buildings and crime scenes. The organisation is urging people to contact their insurer immediately in order to check what they are covered for and arrange help. Nick Starling, Director of General Insurance and Health at the organisation, said: “We have every sympathy for residents and business owners who have suffered damage to their properties. This is a time of enormous stress for them”.

Comments over what the social impacts of the riots have been prolific, many of them making links between the coalition’s drastic austerity measures and the ongoing implications of these, particularly now in light of the past few days. Mary Riddell points out the deep social cost of high unemployment:

If there are no jobs for today’s malcontents and no means to exploit their skills, then the UK is in graver trouble than it thinks. Mr Osborne may congratulate himself on his prudence, but retrenchment also bears a social cost. We are seeing just how steep that price may be.