New research has revealed a number of construction SMEs are not sufficiently protected against risks to their business
Many construction SMEs are not fully insured against risks. New research from insurance and risk management firm RSA examined the effect of economic events such as Brexit on the growth of businesses. It also looked into the risks facing SMEs and how these are managed.
The ‘Future Impacts’ report revealed 77 per cent of construction businesses do not see Brexit as a risk to their business. In fact, 48 per cent said leaving would have no impact on their business at all and 29 per cent said it would have a positive effect.
Firms uninsured despite risks
RSA also revealed the uncertainty facing SMEs with 25 per cent of small construction firms noting they would be out of business if they were hit with an unexpected £50,000 bill. Nationally, this figure for SMEs stands at 28 per cent.
The report recognised three top risks among SMEs:
- Economic uncertainty (35 per cent)
- Increasing market competition (35 per cent)
- Cash flow (31 per cent)
Despite these risks, the RSA report revealed 58 per cent of construction SMEs remain uninsured. Furthermore, 88 per cent of insurance brokers see underinsurance as a problem for SME clients.
Insurance cover must be periodically reviewed
Russell White, Schemes and Deals Director, Regions and SME, Commercial Risk Solutions at RSA, said: “The fact that a quarter of SMEs in the construction sector say that they would go out of business if faced with a uninsured bill of £50,000, really highlights the need for businesses in this sector to ensure that their insurance arrangements are as comprehensive as possible.
“Growing and shifting risks mean that SMEs should be regularly reviewing their insurance cover, however 39 per cent in construction haven’t done this in the past year.”
White added: “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.”
This research comes on the back of a report from Arcadis, which revealed concerns a hard Brexit would see the skills gap in the construction sector widen to a skills gulf.