UK economists prove cold weather hurts small businesses the most

Analysis of Met Office and ONS data reveals the weather events that impact the UK economy and small businesses are hit the hardest.

Cold snaps are the weather phenomenon most likely to damage UK business performance, according to new research.

Economists from the Centre for Economics and Business Research (Cebr) examined the relationship between different weather events and economic growth across the UK’s main industries over the last decade.

They found that since 2005, periods of very cold weather have seen quarterly GDP growth on average 0.6 percentage points lower than typical levels. When minimum temperatures are one degree Celsius lower than average, quarterly GDP is on average £2.5 billion lower. This is a bigger negative effect than any other form of adverse weather, including snowfall, heat waves or flooding.

The fall in GDP results from lower output across a number of industries and lost productivity as transport link sand staff availability suffer. Those who do get to work on particularly poor weather days often meet a skeleton staff, hindering productivity.

Whilst cold has the biggest negative effect on the economy, different industry sectors are impacted by different forms of extreme weather. For example, professional services and accommodation and food are the sectors that take the biggest hit from heavy rainfall.

High rainfall has a big impact on office-based jobs, with just 10 millimetres above average costing the economy £86 million in a single quarter. In January 2015, rainfall was 26.5mm above the 2004-2014 January average of 126.8mm – potentially costing the economy £76.3 million over the quarter.

SMEs suffer

The research also explores the resilience of businesses of different sectors and sizes. The information and communications sector is one of the few to see positive growth during poor weather, which Cebr attributed to its more prevalent use of cloud-based technology allowing employees to work from home. On average, nearly two thirds (65 per cent) of all companies in this sector use some form of cloud technology compared to just 15-30 per cent of all other businesses.

But the report warns that smaller businesses are at a disadvantage in terms of poor weather, as Scott Corfe, head of UK Macroeconomics at Cebr explains.

‘Many small offices are unprepared for such events as they often lack remote access to their work due to security concerns and a lack of infrastructure,’ he says. ‘This is compounded in many cases by inadequate internet connections or computing power at staff homes. In addition SMEs (small and medium sized businesses) tend to suffer more than their larger counterparts who can spread the setup and maintenance costs of remote working infrastructure across many more staff.’

The report was commissioned by cloud services company 8×8 Solutions and released in the run up to Business Continuity Awareness Week to highlight the need to prepare for adverse weather.

‘Bad weather hits businesses hard, and medium-sized companies are more vulnerable than their larger counterparts,’ says Kevin Scott-Cowell, CEO of 8×8 Solutions. ‘Until now, the technical infrastructure to enable remote working and guard against disruption has been out of reach for many companies, but cloud solutions are changing this.

‘It’s now affordable for any size business to put in place a plan and deploy the right remote working technology. This can make sure it’s business as usual for customers, whatever the weather.’

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