New flood insurance scheme would lead to permanent pub closures, say property agents

05-Feb-2014 - Last updated on 05-Feb-2014 at 09:00 GMT

Related tags Insurance

The new scheme excludes most buildings cover for leasehold sites and small and medium-sized enterprises

Property agents have warned that there could be permanent pub closures if a new Government-backed scheme - which would see thousands of pubs excluded from access to affordable flood insurance - is rubber-stamped.

The Government has passed a bill at second reading to set up Flood Re, an insurance scheme for high-risk properties, from summer 2015. The scheme is intended to replace the ‘Statement of Principles’ under which insurers offered affordable flood coverage in return for the Government maintaining its spending on flood defences, which was felt to be untenable.

However, the new scheme excludes most buildings cover for leasehold sites and small and medium-sized enterprises (SMEs), which means thousands of pubs would be left without access to affordable flood insurance.

'Serious consequences'

Sean Ludden, licensed & leisure director at Colliers International, said the scheme has “potentially serious consequences” for the pub industry, “with the possibility of permanent closures”. Colliers is currently marketing a Devon pub, which was severely flood-damaged in 2012.

“With no certainty of obtaining insurance in the future, pub buyers have been very reluctant to make the investment necessary to get this once thriving business up and running again, and it is likely that the building will eventually be sold for a fraction of its former value, and converted to an alternative use, leading to its permanent loss from the sector,” Ludden said.

He added that the Government’s proposals disregard the fact that most pubs are a home as well as a business.

'Financial ruin'

Fleurets director Simon Hall said the scheme could lead to “financial ruin” for licensees and “potentially the permanent closure of yet another pub”.

“It never ceases to amaze me how the Government can take a good idea that should be all about positive support for people who need it and, through penny pinching and lack of consideration, turn it into a negative,” he said.

“All the discussion is focusing on who or what will not be covered and there seems little support for anybody to be excluded, be that leasehold or freehold, residential or commercial — or, indeed, pubs.”