UK Businesses Frozen By Cold Snaps
London – 4th March 2015 – Cold snaps are the weather phenomenon most likely to damage UK business performance according to new research released today.
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 decade¹.
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 links and 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 ten 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 £76.3million over the quarter².
ICT sector resilient, but 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. Cebr concluded that this is because the sector leads the way in using cloud-based technology allowing employees to work from home. On average, nearly two thirds (65%) of all companies in this sector use some form of cloud technology compared to just 15-30% 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, 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. 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, 8x8 Solutions, to highlight the need for businesses to prepare for adverse weather to limit lost productivity.
Kevin Scott-Cowell, CEO of 8x8 Solutions, says, “Bad weather hits businesses hard, and medium-sized companies are more vulnerable than their larger counterparts. 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.”
The research is released in the run up to Business Continuity Awareness Week, an initiative run by the Business Continuity Institute. Lyndon Bird FBCI, Technical Director at the BCI, said, “This research is a timely reminder of the need for companies to adopt business continuity management best practice. That means having the plans and technology in place to manage risks to the smooth running of their organisation or delivery of a service, ensuring continuity of critical functions in the event of a disruption, and effective recovery afterwards.”
Notes to editors
- 1. The report was compiled by the Cebr in February 2015. This report examines the relationship between weather events and economic growth (measured in terms of gross value added, “GVA”) across the UK’s main industries. The report considered the time period 2005-2014 in the analysis.
- Economic data was sourced from the ONS national and labour market accounts and weather data was sourced from the Met Office.
- The optimal series for this report was found to be quarterly growth rates of GVA.
- Seasonally adjusted data was used as this takes account of the impact of regular weather changes across the year – allowing us to identify how abnormal weather impacts different parts of economy.
- Indicators were required to identify abnormal weather events and industry values.
- An abnormal weather event was defined as one in which weather was significantly above or below long-term averages for a given month. (More than one point five standard deviations away from the average in statistical terms).
- Several models were test in this report, the optimal model was found to be:
- Averaging sector economic growth rates in periods of abnormal weather with longer term averages.
- £ values of losses are calculated using the latest quarterly national accounts data.
- Data taken from the Met office analysis of January 2015
In January 2015, the overall UK rainfall total was 126% of average.
The historic average rainfall for January is 242mm. 126% of 242mm is 305mm, 63mm above average.
10mm above average rainfall costs the economy £86m per quarter. 26.5mm additional rain is equivalent to £ 76.3million cost to the economy per quarter.
About 8x8 Solutions
8x8, Inc. (NASDAQ:EGHT) is a provider of unified communications and collaboration (UCC) services in the cloud to small and medium businesses and mid-market and distributed enterprises. The company delivers a broad suite of UCC services to in-office and mobile devices spanning cloud business VoIP phone service, virtual meeting web conferencing, contact centre software and virtual desktop through our proprietary unified software as a service, or SaaS, platform. For additional information, visit www.8x8.com, or www.8x8.com/UK or connect with 8x8 on Google+, Facebook, LinkedIn and Twitter.