The cost of the Floods

Evan Davis, the BBC's Economics editor, in his latest blog has estimated the economic costs of the current flooding in the UK and pondered what this would mean economically if this is a precursor to more regular bouts of flooding caused by global warming.

In summary:

• Evan estimates the cost at around £5 billion.
• £5 billion represents under 1/2% of GDP. So small in the big picture.
  
• News stories tend to over-embellish damage done and we tend to over-estimate its economic importance.
• This would be more important if it represented a regular economic cost, say every few years, rather than a one in sixty year event.
• Infrastructure may need to be made more weather-proof at significant expense.
  

Building on flood plains

The leaked UK housing green paper says that a ban on building on flood plains would be "unrealistic". Against the backdrop of widespread flooding in the UK, which so far has affected around half a million people in England, it seems reckless. In fact, Gordon Brown, in his press briefing today, said that climate change meant planning for more extreme weather events was needed. This planning doesn't appear to stretch to where we should safely build people's houses. The only conclusion I can draw is that Brown & co assume that the political gains from happy new home owners is greater than the risk of widespread flooding before an election.

I could of course be being wildly cynical and, in fact, the government are going to take into account the risk of flooding and build appropriate houses like these in the Netherlands.



The BBC has an article about them here.

Of course, the other issue here is insurance. Will Insurance companies insure new homes built in flood planes? It seems unlikely unless the premiums are very expensive and the flood defences very good. Which, of course, they aren't as the state has failed in its side of the bargain and neglect flood defences for years.

As global warming is likely to increase sea levels over the next few decades, the low lying Thames estuary will become susceptible to flooding. It is also being touted by engineers as probably the best flood defence for Central London, particularly against storm surges from the North Sea. The mooted plans to build hundreds of thousands of homes there seems not just reckless for those who would be living there but also for Londoners and their businesses.