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4 Economic Assessment
4.1 Background
The assessment of damages associated with flooding and
erosion events caused by severe weather conditions has been
developed over the years by Defra (previously
MAFF) in order to provide the business
case for investment to reduce the risk to people and the
built and natural environment. The damages can be divided
into two main categories: those that can be assessed in
monetary terms (£) and those that cannot readily be valued
but can be described in qualitative or quantitative
terms.
Much of the work has been carried out by the Flood
Hazard Research Centre at Middlesex University for
MAFF and Defra and takes the form of
manuals which have now been brought together in the
Multi-Coloured Manual (
MCM). The
MCM gives comprehensive depth damage
data for residential properties and to a lesser extent for
commercial properties. The
MCM also gives guidance on assessing
emergency service costs, disruption to road and rail
travel, values of changes in agricultural output and values
for enjoyment for coastal recreation.
However, there are also impacts from flooding and
erosion that are difficult to value in monetary terms such
as damage to heritage assets or environmental sites. These
impacts may have considerable value to society and to not
include them in an impact assessment may under-estimate the
damages. A number of techniques can be used such as
replacement costs; benefits transfer techniques or aversive
expenditure. If none of these are suitable then it may only
be possible to describe the impacts and make a value
judgement.
Table 4-1 gives an indication of the likely impacts from
flooding and/or erosion and whether they can be valued in
monetary terms or not. This uses an Appraisal Summary Table
(
AST) approach to provide a systematic
list of potential impacts. An
AST is the starting point for each
assessment exercise where the impacts for the particular
scenario being investigated are identified, and it is
considered whether monetary valuation is appropriate or
not. Table 4-1 gives an initial indication of the
methodologies available for assessing those impacts that
can be valued in monetary terms and is derived from several
sources including the Multi-Coloured Manual (
MCM), see Table D-1 in Appendix D.
The two tables provide a starting point for estimating
the costs of the extreme weather events in Scotland. The
final output will be costs broken down by activity together
with a description of those impacts not easily costed, but
again, reported by activity, using the
AST format discussed above and as shown
in Table 4-1.
It must be noted that providing an estimate of the costs
is constrained by data availability rather than methods
available.
Table 4-1: Appraisal summary
table for assessment of damages from flooding and
erosion
Impact Category | Impact likely? (Y/N) | Impact Details | Qualitative or Quantitative
Assessment | Monetary valuation |
|---|
Economic Impacts |
|---|
Assets | | Damage to building fabric | | v |
|---|
Damage to household inventory items | | v |
Damages to services in commercial
properties | | v |
Damage to moveable equipment on commercial
properties | | v |
Damage to fixtures and fittings in
commercial properties | | v |
Clean-up costs | | v |
Erosion of assets | | v |
Loss of memorabilia and irreplaceable items
and pets | v | |
Disruption to household due to flood
damage | | v |
Emergency repair and response costs | | v |
Land use | | Erosion of land | | v |
|---|
Change in agricultural output | | v |
Permanent evacuation of area | | v |
Transport | | Increased travel costs (road traffic
disruption) | | v |
|---|
Increased travel costs (rail disruption) | | v |
Business development | | Additional communication costs | v | |
|---|
Environmental Impacts |
|---|
Physical habitats | | Impact on environmental sites | v | |
|---|
Water quality | | Change in water quality | v | |
|---|
Water quantity | | Change in quantity available | v | |
|---|
Natural processes | | Changes that may produce a negative impact
on the developed environment | v | |
|---|
Historical Environment | | Damage to building fabric | | ? |
|---|
Damage to inventory items | v | |
Damages to services | v | |
Damage to moveable equipment | v | |
Damage to fixtures and fittings | v | |
Clean-up costs | | v |
Erosion of assets | | v |
Loss of irreplaceable items | v | |
Disruption due to flood damage | | ? |
Emergency repair and response costs | | v |
Landscape and visual amenity | | Change in landscape | v | |
|---|
Social Impacts |
|---|
Recreation | | Loss of leisure and recreational
opportunities | | v |
|---|
Increased cost of shopping and recreational
opportunities | | ? |
Health and safety | | Worry about future flooding | | v |
|---|
Damage to physical and/or mental health,
death or injury | | ? |
Loss of confidence in authorities and
services | v | |
Availability and accessibility of
services | | Evacuation costs and emergency services
costs | | v |
|---|
Loss of utility services | | ? |
Loss of services | v | |
Equity | | Loss of income/earnings | | v |
|---|
Sense of community | | Loss of community | v | |
|---|
Disruption due to flood warnings or
alarms | v | |
4.2 Developing an Approach to Estimate the
Economic Costs of Flooding in August 2004
Once categories that can be accorded a monetary value
have been identified, it is necessary to obtain values that
reflect the cost of flooding in Scotland. A spreadsheet has
been utilised to enable a range of damage estimates (low,
mid and high) to be derived. It is considered that a range
can be used to reflect uncertainty within the damage
estimates and to provide a basis on which the damage
estimates are proportional to the size of the flood event,
landslide, etc.
The spreadsheet includes estimates for 29 different
types of damage. A copy of the 'damage data' spreadsheet,
which sets out the damage costs used for each category,
together with the reference source and key issues
concerning uncertainty and application to Scotland, is
given in Appendix D. Many of the damage costs can use the
same base data to estimate costs (
e.g. costs to emergency services and
evacuation costs are also based on the number of
residential properties) such that the data
entry/information required can be simplified. For example,
damage to building fabric and damage to household inventory
items are combined to give an estimate of damage to
residential properties from flooding. Other estimates
provide alternative costs depending upon the type of impact
experienced. For example, change in agricultural output due
to flooding of farmland can be related to different types
of crops/grassland (grass/cereal rotation, arable,
intensive grass and extensive grass). In this case, the
spreadsheet allows different crop types to be selected such
that an overall estimate of damages from flooding of
farmland can be calculated.
Once those damages that can be aggregated have been
combined, there are a total of 15 categories for which
damages can be estimated. Each category requires specific
information that can be combined with the damage estimates
to give an economic cost of flooding for that category.
This information is entered into the 'summary of damage
estimates' worksheet. For example, damages to commercial
properties are calculated once the number of commercial
properties affected has been input. As with the damage
estimates, it is possible to enter low, mid and high
estimates to provide a range of overall economic costs.
Other categories require two pieces of information. For
example, residents may move home during repairs rental
costs may be incurred whilst residents are in alternative
accommodation, the number of weeks for which this is needed
and the number of residential properties affected has been
considered. This is then multiplied by the cost of renting
per week to give the economic cost. A copy of the 'damage
estimates for Scotland' worksheet showing the how the
information entered into the 'summary of damage estimates
worksheet' is combined with the damage data is given in
Appendix D. This worksheet also presents the low, mid and
high cost estimates for each of the 29 different types of
damage.
Detailed information on low, mid and high estimates for
damage data and the specific information on numbers, areas,
distances, etc. affected by the flooding in August 2004,
leads to a comprehensive spreadsheet from which the
'summary of damage estimates', which provides an overall
estimate of damage costs derived. The summary data is
divided into three categories:
- Economic: damages that relate to economic losses,
such as to property, roads, transport, etc.
- Environment: damages that relate to impacts on the
environment, including loss of environmental sites (
e.g. due to erosion), impacts on
historic/heritage sites and impacts on bathing waters;
and
- Society: damages that relate to the well-being of
the local population, including worry about future
flooding, injuries occurring as a direct result of
flooding, evacuation costs, loss of services, loss of
earnings and loss (or increased cost) of leisure and
recreational opportunities.
4.3 Damage Estimates for Flooding in Scotland
in August 2004
Using information available on the number of properties
(residential and commercial), number of landslides, impacts
on transport links, and more general data on the effect of
the floods, a range of damage estimates have been
calculated. In many cases, the available information had to
be supplemented with 'typical' data and/or inferred from
the amount of data that was available.
Table 4-3 presents variables used to estimate the
economic costs of flooding in August 2004. The rationale
for the estimates given is also provided. This is the
information that is entered into the 'summary of damage
estimates' worksheet. In most cases, there was little
information on which to base the estimates such that the
use of low, mid and high provides a way of capturing the
likely costs within a range.
Table 4-2: Information used
to estimate the economic costs
Damage Category | Units | Information Used | Rationale |
|---|
Low | Mid | High |
|---|
Damage to residential properties | Number of residential properties flooded | 169 | 186 | 211 | 169 properties were known to have been
flooded, to account for those that may have
been missed the mid value uses the low value
+10% and the high value uses the low
value+25% |
Damage to commercial properties | Number of commercial properties flooded | 20 | 22 | 25 | 20 properties were known to have been
flooded, to account for those that may have
been missed the mid value uses the low value
+10% and the high value uses the low
value+25% |
Need for rented accommodation | Number of weeks that rented accommodation is
required | 1,690 | 1,859 | 2,113 | Based on number of residential property
affected and an average of 10 weeks per
household in rented accommodation |
Lost working days | Number of days lost | 438 | 482 | 548 | Based on two lost working days per
residential property flooded |
Erosion of agricultural land | Number of hectares eroded | 0.4 | 0.44 | 0.5 | Based on average of 400m2 of agricultural
land eroded per landslide over 10 landslides
for the low estimate. Mid is low+10% and high
is low+25% to account for landslides not
included |
Flooding of agricultural land | Number of hectares flooded | 20 | 22 | 25 | No measurements of area flooded were
available, except that there were 'some large
areas'. Mid value is low+10% and high value is
low+25% to give a range |
Erosion of environmental sites | Number of hectares eroded | 0.4 | 0.44 | 0.5 | Not known, assumed to be the same as
agricultural land |
Cost of slight injuries | Number of slight injuries | 78 | 107 | 146 | Number not known but based on injury risk of
0.2 to 0.3 (
i.e. 1 in 5 people to 1 in 3
people flooded) multiplied by number of
residential properties flooded and average
household size (2.3 people per household) |
Cost of major injuries | Number of major injuries | 0 | 1 | 1 | Based on injury risk of 0.001, 0.002 and
0.003 and number of residential properties
flooded and average household size (2.3 people
per household) |
Damage to historic buildings | Area of historic buildings affected (m2) | - | - | - | No information on specific impacts on
historic buildings. Not possible to value |
Disruption to train services | Number of days that train service is out of
operation | 2 | 4 | 6 | Based on number of flood events affecting
train lines and estimate of 1, 2 and 3 days per
event |
Costs of emergency repairs | Number of emergency repairs required | 20 | 30 | 50 | Based on number of flooding events and total
number of events [Note relates to costs of
repairs to defences, flood structures and
assets] |
Disruption to road traffic | Length of diversions (km) | 170 | 213 | 340 | Based on 30km for diversion on A9, 100km for
diversion on A181 and a number of smaller
diversions on other roads. Mid value is low+10%
and high value is low+25% to give a range |
Damage to roads | Length of road requiring repairs (m) | 500 | 750 | 1000 | Based on average length of road to repair of
50m, 75m and 100m over 10 landslides |
Cost of reduced water quality at beaches | Number of beaches failing guide
EC Bathing Water
Standards | 0 | 0 | 0 | EC Bathing Water Directive
allows three spills per season due to adverse
weather. No single beach exceeded three spills,
therefore, no damage costs are expected to have
been incurred |
4.4 Summary of the Estimated Costs of Flooding
in Scotland in August 2004 and Key Issues
The information presented in Table 4-2 was used to
calculate the monetary value of damages and this is
presented in Table 4-3 as being within the range of £7.2
million to £31 million. The low figure is considered to be
a robust minimum estimate of costs. The mid range estimate,
which may be considered the best estimate is £18 million.
However, there are a number of key uncertainties within
these estimates mainly due to a lack of quantitative data
on the extent and effects of the various flood events and
it is necessary to explore these. The most significant of
these uncertainties are discussed below.
Table 4-3: Summary of cost
estimates
Damage Type | Low | Mid | High |
|---|
Economic | £6,600,000 | £15,000,000 | £27,000,000 |
|---|
Environment | £6 | £13 | £30 |
|---|
Social | £610,000 | £2,500,000 | £3,700,000 |
|---|
TOTAL | £7,200,000 | £18,000,000 | £31,000,000 |
|---|
Notes: Based on impacts identified in Table 4-2
Most of the costs are associated with economic damages,
with this representing £15 million of the £18 million for
the mid estimate (83%). For the low estimate, economic
costs represent 92% (£6.6 million) and for the high
estimate, the economic costs are 87% (£27 million). Most of
these costs relate to damages to residential and commercial
properties. The estimates for commercial properties could
be a significant source of uncertainty as they are based on
very high estimates of £109,000 per property (low),
£308,000 per property (mid) and £511,000 per property
(high) (cost figures are taken from the Multi-Coloured
Manual). If all of the properties affected in Scotland are
small shops or premises, the damage estimates are likely to
be too high.
The second most significant economic costs are for
emergency repairs. These range from £1 million (low) to
£7.5 million (high) and include cost of repairs to flood
defences and other flood structures. The damage costs
derived from costs following flood events in Wales and the
estimated number (given in Table 4-3) is based on the
number of reported flood events. Perth and Kinross Council
have reported additional costs of £1.3 Million pounds
associated with floods in August predominantly in the
response phase and repair of local roads
14.
A third major economic cost is road repairs and the mid
estimate of damages of £1.5 million is consistent with that
reported (
RECAP Flooding Forum, 29 November
2004).
The costs to society are also significant, with these
ranging from £0.6 million (low) to £3.7 million (high).
Costs to society for the mid bound estimated are £2.5
million, or 14% of the total. The majority of costs to
society are from worry about future flooding, costs from
slight injuries, and the costs of emergency services and
evacuation of properties.
Worry about future flooding is only included for those
properties that were flooded. This may be an under-estimate
in that other households may also be concerned about the
potential for flooding, particularly if their property is
near to those that flooded in 2004. It may also be an
over-estimate in that it assumes that the level of worry
continues at the same rate over 100 years. In fact, the
level of worry is likely to decrease over time and as the
property may be sold to residents who are unaware of the
risk of flooding.
The costs of slight injuries are based on an average
risk of injuries due to flooding. It is unclear how
accurate the low, mid and high estimates may be of actual
injuries sustained. It is unlikely to be an under-estimate
since there are no reports of large numbers of injuries
during the August floods. The only information available in
terms of injuries was that 'one boy was trapped in a pipe'
and had to be rescued and 'one family's car was trapped in
a mudslide'
15.
The costs of emergency services and evacuation costs are
assumed to apply to all residential properties flooded and
are based on a rate of 10.7% of residential property
damages (from the Multi-Coloured Manual). Uncertainty may
arise regarding the number of properties affected.
Costs to the environment are very low, and relate only
to costs from flooding of environmental sites. No
information was available on the area of environmental
sites flooded, so this was assumed to be the same as the
area of agricultural land. Since the area of agricultural
land flooded is also unknown, costs to the environment are
very uncertain and may be significantly under-estimated if
large areas of environmental sites were flooded. The same
argument holds for damage to agricultural land, where
damages may be significantly under-estimated if the area
affected was larger than 20 to 25 hectares.
It is noted that "Flood Prevention Schemes: Guidance for
Local Authorities, Chapter 5 Economic Appraisal is about to
be published by the Scottish Executive".
4.5 Other (Non-Monetised) Impacts of Flooding
in Scotland in August 2004
Table 4-2 shows that there are some damages that cannot
be expressed in monetary terms. Thus, it is necessary to
provide a description of these impacts such that they can
be included in a discussion of damages. Table 4-4 provides
a completed
AST with descriptions of damages where
it was not possible to place a money value on the
impacts.
Table 4-4: Appraisal Summary
Table for Assessment of Damages from Flooding and
Erosion
Impact Category | Impact likely? (Y/N) | Impact Details | Qualitative or Quantitative
Assessment | Monetary valuation |
|---|
Economic Impacts |
|---|
Assets | Y | - Loss of memorabilia and irreplaceable
items and pets
| Some irreplaceable items are likely to have
been lost in the 169+ residential properties
flooded, but no specific information is
available | |
|---|
Land use | Y | - Erosion of land, change in agricultural
output, permanent evacuation of area
| All impacts have been valued in money
terms | v |
|---|
Transport | Y | - Increased travel costs (road
traffic/rail disruption)
| All impacts have been valued in money
terms | v |
|---|
Business development | ? | - Additional communication costs
| No information available | |
|---|
Environmental Impacts |
|---|
Physical habitats | ? | - Impact on environmental sites
| Some account of damage to environmental
sites is taken into account in the money
estimates of damages. No further information on
impacts is available | v |
|---|
Water quality | ? | | Discharges are known to have occurred,
particularly for bathing waters. However, no
long terms effects are expected | X |
|---|
Water quantity | ? | - Change in quantity available
| No information available, but unlikely to
have been affected unless a pollution incident
affected a water source | X |
|---|
Natural processes | Y | - Changes that may produce a negative
impact on the developed environment
| Impacts on roads from landslides are covered
in costs of disruption and road repairs | X |
|---|
Historical Environment | ? | - Damage to building fabric, inventory
items, services, moveable equipment,
fixtures and fittings, clean-up costs,
erosion of assets, loss of irreplaceable
items, disruption due to flood damage and
emergency repair and response costs
| No information is available on flooding of
historic buildings or sites, hence, impacts
cannot be assessed | X |
|---|
Landscape and visual
amenity | Y | | Landslides will have changed landscape
locally, but most were in areas where
landslides have occurred previously, therefore,
should be little impact on landscape | X |
|---|
Social Impacts |
|---|
Recreation | ? | - Increased cost of shopping and
recreational opportunities
| People would have been forced to undertake
indoor activities which could affect perception
of Scotland as a holiday resort. Impacts are
likely to be limited, however, since weather in
Scotland is known to be changeable | X |
|---|
Health and safety | ? | - Loss of confidence in authorities and
services
| Impact uncertain as weather was recognised
as being extreme. May be some loss of
confidence where a large number of properties
were affected | X |
|---|
Availability and accessibility of
services | ? | | Impact on services (water, electricity, gas,
etc.) is not known. Assumed to have been
limited impact (if any) due to lack of
publicity. | X |
|---|
Equity | Y | | Loss of working days has been included in
the money estimates | v |
|---|
Sense of community | Y | | Long-term effects,
e.g. people moving out of area,
should be localised such that the community is
not impacted significantly. However, no
information is available to verify this | X |
|---|
| | - Disruption due to flood warnings or
alarms
| Will have been disruption due to flooding of
roads, properties and, if warnings were given,
to move property. Impacts expected to be small,
however, compared to direct impacts of
flooding | X |
|---|
Overall, the non-monetised impacts are not expected to
be significant when compared with the money estimates.
Little or no information is available on the types of
impacts described in Table 4-4, which may mean they have
been under-estimated. However, a general lack of
publicity/news on serious impacts suggests that most
impacts were indeed small.
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