Events | 2010.04.19
Volcanic ash flight disruption 'costing UK £100m a day'
About three-quarters of the UK\'s financial losses resulting from the flights lockdown are being borne by the airline industry
As the UK flight disruption enters its fifth day, Britain\'s financial community is starting to count the cost of the disruption – and the estimates keep rising.
The Centre for Economics and Business Research (CEBR) said this morning it believes the UK economy will lose £100m for every day that planes are grounded. About three-quarters of that cost is being borne by the airline industry, with the wider economy suffering a £25m hit.
The crisis began last Thursday, and there are fears this morning that it could run all week. That suggests UK Plc could be landed with a £1bn bill.
The CEBR itself had to cancel two meetings this morning because attendees could not make it. It warned that many corporate supply chains will be disrupted, with companies that rely on perishable goods being particularly hit. We reported on Friday afternoon that the main air freight distribution at Heathrow airport has ground to a halt , which could hit supplies of asparagus, grapes, green onions, lettuce and pre-packed fruit salad.
As so often, small firms may suffer most from the disruption. The Federation of Small Businesses (FSB) is worried that some could encounter cashflow problems unless flights resume soon.
"There is huge concern that it will be hard for people to put money into the bank, as well as putting their reputation at stake and making it hard to attract new customers," said the FSB\'s Stephen Alambritis.
The FSB is also worried that small firms could miss a VAT payment because their financial controller is stranded abroad. It called on HM Revenue & Customs to be lenient over late VAT payments.
"If a taxpayer is stranded and not able to return their quarterly tax form on time ... it should be treated as a reasonable excuse," Alambritis argued.
We called HMRC about this. They don\'t have a blanket response for volcanic ash-related issues, but promised to look at each case on its merits.
Back on the wider economic impact, and Howard Archer of IHS Global Insight is confident the impact will be limited in the near-term. He said the airlines\'s woes are good news for rail and coach operators. And while Britain is missing out on revenue from overseas tourists, it will benefit as those stranded foreign holidaymakers spend money in Britain instead.
"The overall impact on business confidence should be slight and there should be little, if any, impact on consumer confidence. The main rider to this is that the economic recovery is still very fragile, so that any event that has any negative repercussions at all may have more of a depressing impact on confidence than it would if we were in economic good times. And the uncertainty stemming from how long the volcanic ash problem could last may also affect confidence," he said.
For more information, please visit
http://www.guardian.co.uk/business/blog/[...]/volcanic-ash-flights-airlines
