How businesses can better prepare for possible social unrest

The fear factor is growing in Europe
In the context of rampant inflation fuelled by a global energy supply crisis, businesses in Europe are bracing for a tough winter 2022 which might bring energy rationing and widespread unrest.
Headlines point to increased cost pressures on UK and EU businesses and rising social unrest. In this uncertain environment, risk managers and key executives have a difficult time operating and forecasting potential business impacts. Margins of error are limited and critical business decisions need to be made.
To better assess the potential impact of those risks and understand whether uncertainty can be reduced or eliminated, we look back at the Gilets Jaunes protests and the so-called ‘Three Day Week’ in the UK to draw some learnings and shed some light on what could lie ahead in Europe, and how to prepare for it.
What’s the cost of social unrest? Gilets Jaunes: 7 months of disruption that cost €2Bn to businesses and €17Bn to the French State

So what is the ‘Gilets Jaunes’ protest?
The Gilets Jaunes is a large civil protest movement that started in October 2018 in France. Initially created to protest against a rise in duties on diesel and the cost of living, the movement grew rapidly. The protests were organised across the French territory, every Saturday.
The movement was most active between November 2018 and 2019, and lost momentum during COVID-19.
The reported economic and business impacts of the protests
The French government has conducted a detailed analysis of the impact to the economy and businesses towards the end of July 2019: €17Bn in fiscal costs to the State, €2Bn of business revenue losses over 7 months.
Businesses exposed to tourism and high streets suffered the most, especially in large cities like Paris. Losses either stemmed from physical damages due to vandalism, looting, or loss in revenues.
Physical damages have been partly indemnified by insurers. However, the bulk of the economic loss has been driven by business interruptions. Those losses weren’t insured or only partially covered (when it followed physical damages). Whilst a lot of businesses did not incur physical damage, they still were impacted dramatically: customers did not turn up for fear of being hurt or because they could not access the premises all together, due to the various road blockades.

The CNCC has estimated that businesses observed drops in revenues up to 90% on Saturdays, with an average closer to 30%. In Paris, 90% of businesses surveyed have observed ‘material’ drops in revenues since the beginning of the protests. In Champs Elysees, businesses have reported revenue losses for 29 consecutive weekends in the period (7 months). Seasonal retail (e.g. toys and chocolate stores) lost the most, observing drops in their budgeted revenues of 70%. Restaurants and hotels have recorded an average drop of 20% in their weekend occupancy, equivalent to a €850M loss over the period. The transport sector (from airlines to railways and taxis) lost €800M. Supermarkets, hypermarkets, department stores and clothing stores had more muted losses, although still significant, ranging from 6% to 90% of budgeted revenues depending on the location. Independent business owners and small businesses suffered a lot and faced financial distress: they lost between 20% and 60% of budgeted revenues, depending on how close they were to the disruptions.
Revenues lost on weekends were not compensated by increased activity during the weekdays. As always, SMEs have been the most impacted by those protests given their relative lack of resilience compared to larger enterprises. About 48% of independent business owners surveyed reported being in ‘perilous’ financial conditions.
Energy rationing in the UK in the early 1970s

First strike in 1972: 1.5m people laid off in a matter of days
In the early 1970s, the main source of energy in the UK was coal. In the context of a dislocated commodities market (oil embargoes) and high inflation, the UK faced intermittent blackouts due to tight coal supply, further to a clash between the government and coal miners on the rising cost of living.
Several strikes led the UK to declare a State of Emergency, plunging the UK into energy rationing with planned cuts to electricity from 6 to 9 hours every day. This caused great disruption to industry, forcing companies out of business and employees to be laid off: in the two days following the introduction of emergency measures, more than 1.5 million people were laid off, doubling the number of unemployed in a matter of hours.
On the 25th of February 1972, an agreement was finally reached between parties, and miners returned to work three days later, ending a 7-week strike that plunged the UK into chaos.
The Three Day Week of early 1974
In late 1973, the UK electricity market was once again put on its knees, due to renewed disagreements with the miners’ union. In December 1973, the government declared the ‘Three Days Week’, whereby commercial consumption of electricity would only be allowed for three consecutive days each week, from the first of January 1974. On those days, businesses also had to limit their electricity use and were banned from operating for long hours. Only essential services like hospitals, supermarkets, and printing presses were exempt.
Many small businesses did not survive despite the government’s attempts to ensure economic stability. According to historian Dominic Sandbrook, many businesses lost 40% of working hours and maintained production at 75–80% of normal.
After several months of turmoil, the Conservatives’ government lost a majority in the House of Commons to Labour, who subsequently caved to the pay rise demands of miners. The Three Day Week ended on the 7th of March 1974, but several restrictions on electricity use remained in place to allow for electricity supply to catch up.
Drawing parallels to what could lie ahead in Europe: why does that matter?
As of the time of writing in September 2022, the economic outlook is increasingly gloomy in Europe. Rampant annualised inflation (~9–10% depending on countries) — with new highs every month — and sobering forecasts are making daily headlines (e.g. Goldman Sachs & Citigroup see UK inflation topping 18–22% by 2023).
The UK government has been preparing emergency plans and ‘reasonable worst-case scenarios’ for potential blackouts in winter, where cold weather could combine with gas and energy shortages. Assuming the UK and some Western European countries go into controlled energy rationing and lockdowns this winter, there could be significant losses of commercial activity due to both energy rationing and protests.
Social unrest weighs a lot on commercial activity and can lead to large business interruption losses, especially for SMEs. The Gilets Jaunes taught us that a 1-day a week disruption, for 7 months, led to a €2Bn loss of revenues for businesses, with daily drops vs budgeted revenues of up to 90%. The rising cost of living crisis could be sufficient to yield a similar result in Europe. Energy instability could make matters worse, and act as a catalyst for more disruptions.
The reality is that it is extremely hard to know what is going to happen over the next year: good or bad winter, central bank policies, political & geopolitical uncertainty, EU fragmentation, consumer expectations… all are variables that can change the final outcome. In such uncertainty, European CEOs and CFOs may struggle to make decisions and plan for contingencies. The impact of a bad scenario could be particularly severe for the retail sector ahead of the Christmas shopping season.
OTT Risk can provide relief to businesses in needs
At OTT Risk, we’ve designed a new type of insurance coverage that issues ‘all-risk’ protection based on business and economic fundamentals, such as credit card transactions, occupancy rate, passenger flying or store sales data.
Our policies can protect businesses against large shock events such as pandemics, cyber attacks, mass social unrest, or the next ‘unknown black swan’ and help alleviate some of the uncertainty European businesses have to contend with currently.
Whilst traditional policies usually focus on insuring a known event (e.g. a fire) and its contingencies, our model focuses on the actual economic outcome following an insurable event: risk need not be defined precisely, it is instead captured through definition of economic catastrophe: for example following a loss in monthly revenues of 60% vs a set budget. In the context of a myriad of complex risks that could combine into a bigger catastrophe (social unrest, energy and food shortages, unstable political regimes), this approach can provide some ‘peace of mind’ to business operators.
Feel free to get in touch with our business development team and we will provide you with a more comprehensive understanding of the type of protection we can offer.
Industries we support: retail, hospitality, foodservice (restaurants, pubs), travel (airlines, airports), leisure, commercial real estate.
Get in touch with us: contactus@ottrisk.com
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