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UK Businesses Tally Up the Steep Costs of Riots

The insured costs of the riots that have rocked the United Kingdom for four dayslook set to exceed 100 million pounds ($163 million), according to early estimates from the Association of British Insurers (ABI).

A riot police officer attempts to break down the door of a house next to a burning car as he is targeted by rioters after local residents claimed a baby was still in the property in Clarence Road in Hackney in London, England.
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A riot police officer attempts to break down the door of a house next to a burning car as he is targeted by rioters after local residents claimed a baby was still in the property in Clarence Road in Hackney in London, England.

However, with uninsured losses resulting from the closing of shops -- as well as a now deeper dent pounded into already fragile economic sentiment -- means that businesses now need strongly supportive governmental policy, businessmen and trade associations told CNBC.com.

"If this has been nipped in the bud now…then I don't think it will do that much damage, but if this goes on for night after night and is broadcast around the world, then it will have an impact, that's unquestionably the case," David Frost, director general of the British Chambers of Commerce, told CNBC.com on Wednesday.

"There's two elements: One is the damage that has been caused on the streets, whether it be London, Birmingham or Manchester. The other is its implications for the economy. One of the things we have seen is businesses shutting up early, taking street furniture away. That's the wider impact," he said.

"There is already huge uncertainty, and the last thing we need is anything that knocks confidence," Frost said.

The UK's economic recovery has slowed, with the Bank of England today revising its gross domestic product growth estimates down to 1.4 percentin 2011, from earlier forecasts of 1.8 percent – the seventh time since the end of the recession that it has cut its projections.

Extra bank holidays scheduled around the Royal Wedding, a blow to manufacturing that stemmed from the Japanese Tsunami, and weakening global sentiment have all weighed on the domestic economy.

Greater discounting helped retail sales to grow at their fastest annual pace since April 2011. That revival may prove brief, as shoppers stay away from commercial districts.

James Lowman, chief executive of the Association of Convenience Stores, told CNBC.com that the riots inevitably will strike a blow to growth, agreeing with Frost that small business owners, many of whom had suffered losses either to property or to sales, will face a tough period of recovery.

"Look at high streets in urban or suburban areas, there are simply less people out," he said. "Combined with the pre-existing slump in the economy, some form of support for the sector, particularly those whose insurance will not cover the damage, could be critical," he added.

For the time being though, shop owners need to prioritize personal safety over that of their property, Lowman said, as reports circulate of small businessmen preparing to physically defend their stores.

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