The UK’s proposed flood insurance scheme will exclude SMEs, despite protests from the British Insurance Brokers’ Association (BIBA).

The Flood Re program – backed by the Association of British Insurers (ABI) – aims to make cover available to 500,000 high-risk homeowners by adding a levy to all policy premiums.

BIBA has argued that excluding small businesses, which employ about 14 million people, would make it difficult to find affordable cover.

But the Government’s response to a consultation on the legislation has confirmed the exclusion.

It says it recognises the “difficult challenges” facing some small businesses in high-risk areas, but there is “insufficient evidence to justify government intervention in the provision of insurance cover”.

“In general, business insurance policies are often bespoke and already priced to risk, as opposed to the household insurance market where a cross-subsidy has historically been in place,” the Government says.

BIBA has indicated it will continue to fight the exclusion.

Meanwhile, the Environment Agency has published research showing floods cost the UK economy almost £600 million ($1.07 billion) last year.

Affected businesses suffered average losses of £60,000 ($107,443) during the record-breaking wet spell, but flood defences protected 200,000 properties, it says.

“Sustained and targeted investment in flood defences, with the Government taking the lead, is essential to keep on top of the UK’s rising flood risk,” ABI Director-General Otto Thoresen said.

“Insurers play a crucial role in not only helping companies recover from the significant and expensive impact of a flood, but also in offering help and advice to enable businesses to manage and minimise the flood risk.”