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Seven out of 10 small firms would go out of business if they experienced a major emergency in their first year, and over two-thirds have no contingency in place to deal with an emergency, according to the Department of Business, Enterprise and Regulatory Reform’s Annual Survey of Small Businesses’ Opinions 2006/07.

BERR, Defra and the Association of British Insurers have now teamed up to raise awareness of this issue. The ABI has, as a result, produced the Insurance for Small Businesses Guide.

The guide outlines the insurance required of a company by law. It also explores how businesses should protect themselves from compensation claims and legal action, protection for property and employees, and how to manage financial risk.

Pat McFadden, minister of state for the department of business, said: “Small businesses are vital. The millions of people who launch, lead and work for small businesses up and down the country create vital jobs and provide vital risk management advice to help ensure our small businesses grow and flourish.”

Stephen Haddrill, the ABI’s director general, said: “Small to medium-sized firms are particularly vulnerable to the unexpected event that could bring them down. We have produced this guide following last summer’s floods, when insurers dealt with over 27,000 claims from flooded firms and paid out £1bn to them. During that time it became clear many firms had inadequate or no plans in place to help them survive a major incident. I urge all firms to plan for the unexpected. Doing so will make the difference between survival and going under should the worst happen.”