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True cost of Beast from the East could be hundreds of millions, warns business expert

Professor Lawrence Bellamy

Published on 05 March 2018

The Beast from the East could cost North East business hundreds of millions of pounds in lost revenue as plummeting temperatures leave companies out in the cold.

With further weather warnings in place, motorways closed, schools shut and public transport systems struggling to keep passengers moving in challenging conditions, the impact of the arctic weather front battering the region has already taken a significant toll.

But the true economic cost of the past few days on the North East will spiral into the hundreds of millions and resonate for months to come, according to one expert.

Professor Lawrence Bellamy, Dean of the Faculty of Business, Law and Tourism at the University of Sunderland, explains how a snowball-effect of different factors has made the past 48-hours a nightmare for small - and big - businesses.

Professor Bellamy said: "Extreme weather conditions are thankfully rare in the UK, but the blizzards this week have caused significant disruption across the North East region. 

"If you are an employee, on a reasonable contract of employment, then the resulting travel delays, school closures and event cancellations tend to have limited financial impact. 

"For companies across the region then an extended time of disruption can make the difference between profit and loss. The North East has a strong manufacturing sector with complex supply chains. It only takes one element of that chain to fail and disruption can occur throughout the organisations involved."

It is not just staff struggling to get into work that is causing a headache in the region but also the UK-wide disruption the snow has brought to transport systems. Sections of the A1 across the region have been closed, train services in and out of Newcastle and Sunderland cancelled, and Metros disrupted.

Professor Bellamy added: "Processes cannot be operated safely without the correct staff and production does not occur without the correct materials arriving. 

"Lean operations reduce stock levels and critical items delayed can stop the line. The road delays and closures on critical routes such as the A1M, M62, A19 and A66 cut off the vital supply of people and materials needed to keep firms running."

But it is not just during the bad weather that businesses will feel the chill. The long-term costs of the Beast from the East will rumble on. 

"For some organisations getting back up to the required output capacity can take days or weeks," says Professor Bellamy. "With each day under optimum output costing thousands or potentially millions across the supply chain. Recovering from this takes extra effort too, overtime cutting into margins which may already be tight."

The impact of the weather will also hit different businesses in different ways.

Professor Bellamy added: "In retail the supermarket sector supply chains can quickly experience losses through goods which have a limited shelf-life and are available for sale for less time, increasing waste. In extreme events total losses may occur."

Hundreds of schools have been closed across the region, with many parents forced to work from home if that's an option. But this type of home-working also comes at a cost. 

"Whilst the physical movement of goods and people is important then the knowledge economy may not in fact be immune, despite the opportunity for home-working, says Professor Bellamy.

"Increased demands placed upon internet services can lead to reduced download speeds and connectivity issues. All organisations are serviced by support services and critical operations can be hit by power or communications failures."

With the region having a high number of customer contact centres, these can often take the brunt of extreme weather conditions.

Professor Bellamy added: "Sectors such as utilities using call centres can experience increased call volume at the same time as a reduction in the availability of staff. This can hit service levels and hence reputation. The true cost of this will never be known."

Warnings have already been issued after the National Grid reported a six-year high in demand on Wednesday. Suppliers have been asked to provide more gas to meet the demand of homes - but if this does not work businesses may be forced to reduce their usage - further adding to the overall cost of the cold-snap.

  So what is the answer?

According to the University of Sunderland professor "contingency planning is everything".

He added: "Authorities may argue that extreme weather occurrences are so rare that having many resources available to deal with them is not financially viable. The result it could be argued is potentially £100s millions lost to the North East economy. Contingency planning is everything and rapid recovery critical."

David Thompson, 68, runs a sign-making company in the region. The business was forced to close on Wednesday as staff were unable to get into work.

Mr Thompson, of Gateshead, said: "For small businesses like ours, this is a real challenge.

"We managed to open on Thursday but just getting here only solves half the problem. There is then the issue with suppliers and customers.

"You can prepare for this type of event to a certain extent but there are undoubtedly long-term costs even for the shortest of disruptions."