• British businesses poorly cushioned against shocks in uncertain times

    November 24th 2016. Posted in Business Insurance

    As the UK economy embarks on uncertain times, a new study by AXA finds that financial cushions are absent or threadbare for most of the nation's businesses. Instead, family and friends remain the main source of rescue for business owners facing the toughest times.

    • Family remains the biggest source of support when UK businesses face a crisis – by providing finance or labour during hard times.
    • The average business could only keep going for three months on current funds. One in ten – half a million businesses – have less than a month's worth of capital.
    • Fifty one per cent of small firms with employees are potentially breaking the law by not taking out employers' liability insurance. Freelance professionals are least protected from claims.

    One-man bands rule in the UK: 4.2 million of the nation's 5.5 million businesses have no employees and run entirely on the efforts of one man or women1. But what happens when illness, accident or other life events take that person out of action? AXA found that for 44 per cent of British firms2, it would spell closure and a rapid fall in income for those days, weeks or months.

    Thirty one per cent say they could keep the business going, but only because their family would rally round them. Most commonly, their partner takes the reins, but with the growing number of ‘grey entrepreneurs', children and grandchildren are increasingly called in. And for one in twenty, it is mum or dad who gets a call.

    Altogether, just 28 per cent could afford to call in professional help if they were out of action.

    While most businesses surveyed reported steady or increasing profits over the past year, few feel confident enough to put money aside for hard times. The average business could only keep going for three months on current funds. And one in ten – half a million businesses – say their resources would not stretch even to the next month.

    When it comes to finance, a quarter say they would turn to family and friends first for a loan rather than trust to formal financial mechanisms. Thirty per cent would use their personal credit card, and just 22 per cent would turn to business banking services.

     

    Common misunderstandings about insurance persist

    AXA's latest figures on insurance take-up among SMEs (first half of 2016) also suggest that under-insurance remains a risk for small firms:

    • Fifty one per cent of small firms with employees are potentially breaking the law by not taking out employers' liability insurance (little change over the past three years). Fines can be as high as £2,500 for each day an employer isn't insured.
    • Freelance professionals are the worst protected against claims. Only 35 per cent of those who provide professional services are covered for negligence claims or breach of data protection laws.
    • By contrast, there has been a steady increase in the number of businesses covered for accident/injury claims from members of the public. In 2012, 66 per cent of firms had public liability cover; that is now 82 per cent, and rising.

    Darrell Sansom, Managing Director, AXA Business Insurance, comments:

    "We have a fantastic tradition of family at the heart of business here in the UK. Many entrepreneurs start out with a baby on their knee at the computer, or credit their earliest successes to the help and support of their partners and loved ones. But in an advanced economy like ours, businesses should also have a range of financial tools to call upon when they face unexpected illnesses, accidents, setbacks and shocks.

    "It is a worry that small businesses are still so exposed financially, and insurance gaps persist, even on legally required cover. There remains a job to do to inform businesses better about their risks and the support available – and these findings are a call to action not just to small businesses, but to everyone in our industry too."

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    Notes for Editors 

    1Department for Business Innovation and Skills, Business Population Estimates for the UK and Regions 2016, 13 October 2016.

    2Figures taken from a survey of 500 small business owners conducted by AXA Business Insurance in July 2016 and compared with previous years' quarterly surveys of similar sample size.

    AXA's top tips for crisis resilience

    • Create a succession plan now while the going's good. Identify external contractors who could take on work for you're out of action. If a family member is the best bet, train them now in any necessary skills – and prepare a good handover document.
    • Speak to your accountant or financial adviser about emergency funds. A professional can often identify little changes in how you manage cash flow and advise on the best way to put funds aside for an emergency.
    • Check what insurance you need and what your business insurance package includes. If you renew automatically every year, your policy may not accurately reflect your current business. For example: does it cover recent purchases of equipment, seasonal or casual help, or risks associated to new kinds of services or contract?

    Business insurance explained

    Professional indemnity insurance: https://www.youtube.com/watch?v=mdMQuhkl88Y

    Employers' liability insurance: https://www.youtube.com/watch?v=awqkujczeFA

    Public liability insurance: https://www.youtube.com/watch?v=TlbDKswF8UY

    Legal Notes 

    AXA Business Insurance

    AXA Business Insurance is part of AXA Insurance UK plc, which belongs to the AXA group of companies. With us, you choose the business insurance that's right for you. We offer public liability, employers' liability and professional indemnity insurance online to start ups, sole traders, self-employed people and small businesses. In addition we offer van insurance and landlord insurance. AXA Business Insurance also runs Business Guardian Angel which provides resources to help protect and grow small businesses.

    You can follow AXA Business Insurance on Twitter @AXAbizteam, for business insurance help, and @AXABizAngel, for the latest business news. You'll also find AXA Business Insurance on Google+ and Facebook - and you can watch expert guides and business case studies on the AXA Business Insurance YouTube channel.

    About AXA

    The AXA Group is a worldwide leader in insurance and asset management, with more than 161,000 employees serving 103 million clients in 59 countries. In 2014, IFRS revenues amounted to Euro 92.0 billion and IFRS underlying earnings to Euro 5.1 billion. AXA had Euro 1,277 billion in assets under management as of December 31, 2014. In 2015 Interbrand ranked AXA the 1st insurance brand worldwide for the 7th consecutive year.

    In the UK AXA operates through a number of business units including: AXA Wealth, AXA Commercial Lines and Personal Intermediary, AXA Personal Direct and Partnerships, AXA PPP healthcare, AXA Ireland and an independent distribution business Bluefin. AXA employs over 12,000 staff in the UK.

    The AXA ordinary share is listed on compartment A of Euronext Paris under the ticker symbol CS (ISN FR 0000120628 - Bloomberg: CS FP - Reuters: AXAF.PA). AXA's American Depository Share is also quoted on the OTC QX platform under the ticker symbol AXAHY.

    The AXA Group is included in the main international SRI indexes, such as Dow Jones Sustainability Index (DJSI) and FTSE4GOOD.

    It is a founding member of the UN Environment Programme's Finance Initiative (UNEP FI) Principles for Sustainable Insurance and a signatory of the UN Principles for Responsible Investment.