Home Office Research Study 229
The economic costs of fire
Mark Weiner
The views expressed in this report are those of the authors, not necessarily
those of the Home Office (nor do they reflect Government policy).
Home Office Research, Development and Statistics Directorate
October 2001
The economic costs of fire
Home Office Research Studies
The Home Office Research Studies are reports on research undertaken by or on behalf of
the Home Office. They cover the range of subjects for which the Home Secretary has
responsibility. Other publications produced by the Research, Development and Statistics
Directorate include Findings, Statistical Bulletins and Statistical Papers.
The Research, Development and Statistics Directorate
RDS is part of the Home Office. The Home Office’s purpose is to build a safe, just and tolerant
society in which the rights and responsibilities of individuals, families and communities are
properly balanced and the protection and security of the public are maintained.
RDS is also a part of the Government Statistical Service (GSS). One of the GSS aims is to
inform Parliament and the citizen about the state of the nation and provide a window on the
work and performance of government, allowing the impact of government policies and
actions to be assessed.
Therefore Research Development and Statistics Directorate exists to improve policy making, decision
taking and practice in support of the Home Office purpose and aims, to provide the public
and Parliament with information necessary for informed debate and to publish information
for future use.
First published 2001
Application for reproduction should be made to the Communications and Development Unit,
Room 201, Home Office, 50 Queen Anne’s Gate, London SW1H 9AT.
© Crown copyright 2001
ISBN 1 84082 737 8
ISSN 0072 6435
Foreword
This report on the economic costs of fire provides revised estimates of the total cost of fire
and, for the first time, of the average costs of different types of fire, broken down by
location and cost type. It refines and builds on previous work in this area, drawing together
a wide range of information.
These estimates provide an important tool for decision-makers involved in the appraisal and
evaluation of the impacts of fire prevention, fire cover and damage reduction policies. The
report estimates that fire cost the economy £6.9bn in 1999, but also illustrates that different
types of fire are likely to have different economic impacts. It is essential that this information
is used by government in thinking about how best to allocate time and resources aimed at
reducing the costs of fire.
Inevitably the cost estimates provided are open to scrutiny and improvement, and further
development work will help refine and challenge the findings.
PAUL WILES
Director
Research, Development and Statistics
Home Office
Responsibility for fire policy and research has now moved to the Department of Transport,
Local Government and the Regions. If you would like to comment on this report, please
contact:
Scott Dennison
Department of Transport, Local Government and the Regions
Zone 4/25
Great Minster House
76 Marsham Street
London
SW1P 4DR
Tel:
Fax:
Email:
020 7944 3929
020 7944 2177
[email protected]
i
The economic costs of fire
Acknowledgements
I would like to thank the many people who have assisted in the development of this
research, providing helpful comments, support and advice over the course of the project.
Particular thanks go to Carole Willis, Mike Reed and Lorraine Watson, who have been ever
present in their guidance throughout, and to Zohir Uddin and Sam Brand who took the
project on at such a crucial stage.
Thanks also go to the Cost of Fire Sub-Group of the Fire Safety Advisory Board, who have
ensured that the research reflects what happens in the ‘real world’ rather than just a list of
numbers and calculations, as well as provided helpful comments on the drafts of this study.
Finally, my thanks go to the many statisticians in the Home Office who provided much of the
information for this study. In particular, Rob Schofield, Stuart Deaton and Rebbecca Aust
who have had to handle what must have seemed like an insatiable desire for more data.
Mark Weiner
Economics and Resource Analysis Unit
Home Office
October 2001
ii
Contents
Foreword
i
Acknowledgements
ii
Contents
iii
Executive summary
v
1.
Why measure the cost of fire?
Introduction
Policy development and appraisal
Performance assessment
Why average costs?
Structure of the paper
1
1
1
2
3
3
2.
Background and previous research
Introduction
Previous studies of the cost of fire
5
5
5
3.
Methodology
Introduction
Costs in anticipation
Fire protection and safety equipment in buildings
Commercial and public sector buildings
Dwellings
Fire safety activity
Insurance administration
Costs as a consequence
Damage to property
Domestic property
Commercial property
Losses from vehicle fires
England and Wales
Casualties
Lost business
Costs in response
Fire Service response costs
7
7
8
10
10
11
11
12
13
13
14
14
15
15
15
17
17
17
iii
The economic costs of fire
iv
4.
The estimates
Introduction
Total cost of fire
Sensitivity analysis
Average costs
Fires in buildings
Fires in domestic property
Fires in commercial property
Fires in the public sector
Outdoor fires
Vehicle fires
Other outdoor (primary) fires
Other fire
Malicious fires
False alarms
19
19
19
21
21
23
23
24
24
24
25
25
26
26
27
5.
Using and developing the estimates
Using the estimates
Notes of caution
Future developments
Property damage
Preventing injury and fatality
Lost business
Fire Service costs
Other costs
Improving the breakdowns
29
29
29
30
30
31
31
32
32
34
Appendix 1. Best, lower and higher estimates
Cost estimates for building fires
35
35
Bibliography
37
Executive summary
The Home Office has been conducting a research programme to develop the previous
estimates of the cost of fire produced by Roy (1997), with a view to updating the estimates
and to develop measures of the average cost per fire.
This work has been conducted in collaboration with the Fire Safety Advisory Board (FSAB),
a body established to take a strategic overview of, and advise ministers on, all general fire
safety matters. The FSAB represents the interests not only of the Fire Service and various
government departments, but also of the private sector. This paper forms a report to the
board on the progress of research so far, along with suggestions for future developments.
The Home Office previously estimated the cost of fire in England and Wales in 1993 to be
around £4.5bn (Roy, 1997). This demonstrates the size of the impact of fire, but provides
little information on the relative impacts of different categories of fire, such as by location or
cause. Without this information it is difficult to assess the relative benefit of fire policy and
regulations which may have very different impacts for different types of fire.
Decisions are being made continually on how to reduce the impact of fire. How much to
spend on a TV advertising campaign, what fire protection and safety measures should be
provided, and so on. However, if we cannot assess the benefit of the reduction in fire, it is
difficult to assess which measures are the most cost-effective, and which provide the greatest
benefit to society.
The aim of the research was to develop estimates of the cost per fire for different types of
fire, for use in policy appraisals. It was envisaged that this could eventually form part of a
performance indicator. This would allow fire policy to follow in the footsteps of criminal
policy, and the crime reduction programme, in quantifying and comparing the costs and
benefits of policy interventions. It would also assist in measuring performance against the
Home Office aim ‘to reduce the incidence of fire and related death, injury and damage…’.
Following the re-organisation of departmental responsibilities after the 2001 general election,
responsibility for the Fire Service and fire policy was transferred from the Home Office to the
Department of Transport and Local Government and the Regions (DTLR). The DTLR Business
Plan 2001 includes an objective to "improve health and safety by reducing risks from work
activities, buildings and fire", which is similar in scope to the former Home Office aim.
v
The economic costs of fire
The costs of fire have been estimated using a variety of sources and assumptions. This paper
reports how the estimates have been calculated and highlights the issues associated with
them. Chapter 5 in particular looks at how the current evidence can be improved. Although
there is room for development and improvement, these estimates can go some way to
indicating the scale of impacts of different types of fire and the potential benefits associated
with fire reduction measures.
The average cost varies widely across the locations of fire. The average cost of commercial
fires was estimated to be £63,600 compared to £21,500 for domestic fires (excluding fire
protection). However the cost of casualties is far higher in domestic fires. The least
expensive fires were outdoor secondary and chimney fires at £1,100 per fire.
The total cost of fire was estimated to be £6.9bn with commercial fires accounting for over
40 per cent of this. Costs ‘in anticipation of fire’ accounted for over £3.3bn, with costs ‘as a
consequence’ of fire adding a further £2.5bn, and the cost of the Fire Service responding to
fire accounting for the remaining £1bn.
The cost of malicious fires was estimated to be £1.2bn, excluding the cost of fire protection.
This may be an under-estimate since it assumes that the average cost of malicious fires is the
same as accidental fires in the same location. However it is clear that malicious fires
account for a significant proportion (just under 20 per cent) of the total cost of fire with the
exception of property losses, which are assumed to be 15 per cent higher, following
evidence from the British Crime Survey (2000). A summary of the cost estimates can be
found on page 20, tables 4.1 and 4.2.
vi
1.
Why measure the cost of fire?
Introduction
Fire represents a significant cost to the economies of England and Wales. Previous estimates
suggest that fire cost around £4.5bn in 1993 as a result or in anticipation of fire (Roy,
1997). Even this did not include a range of impacts that result from fire. Reducing this cost
would represent a significant saving to the public and private sectors, as well as to
individuals.
This was the context in which the Home Office undertook research to investigate these costs
more fully and to consider how different categories of fire might impact on society. This work
has been carried out in conjunction with a sub-group of the Fire Safety Advisory Board.
Policy development and appraisal
The current focus of policy is on accidental dwelling fires and arson. This is the result of an
assessment by policy-makers of the number and impact of these fires, and the effectiveness
of policy measures in reducing them. Particular focus has been on areas with high numbers
of casualties. Figure 1.1 shows how the cost of fire can aid this assessment. The largest
category of fire in terms of volume is outdoor fires, but these account for only 13 per cent of
the direct costs resulting from fire.
Figure 1.1:
Number and cost of fires (excluding costs in anticipation of fire)
Number:
21%
Cost:
26%
17%
Domestic
5%
13%
3%
Public sector
37%
13%
54%
Commercial
Other outdoor
Vehicle
11%
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The economic costs of fire
Figure 1.1 indicates why there has been a focus on community fire safety and other policies
on domestic fires. This location is the most costly, representing over one third of the costs
incurred as a direct result of fires. By focusing on domestic fires, fire policy has attempted to
reduce this loss.
Another element (not included in the graph above) is the cost of fire protection measures in
buildings. It has been handled separately because of difficulties in estimating the costs. Fire
protection legislation represents another method of reducing the costs as a consequence and
in response to fire, particularly in commercial and public sector buildings.
It is important that impacts of fire precaution measures are considered in conjunction with
other measures to reduce the cost of fire (e.g. community fire safety measures), to produce
the best combination of policies. This will require cross-government working between
building and health and safety regulations, fire brigades and community fire policies.
The cost of fire research will allow all of these factors to be taken into account through costbenefit analysis, and policy appraisal and evaluation. It allows comparison of the costs of
different policies with their outcomes, helping to answer questions such as:
• how can scarce resources be used to maximise their impact?
• is prevention better than cure (damage mitigation)?
• what is the optimal trade-off between fire safety education, fire protection (e.g.
sprinklers, fire-break walls) and fire response?
Of course, cost benefit analysis does not provide the definitive answer to these questions. It
is just one of a range of tools that should be applied in policy appraisal to consider the
impacts of a policy. However, for the first time the cost of fire estimates allow these issues to
be considered.
Performance assessment
The Home Office formerly had an aim to ‘reduce the incidence of fire and related death,
injury and damage…’ [responsibility for fire policy and research has recently passed to the
Department of Transport and Local Government and the Regions (DTLR). The DTLR Business
Plan 2001 includes an objective to "improve health and safety by reducing risks from work
activities, buildings and fire", which is similar in scope to the former Home Office aim]. A
range of performance indicators was used to try and capture performance against this aim.
2
Why measure the cost of fire?
However, the cost of fire could in future be developed into an over-arching Public Service
Agreement (PSA) measure, since it has the potential to capture all of the impacts of fire. A
measure such as this could be used to assess the overall performance of the government in
reducing the impact of fire.
This paper is only a starting point to developing a measure of this sort. It represents a
promising first step, based on the best available existing evidence, but there are a number
of improvements that could be made to the precision of any indicator. These are explored
further in Chapter 5.
Why average costs?
The total cost of fire is an important figure because it identifies the scale of the problem.
However, it is of only limited use in considering the reasons why costs change, which can
be due to several reasons:
• change in the number of fires
• change in the mix of fires (e.g. proportion of fires in different locations)
• change in the average cost of fires
In addition, the total cost estimates do not facilitate policy appraisal and evaluation. This is
an important aspect of the efficiency and effectiveness of government policy. Without
appraisal and evaluation it is not possible to identify the most cost-effective policies, or to
learn lessons for the future.
Structure of the paper
This report brings together the available data and evidence on the cost of fire. Chapter 2
sets out the context for the research and highlights previous research into the cost of fire
from around the world. Chapter 3 discusses the approaches used and the weaknesses in the
data and assumptions made, whilst chapter 4 sets out the cost of fire estimates. Finally,
chapter 5 considers the key areas for future research needed to improve the current
estimates.
3
The economic costs of fire
4
2.
Background and previous research
Introduction
Fire has historically had a low profile in terms of the perceived risk it poses to life and
property. However, the incidence of fire is not as rare as some believe. There were
396,700 reported fires in England & Wales, including 60,700 fires in dwellings. As a result
of these 556 [525 excluding Paddington rail crash victims] people lost their lives and
15,300 sustained injuries of some kind [Watson, et al., 2000].
However, this does not tell the complete story. The 2000 British Crime Survey estimates that
only between 13 per cent and 26 per cent of domestic fires are reported to the Fire Service
(Aust, 2001). This suggests there were around 663,900 fires in dwellings alone in 1999.
The majority of these fires will be small-scale and result in little or no damage and injury.
What is important is not the number of fires, but the impact of those fires, the measurement
of which is the aim of this report. There have been a number of reports which have
considered this issue in the past and the current work is designed to build on and develop
these.
Previous studies of the cost of fire
One of the most influential reports for England and Wales is the Home Office report ‘The
cost of fires: A review of the information available’ (Roy, 1997). It represents one of the
most comprehensive analyses of the main elements of the cost of fire to date, and draws on
research from across the world. Roy (1997) estimates the cost of fire in 1993 to be slightly
over £4.5bn. The breakdown of this is shown in table 2.1
Table 2.1 also shows an updated figure for 1999 based on the Roy (1997) methodology.
This suggests that the cost of fire in England and Wales has risen to just under £6.1bn, an
increase of £800m in real terms between 1993 and 1999.
5
The economic costs of fire
Table 2.1:
Previous Estimates of the Cost of Fire in England and Wales (£m)
Category
1993
1993
(1999 prices)
1999
850
216
1,206
1,018
1,125
90
4,505
999
254
1,418
1,197
1,322
106
5,296
1,119
296
1,124
1,312
2,107
121
6,078
Direct Property Loss
Loss of Business
Death or Injury
Fire Service
Prevention
Administration of Insurance Claims
Total
Source: The cost of fires: A review of the information available, Roy (1997), Table F (for 1993 data), plus
updated calculations for 1999.
Some of the estimates outlined in table 2.1 are significantly different to those of the current
research (see chapter 4). These are due to different methodologies and assumptions being
applied. For example, estimates of the cost of fire protection in buildings now apply capital
accounting techniques to consider the cost of fire protection in existing buildings [Roy
(1997) uses new construction to estimate this cost, and so varies significantly with the state
of the economic cycle].
The only other work to consider the cost of fire in the UK is the World Fire Statistics Bulletin
(Wilmot and Paish, 2000). This is a regular bulletin which collects data from around the
world and attempts to estimate the cost of fire for different countries on a consistent basis.
This report estimates that 0.67 per cent of the GDP of the UK in 1997 was spent on firerelated costs (although the report does not attempt to place values on fire-related death or
injury). This is equivalent to approximately £4.8bn for the UK as a whole in 1997.
Hall (2000) looks at the total cost of fire in the US. The report has been running for a
number of years, and forms the basis for a number of the assumptions made by Roy (1997).
Hall (2000) estimates that the cost of fire in the US was $65.7bn in 1997 (about 0.8 per
cent of GDP), although this rises to $98.3bn (about 1.2 per cent of GDP) when including an
estimate of the losses to society from fire-related death and injury.
Finally, Schaenman et al. (1994) estimate the cost of fire in Canada and provide one of the
most detailed studies available to date. They estimate that the cost of fire in Canada was
around $11.6bn in 1991 (about 2% of GDP).
6
3.
Methodology
Introduction
The impacts of fire are many and varied and there are a variety of different ways to
categorize these costs. This study uses the same approach as research into the costs of
crime (Brand and Price, 2000). The costs of fire are broken down into three categories:
• Costs in anticipation
These are predominantly protection and prevention measures undertaken by or
for the benefit of potential victims of fire.
• Costs as a consequence
These are costs that are incurred as a result of fire. These costs are due to
exposure of property, individuals or the environment to fire and its products, and
the cost is borne by a range of victims. These include individuals, private firms
and society.
• Costs in response
These are the costs of extinguishing and clearing up after fire. Society bears the
majority of these costs.
The aim of this report is to provide a comprehensive analysis of these impacts, on different
locations, for England and Wales. However, this is only a first step, and a lot of research
needs to be carried out on the knowledge gaps that have been identified. Table 3.1 shows
all of the costs of fire that are, or are not estimated in this report:
7
The economic costs of fire
Table 3.1
Costs of Fire
Estimated
Not Estimated
In anticipation
Fire safety equipment
Fire protection measures in buildings
Fire safety activity by the Fire Service
Insurance administration
Fire protection in consumer items
Fire safety research
Fire prevention education and training1
As a consequence
Property losses
Lost output
Emotional and physical suffering
Healthcare costs
Loss of business
In response
Fire service response costs
Environmental costs
Heritage and cultural losses
Local authority clean up (e.g. removing
burnt out cars)
Householder clean-up costs and
disruption2
Wider economic distortions
Private Fire Brigades responses
Criminal Justice costs and investigation of
arson fires3
1 Other than that provided by the Fire Service
2 Householders will have to take time to arrange for the repair of property, even to move out temporarily. This
cost is included to the extent that it is included in insurance claims, but has not been explicitly considered by this
research
3 An attempt has been made to quantify criminal justice costs for malicious fires, although it has not been
included in the overall estimates.
Costs in anticipation
There are five main elements of costs in anticipation:
1. Purchase of fire safety equipment: – This is the purchase of equipment such as
automatic fire detection and suppression systems, and portable fire-fighting equipment.
These may be a requirement of fire safety legislation. This would also include the cost
of smoke alarms in domestic premises.
2. Fire protection in consumer items: – Consumer items often have fire safety
requirements, for example cut-outs on heaters to prevent over-heating. Such additional
protection increases the cost of the item. However, this cost is very difficult to quantify
since many of the additions are multi-purpose. How much do circuit breakers exist to
prevent fire, and how much to prevent electrocution?
8
Methodology
3.
4.
5.
Fire protection in buildings: – Fire safety and building regulations exist to provide a
minimum level of life safety. However, these regulations may increase the cost of
construction.
Fire safety education and other activity: – There are a variety of activities that can be
classed as fire safety. Fire brigades undertake inspections of certain types of property
to ensure the fire protection regulations are enforced, or employees may be trained on
fire safety as a part of induction courses or health and safety training.
Insurance administration: – The cost of administering insurance policies, including
commissions paid to agents, the cost of setting up policies and the cost of investigating
and administering claims.
Costs in anticipation do not vary directly with the number of fires in the short to medium
term. Fire regulations do not tend change on a year-to-year basis in response to the number
of fires. However, in the long-run it is reasonable to assume that the costs of regulation will
vary in relation to the number, and the damage caused by fire. If the number of fires
significantly increased we might expect consumers to buy more smoke alarms or the
government to respond by amending regulations.
The cost in anticipation should ideally be included in the average cost of fire. It is
particularly important for policy appraisals within government, where the optimum level of
fire protection, both in buildings and consumer items, is sought. In this case there is a link
between the number of fires and the level of fire protection [fire protection is used here in its
broadest sense and includes fire safety activity of brigades, regulations on buildings and
other interventions]. Increasing the level of fire protection reduces the number of fires (or
resulting cost). For all interventions the cost of the policy or regulation should be less than
the benefit of the reduction in the cost of fire.
In practice, it is difficult to estimate the cost-effectiveness of existing fire regulations, but this
does not prevent the appraisal of future changes in policy. This is increasingly important in
debates about trade-offs between fire cover by brigades, building regulations and fire safety
strategies.
This report has attempted to estimate all of these elements, except fire protection in
consumer items and the cost of fire safety education (other than that carried out by fire
brigades).
9
The economic costs of fire
Fire protection and safety equipment in buildings
The cost of fire protection and fire safety equipment has been combined into one for the purpose
of this report. This is because the estimates of the cost of fire regulations include fire safety
equipment. In addition, most fire protection in domestic property involves fire safety equipment.
Commercial and public sector buildings
The bulk of the cost of fire protection in buildings is in the commercial and public sectors.
Fire regulations are predominantly designed to protect the occupiers of these buildings since
private businesses are unlikely to realise the social benefits of such protection [This is an
example of a (negative) externality which could lead to a market failure. Private businesses
would not receive the full benefit of fire protection, for example the value of lives saved, and
so would not be willing to pay for society’s optimum level of fire protection].
The cost of meeting the fire-related aspects of the Building Regulations, as set out in the
provisions of Approved Document B, was estimated by the Building Research Establishment
(BRE) (1996). This, in conjunction with the opinions of fire engineers [Meeting with J.
Hodge, J. Meikle and T. Gough], suggest that the cost of commercial and public sector
buildings is around 5 per cent higher as a result of fire safety regulations [The provisions of
Approved Document B were amended with effect from 1st July 2000, therefore future
estimates will need to consider any additional costs that result]. This includes the cost of fire
safety equipment such as fire alarm systems.
There are two ways that this figure can be used to estimate the cost of fire protection.
Donald Roy used the assumption that the cost of fire protection was the additional cost
associated with new buildings in any one year. Based on this approach (and the assumption
that building regulations add 5 per cent to the cost of construction) the total cost was around
£1,030m for commercial and public sector buildings in 1999.
However, this ignores the cost of fire protection in existing capital and results in highly volatile
estimates (Table 2.1 for example shows how the cost of fire almost doubled between 1993 and
1999). There is a stock of fire protection in existing buildings. The most suitable method of
estimating these costs is to assume the construction cost is annuitised over a number of years. This
can be viewed as the annual cost of loan repayments to build the capital spread over its lifetime.
Based on this approach, the annual cost of fire protection is estimated to be £2,520m [Based on
the assumption of an average lifetime of 80 years, used in ONS capital stock calculations, and
that the average building is half way through its lifetime. The technique also assumes a real
discount rate of 6 per cent, as recommended by the ‘Green Book’ (HM Treasury, 1997)].
10
Methodology
This assumes that the cost of fire protection in buildings is the same today as it was 80 years
ago (in real terms). In practice this cost has changed over time, so that the level (and cost) of
fire protection in existing buildings will vary.
Dwellings
The cost of fire protection in dwellings is even more complicated. Building regulations apply
to some dwellings, such as houses in multiple occupation and property over three floors,
such as bedsits, flats etc. However, most dwellings are not regulated after the initial build.
BRE (1996) found the cost of building regulations in dwellings under two storeys was
negligible, and that over two storeys was around 2.5 per cent. Unfortunately the capital
stock figures do not separate the two and so it is not possible to use the approach identified
for commercial and public sector capital to estimate the capital costs associated with fire
regulations for dwellings.
Aust (2001) records the proportion of domestic premises in England and Wales that have a
variety of fire safety equipment. Using data from the DETR housing survey (DETR, 2000),
and estimates of the average price of equipment [Private correspondence with Stewart Kidd,
Fire Industry Confederation, June 2001], it is possible to estimate the cost of fire protection
equipment in dwellings as £280m. This is a slight under-estimate since it does not include
built-in fire protection measures.
Depending on how the cost is measured, the total cost of fire protection in all buildings
(dwellings, commercial and public sector) is between £1,270m and £2,750m. Given the
range of uncertainty, these figures have not been included in the average cost estimates.
This does not mean that consideration of the issues should not be included in policy
appraisal (as mentioned above), however further work is required to refine these estimates.
Fire safety activity
The Fire Service carries out a range of activities from inspections to community events that
can be classified as fire safety activities. These costs are in anticipation of fire and, as
discussed above, are not affected by the number of fires in the short run. However, over
longer periods it is likely that an increase in the number of fires is likely to increase fire
safety activities.
The cost of fire safety activities has been calculated from returns to HM Fire Service
Inspectorate by brigades. The Inspectorate records the number of hours spent on different
11
The economic costs of fire
inspection and community fire safety activities in different locations. In addition, data are
collected on the number and rank of staff that have a dedicated fire safety role [This means
that all or some proportion of their job is specifically designated to fire safety].
From this it is possible to estimate the average hourly cost of fire safety activities (including
overheads such as management) using the current pay-scales [Three assumptions were
made to do this. Firstly, it was assumed that non-operational staff were equivalent in pay to
a leading firefighter. Second, that staff on the flexible duty system would receive a 20 per
cent higher salary, and finally that the average salary is the median value of the pay-scale,
which may be an under-estimate. It was also assumed that the average hourly cost of fire
safety activity carried out by non-dedicated staff was the same as the cost for dedicated
staff. There was also an allocation of capital (on the same basis as response costs) to take
account offices and equipment that would be used by fire safety staff].
Insurance administration
Insurance administration represents a loss to society resulting from fire. If there was no need for
insurance, the capital and labour used by insurance companies to administer policies and
claims could (in the absence of fire) be used elsewhere and increase output on other products.
There are a number of possible ways to quantify this cost. The technique used in this report
is a variation on the approach used by Schaenman et al (1994). The Association of British
Insurers (ABI) records the value of ‘commissions and expenses’ for both commercial and
domestic property claims (ABI, 2000). It is assumed that the proportion of these expenses
that are attributable to fire is equal to the proportion of fire claims to total claims.
From this it is possible to estimate the average cost for fire for the UK domestic and
commercial sectors, and for vehicles [The public sector is assumed to be self-insured and so
no insurance administration is attributable to these fires]. The proportion of population in
England and Wales is used to allocate the UK costs for domestic and vehicle insurance
administration, and proportion of GDP is used to allocate commercial costs [Note that GDP
figures for 1998 were used since at the time of writing the breakdown by country was not
available].
This approach gives a significantly higher cost than was previously estimated in Roy (1997).
This assumed that insurance administration was around 15 per cent of gross claims for fire
losses. Expenses and commissions are however far greater than gross claims for fire, and
the new technique takes approximately one third of the cost of this figure.
12
Methodology
Costs as a consequence
Damage to property
One of the most obvious costs of fire is the cost of repairing and replacing damaged
property [For many people fire losses will be covered by household insurance, but the
insurance payments only represent a transfer payment. Transfer payments are ‘those for
which no goods or services are produced in return’ (Gordon, 1993). They represent a redistribution of wealth or income from one group to another. In this case insurance premiums
from those who do not suffer losses are re-distributed to those who do. For this reason
insurance payments are not included in the cost of fire. However the cost of the original
property loss is a cost to society]. Insurance statistics currently provide the best insight into
losses resulting from fire. The ABI represents the majority of the insurance market in the UK
and publishes annual statistics on the total value of claims from domestic and commercial
fires each year. This is the source data for the estimate of property damage from fire.
The total value of ABI claims is unlikely to reflect the value of actual losses. There are a
number reasons for this:
1.
2.
3.
4.
The ABI does not represent the entire insurance market. Estimates suggest that Lloyds
insurers account for approximately 10 per cent of the non-domestic market.
Some domestic properties will not be insured because they are too great a risk for
insurance companies to insure, or the premium is higher than the household is willing
to pay.
The government and large firms have sufficient financial flexibility to insure themselves.
Firms will either hold back sufficient funds to cover expected losses, or will maintain a
‘captive’ (internal) insurance company, which will provide insurance cover [Some of
this may be re-insured, either through a market or the captive insurer. In either case
losses will not be captured by the ABI statistics]. In both of these cases losses will not
be recorded by the ABI.
Even when property is insured, the claim will not usually equal losses because there are
excesses to pay. Whilst this may be relatively small for domestic property, it can reach
£1m for certain commercial risks. Fires resulting in damage below this limit will often not
be reported to insurance companies, and will not appear in ABI data [The BCS estimates
that only around 19 per cent of domestic fires are reported to the fire brigades].
As a result, it has been necessary to make various assumptions to adjust the ABI data to
estimate the value of property damaged in fire.
13
The economic costs of fire
Domestic property
Estimates suggest that around 27 per cent of households did not have contents insurance,
and 39 per cent did not have building insurance in 1997/8 (ABI, 1999). This latter figure is
likely to be an over-estimate since it may not include buildings insurance for rented
properties which will be insured by the property owner, not the household.
The problem is exacerbated since some properties may have buildings or contents insurance,
but not both. It is assumed that one third of households (the mid-point of the above figures) do
not have insurance of one form or another (an assumption also made in Roy, 1997).
It is necessary to make assumptions about the size of the average loss, and the number of
fires in uninsured properties. Data from the British Crime Survey (BCS) 1996 (Budd and
Mayhew, 1997) suggests that the average loss in uninsured dwellings is the same as in
insured dwellings [Personal correspondence with Tracey Budd using data from the British
Crime Survey 1996]. However there is little evidence on the risk of fire and so the
assumption is made that the risk of fire is the same in insured and uninsured dwellings.
These are the same assumptions as were made by Roy (1997).
Early analysis of the BCS 2000 leads to a different conclusion from that of the 1996 survey.
The 2000 sweep suggests that the value of property losses are significantly higher in
insured property [Personal correspondence with Rebbecca Aust using data from the British
Crime Survey 2000]. This may be the result of a small number of exceptionally large loss
fires in the sample, and further analysis of the BCS results is necessary. However this
assumption has been used to derive a lower bound estimate of the value of property losses
in domestic property.
Finally, Aust (2001) estimated the value of property losses in England and Wales to be
£375m in 1999. This has been used to derive an upper-bound estimate on the value of
property fires. Both the upper-and-lower bounds can be found in appendix 1.
Commercial property
There is little evidence of the market penetration of insurance in the commercial sector. It is
not possible to estimate the proportion of property uninsured, or the size of excesses on
insured property.
In the absence of better evidence this research has used the same assumptions as the Roy
(1997) report, which uses capital stock to adjust the claims data. It assumes all commercial
14
Methodology
capital will be insured (as a requirement of institutional shareholders and loans taken out),
with the exception of small businesses which may tend to avoid insurance to minimise costs.
(For this purpose, small businesses are defined as non-dwelling capital owned by persons.)
The technique then assumes that the ratio of damage to capital stock is the same for both
insured and uninsured property. However there is little evidence to support this assumption.
The only difference to the assumptions made by Roy (1997) is that Lloyds is assumed to
represent 10 per cent of the non-domestic market. This is following advice from the ABI that
whilst Lloyds represent 5 per cent of the property insurance market, the majority of its
business is focused on non-domestic insurance.
Conversations with people in the insurance industry suggest that the assumption on
uninsured capital may be a serious under-estimate of the size of the uninsured market. Large
firms in particular will tend to self-insure and even have their own internal insurance
companies which insure and re-insure risks to manage the exposure of the company to fire
losses. This seems to imply that losses are higher than this approach might suggest. It might
be reasonable to suggest that 25 per cent of all private (non-dwelling) capital stock is
uninsured. This has been used to derive a higher estimate, shown in appendix 1.
Losses from vehicle fires
The ABI only publishes the total value of claims for damage to vehicles. It is not possible to
identify the proportion of the claim attributed to fire. However, an Arson Scoping Study
(Home Office, 1998) reported that the cost of arson fires in vehicles in the UK was around
£77m in 1996. From this figure it is possible to estimate the average property loss and this
was assumed to be representative of all vehicle fires.
England and Wales
The ABI statistics report on the insurance market for the UK. This means that there needs to
be an adjustment made to estimate the cost of fire in England and Wales. To do this it has
been assumed that the average property loss per fire is the same in England and Wales as
it is for the UK as a whole.
Casualties
It is often argued that it is not possible to place a value on casualties in fire, or any other
situation. However, such values are implicit in choices every day. The decision on whether
15
The economic costs of fire
to fund a road improvement against a new school, or to target domestic over other types of
fire requires a judgement by a decision-maker and places an implicit value on casualties.
There are research techniques that are increasingly being used to place objective values on
the cost of casualties. These values include three elements:
Healthcare costs
Fire casualties tend to result in costs to the NHS. Reducing these casualties will
free money and time to be used on other conditions.
Lost output
Fire victims will often have to take time off work. This represents a reduction in
production in the economy. Preventing fatalities and injuries will increase the
output of the economy.
Emotional and physical suffering
The emotional and physical suffering of victims is a significant cost and the
hardest to value. It is not possible to value the cost to the individual of
experiencing an incident, since different people will be affected in very different
ways. To attempt to value this would demean the trauma suffered. However, it is
possible to derive the value society places in preventing this incident occurring.
A variety of organisations around the world have attempted to value casualties. This study
uses figures from the Department of Transport Local Government and the Regions (DTLR –
formerly DETR) for preventing road accidents (DETR, 2000). These have been used for a
number of years in road appraisals, and are some of the best estimates available. However,
there are a number of weaknesses in applying these values to fires, as discussed in chapter 5.
In order to apply these figures it is necessary to make assumptions about the equivalent
severity of injury. This is an area that fire statistics do not currently record in much detail.
General categories of burns, smoke inhalation, physical injuries and other injuries are
recorded, but within these categories there can be significant variation in the severity of
injuries.
The same assumptions as used by Roy (1997) have been used in this report. All injuries
involving burns, and 25 per cent of injuries involving smoke inhalation are classed as
serious injuries. The remainder are classed as slight, and valued against DTLR estimates of
slight injury excluding whiplash (Hopkin and Simpson, 1996).
16
Methodology
Lost business
Fire can result in significant losses for businesses in terms of lost production, market share
and customer goodwill. Even a minor fire at crucial stages of production can mean very
large losses for individual firms. In addition, fires resulting in the closure of firms could have
significant effects on staff.
However, the losses are not generally as large for the country as a whole. The lost output of
one firm may result in a gain in orders (and output) for another firm. For example, a fire in
the local supermarket means that customers will simply go to another. In this case the only
cost to society is the increased travel time to reach the alternative supermarket. In the same
way, a company which gains business may employ more staff to meet that demand, and the
net unemployment effect may be zero.
The only loss to the country from fire is where output is lost that is not then produced by
another firm. This could either be through foreign competitors picking up the shortfall, or
where firms are producing unique goods that cannot be produced elsewhere in England
and Wales [In terms of unemployment, there may be some costs in terms of short term
adjustments in the labour market, people having to move or re-train to find work]. There may
also be some wider economic distortions (such as social exclusion) that result from largescale loss of injuries, however these costs have not been estimated in the current report (see
chapter 5).
The ABI (2000) records the total value of claims made for business interruption. This is likely
to under-estimate the lost business to the individual firms, for the same reason that property
is generally under-insured. However the losses to society are significantly less than the sum
of the losses to individual businesses. It has been assumed that the loss to society is 50 per
cent of the value of claims for business interruption and that this only relates to commercial
fires. However, this is a rather arbitrary assumption due to the lack of evidence on the
subject. For sensitivity analysis, a higher estimate has been calculated by assuming all
business interruption claims are a cost to society.
Costs in response
Fire Service response costs
The Fire Service performs a variety of duties, some of which are a legislative requirement,
others not. The Fire Service is only required to attend fires. However, there are a variety of
actions that brigades carry out:
17
The economic costs of fire
• Responding to emergency calls (including special service incidents and false
alarms)
Carrying out fire safety and regulation inspections
• Providing Community Fire Safety advice and education
Special service incidents have not been deemed to be a cost of fire since they cover a
broad spectrum of incidents and often do not involve fire or the risk of fire. The cost of false
alarms is a cost of fire (again in the absence of fire there would be no false alarms). It has
not, however, been allocated to particular locations since fire statistics do not break down
the number of false alarms into different locations.
Fire Service costs were split into three elements for the purpose of estimating the cost of fire:
• response costs
• fire safety costs (including community fire safety)
• overhead costs
Fire safety costs were estimated as set out above and removed from the total estimated outturn cost of the Fire Service in England and Wales (Chartered Institute of Public Finance and
Accountancy (CIPFA), 2000). This gives an estimate of the total cost of fire response and
overheads for all incidents. This was allocated based on an estimate of the average number
of appliance-hours spent attending each incident. For primary fires this was based on data
gathered from fire service statistical returns (form ‘FDR1’) between 1996 and 1999. Data
from the Fire Experimental Unit was used to estimate the time spent attending special service
incidents, secondary fires and false alarms.
Unfortunately, the fire service statistical return only records the total time the Fire Service is
in attendance at a primary fire, and the total number of appliances involved. It is not known
how long an individual appliance is in attendance. For simplicity, it is assumed that each
appliance will attend all incidents for a constant proportion of the total time at that incident.
Thus, if two appliances attend an incident which occurs over two hours, each appliance is
there for a constant proportion of the time (i.e. 50 per cent). The proportion used does not
actually make any difference to the final estimate. What is important is that all appliances
attend for the same proportion of the total time.
In practice, this is unlikely to be the case. However, it represents the best available evidence at the
present time. In future, it would be useful to access and analyse more detailed data from each
brigade, which may include the time individual appliances spend in attendance at incidents.
18
4.
The estimates
Introduction
This section reports the estimates of the total and average costs of fire broken down into five
locations, along with some analysis of the cost of malicious fires. It is important to remember
that these are only point estimates of the average cost. They do not relate to individual
situations since the cost of particular fires will vary from virtually nothing into millions of pounds.
It is also important to remember that these estimates are based on the best available
evidence, and that there are a number of areas that could be improved. Chapter 5 contains
further discussion of these issues.
However, the estimates provide an indication of the likely savings from preventing fire.
There is no reason why they cannot be used for analysis and appraisal in conjunction with
other appraisal techniques, as indicators of the scale of the costs in different types of fire.
Total cost of fire
The total costs of fire are estimated to be around £4.1bn in 1999, rising to £6.9bn when
the cost of fire protection is added. The breakdown of these costs is shown in table 4.1, with
average cost estimates shown in table 4.2.
The most expensive locations are commercial fires, which cost £2.9bn in 1999 (including
fire protection and safety equipment). However, almost 70 per cent of this cost is in
anticipation of fire, with relatively low levels of consequential and response costs.
Losses as a consequence of fire represent a far greater proportion of losses in dwellings,
with these costs representing 65 per cent of the total cost of fire. This may be an indication
of the trade-off between fire protection and losses as a result of fire. Expenditure on fire
protection and safety equipment in dwellings is less than a fifth of expenditure in
commercial premises. However, there are three times as many fires in dwellings and the cost
of casualties is four and a half times higher. These figures need to be interpreted with
caution. Fires may be more likely in domestic premises because of the behaviour of their
inhabitants e.g. through cooking, smoking, heating etc. The relative lack of fire protection
may be a contributory factor to the greater likelihood of fire, but will not be the only one.
19
20
297,525
81,612
10,631
205,282
-
£2,780
£250
£1,600
£930
£2,780
-
£30
£2
£20
£10
£30
£140
£520
-
-
-
£4,900
£1,900
£17,500
-
£1,300
£3,600
Property
Losses
£600
£2,200
-
£190
£100
-£80
£420
£400
£10
£10
£610
£630
£1,300
£7,900
-
£4,200
£5,800
£600
£1,100
£1,500
£190
£270
£3,300
-
£4,100
£5,100
£1,800
£1,800
£1,200
As a consequence (£)
Fatality
Injury
-
£180
£180
£1,240
£360
£580
£300
£1,420
-
£440
£2,100
-
£110
£870
£420
£240
£220
£6,000
£1,700
£2,900
£1,400
£6,900
£2,600
£1,370
£880
£11,100
£1,100
£2,900
£5,100
£22,300
£1,100
£32,500
£21,500
£63,600
£44,300
£10,300
In response (£)
Fire
Cost
Service
Per
Response
Fire
£410
£70
£120
£220
£610
£230
£250
£130
£1,020
In response (£m)
Fire
Total
Service
Response
£6,160
£3,400
£12,300
£12,300
-
£40
£40
-
£40
Loss of
business
Loss of
business
£60
£20
£30
-
£400
£350
£40
£20
£460
As a consequence (£m)
Fatality
Injury
1 Figures may not sum due to rounding errors
2 Fire protection costs are not included in the average cost per fire because no method of allocating fire protection costs to specific incidents was found.
All non-building fires
Vehicle
Other outdoor primary
Other fire
£260
£30
£820
£650
£60
In anticipation (£)
Fire
Insurance
Safety
Administration
£40
£40
-
£480
£130
£350
-
£520
Insurance
Property
Administration Losses
£12,500
£5,300
£28,400
£28,400
In anticipation (£m)
Fire
Fire
Protection
Safety
Average costs per fire by location1,2
All Buildings fires
Domestic
Commercial
Public Sector
All Fire
Table 4.2:
All non-building fires
Vehicle
Other outdoor primary
Other fire
99,178
68,309
20,234
10,635
396,703
Number
of fires
Total cost of fire in England and Wales1
All Buildings fires
Domestic
Commercial
Public Sector
All Fire
Table 4.1:
The economic costs of fire
The estimates
Property losses are the largest single cost category and account for around 35 per cent of
total costs. This proportion varies significantly. Sixty four per cent of public sector losses are
due to damage to property whilst only 25 per cent of domestic losses are from property.
The cost of casualties in fire is also high, accounting for more than £1bn in total. Domestic
fires represent almost 70 per cent of this cost, reflecting the very high loss of life and injuries
sustained in these fires.
Sensitivity analysis
The methodology described in chapter 3 has highlighted upper and lower estimates for
some types of cost (see appendix 1). These provide a range of possible cost estimates,
outlined in table 4.3 below. These do not represent statistical confidence limits, nor do they
imply upper or lower bounds on the estimate. However, they do reflect uncertainty in the
estimates and give a possible range of costs.
Table 4.3:
Sensitivity Analysis of the Costs of Fire in England and Wales (£m)1
Lower
Mid - Estimate
Upper
Domestic
Commercial
Public Sector
£2,000
£700
£1,700
£2,900
£1,400
£1,900
£3,100
£1,500
Total Buildings
£4,400
£6,000
£6,400
1 Figures may not sum due to rounding errors
Average costs
Figure 4.1 shows how widely the average cost per fire varies across the different locations
considered. As expected fires in buildings are generally more costly than outdoor fires
[Outdoor here is used to imply all non-building fires]. Commercial fires have the greatest
average cost per fire, followed by the public sector. ‘Other fires’ [which include chimney
and secondary fires] have the lowest cost per fire since these result in no casualties and
minimal property losses.
Interestingly, primary non-building fires (excluding vehicle fires) are slightly more expensive
than the average domestic fire, despite not all of the costs being included [Non-building
fires do not currently allow for potential property or business losses which may result from
damage to crops and outdoor machinery]. There are two reasons for this. Firstly outdoor
21
The economic costs of fire
fires appear to take longer to extinguish, which means the cost to the Fire Service is only
slightly less than in commercial fires. Secondly, primary outdoor fires in 1999 had a greater
death rate per fire than for any other location. This latter result is partly due to the inclusion
of casualty figures from the Paddington Rail disaster in 1999, and may be subject to later
revision.
Figure 4.1:
Graph of average cost per fire by location
£80,000
£70,000
Cost per fire
£60,000
£50,000
£40,000
£30,000
£20,000
£10,000
£0
22
Commercial
Public
Sector
Other
outdoor
primary
Domestic
Vehicle
Other fire
The estimates
Fires in buildings
Table 4.4:
Average Cost Estimates for Fires in Buildings (£ per fire)1,2
Domestic
Commercial
£1,900
£30
£1,900
£18,300
£820
£17,500
£700
£650
-
Costs as a consequence
Property Losses
Death
Injury
Loss of business
£16,200
£5,300
£5,800
£5,100
-
£32,900
£28,400
£600
£1,800
£2,100
£31,300
£28,400
£1,100
£1,800
-
Costs in response
Fire Service Response
£3,400
£3,400
£12,300
£12,300
£12,300
£12,300
£21,500
£63,600
£44,300
Costs in Anticipation
Fire Safety
Insurance Administration
Cost Per Fire
Public Sector
1. Figures may not sum due to rounding.
2. Fire protection costs are not included in the average cost per fire because no method of allocating fire
protection costs to specific incidents was found.
Fires in domestic property
Domestic property refers to the categories in Fire Statistics (1999) of ‘Dwellings’, and
‘Private garages, sheds, etc.’ [Table 18 Fire Statistics United Kingdom 1999]. The average
cost of a domestic fire was estimated to be £21,500 [excluding fire protection and safety
equipment] per reported fire. This means that a fire in a dwelling costs more than all but the
most serious crime incidents (Brand and Price, 2000). This shows the significance of the
impact of fire on the economies of England and Wales [Note that Brand and Price (2000)
calculate the average cost of all incidents of crime (regardless of whether they are reported).
However, the cost of fire is calculated using an average cost per reported fire. These are
usually more serious and have higher costs, and may explain why dwelling fires are so
expensive when compared to estimates of the cost of crime].
Table 4.4 shows that the most significant cost in a domestic fire is that of casualties,
representing almost half of the average cost of a fire. Each incident costs society almost
£11,000 in terms of healthcare costs, lost output and pain and suffering of victims. Property
losses make up the bulk of the remaining cost, with around £5,300 damage per fire.
23
The economic costs of fire
The victim of fire bears the bulk of the cost in domestic fires with the consequences of fire
representing 75 per cent of the total cost. The fire service response costs the Fire Service
around £3,400 per fire, less than for other fires because of the relatively small scale of
resources required to deal with many domestic fires [compared to commercial or industrial
fires].
Fires in commercial property
Commercial fires refer to the categories ‘Agricultural buildings’, ‘Industrial premises’, ‘Trade,
hotels, catering, repairs etc.’ and ‘other and unspecified’ buildings. These represent the bulk
of fires in private firms. Commercial fires are the most costly fires of all locations. The
estimated cost is £63,600 [excluding fire protection and safety equipment], of which
property losses represent almost half of the cost, reflecting the increased value of property at
risk of fire.
Fires in the public sector
Public sector fires refer to the category of ‘Other service’ in Fire Statistics 1999, which
includes fires in schools and education premises. As discussed previously, this may include a
small number of fires in private buildings, but this is the closest match currently available.
Public sector fires are the second most costly per fire, at £44,300 [excluding fire protection
and safety equipment]. This is largely as a result of the assumption that property losses and
Fire Service response costs are the same as in commercial buildings. These two cost
categories make up 90 per cent of the total cost and are the least reliable of the estimates.
The cost of casualties in public sector fires is slightly higher than in commercial locations,
primarily due to the inclusion of hospitals and residential care homes in this category. These
may have less mobile occupants which may result in a higher fatality rate than most
commercial fires.
Outdoor fires
Outdoor fires represent almost three-quarters of all fires. The majority are relatively minor
and do not involve a threat to life or property (secondary fires), however some have
potentially significant impacts and so it is important to consider them.
24
The estimates
Table 4.5:
Average Cost Estimates of Non-Building Fires (£ per fire)
Vehicle
Costs in Anticipation
Fire Safety
Insurance Administration
Costs as a consequence
Property Losses
Death
Injury
Loss of business
Costs in response
Fire Service Response
Cost Per Fire
1
2
Other outdoor
primary
Other fire
£500
£520
£0
-
£0
-
£3,700
£2,200
£1,300
£270
-
£11,200
£7,900
£3,300
-
£0
-
£880
£880
£11,100
£11,100
£1,100
£1,100
£5,100
£22,300
£1,100
Figures may not sum due to rounding
Fire protection costs are not included in the average cost per fire because no method of allocating fire
protection costs to specific incidents was found
Vehicle fires
Vehicle fires represent the largest total cost, of all of the outdoor fires. However, the average
cost is relatively low at around £5,100. The largest category of cost is property damage,
which accounts for £2,200 per fire.
The cost of casualties is the second largest cost at £1,500 per vehicle fire. This figure tends
to fluctuate significantly due to changes in the casualty rate, primarily in road accidents.
Other outdoor (primary) fires
Primary and secondary outdoor fires have been separated since the costs are likely to be
significantly different. Primary outdoor fires involve risk to life and property, or result in five
appliances attending the incident. They tend to take longer to control (by definition) or result
in death, injury or property damage.
Primary outdoor fires are estimated to cost around £22,000 per fire, with the cost split
equally between the cost of casualties and Fire Brigade’s responses. As discussed
previously, the cost of casualties is partly due to the inclusion of data from the Paddington
rail disaster, which may later be revised out of the figures.
25
The economic costs of fire
However, the estimate of cost for this location of fire does not currently include the cost of
property losses, due to lack of data. This may further increase the average cost.
Other fire
This is the least costly fire of all the locations and includes secondary and chimney fires. The
only cost included in this is an estimate of the cost to the fire service at £1,100 per fire. These
fires, by their nature, do not represent a significant cost in terms of property and other losses.
Malicious fires
The Arson Scoping Study (Home Office, 1998) estimated the cost of malicious fires to be
around £1.3bn in 1997. This included costs as a consequence of fire (property losses,
business interruption and casualties), and in response to arson (including police costs).
The available data makes it difficult to break down the cost of fire by cause. As a result, the
cost of malicious fires has not been explicitly considered by this study. However, given the
policy interest in the area of arson and malicious fires, an attempt has been made to
estimate the cost of these fires.
It is assumed that the average cost of arson fires is the same as for those shown in table 4.2,
except the number (and cost) of casualties and property losses [Personal correspondence
with Stuart Deaton, Home Office, using data from Fire Statistics 1999]. The latter is
weighted by the findings of Aust (2001), which found that property losses were higher than
average in arson fires [Property losses on all fires are weighted with the exception of vehicle
fires which already use estimates of the cost of malicious fires].
Given these assumptions, the cost of arson in 1999 is estimated to be £1.15bn Non-building fires
do not currently allow for potential property or business losses which may result from damage to
crops and outdoor machinery] as shown in Table 4.6, and may be higher [Since the level of
property damage is higher, this might imply that the average business loss and Fire Service
response cost may also be higher. However, there is no evidence to quantify this relationship]. In
addition to this there is an estimated £60m cost to the Criminal Justice System (including the cost
of police, court proceedings and sentence) of dealing with arson [Based on data from Brand and
Price (2000) and the Home Office Flows and Costs Model (Harries, 1999)].
This figure is slightly lower than that estimated by the Arson Scoping Study. The main reason
for the difference is the way in which casualties are dealt with. This report has differentiated
26
The estimates
between ‘serious’ and ‘slight’ injuries. The Arson Scoping Study applies the cost of ‘serious’
road casualties to all casualties from malicious fires.
This report also estimates a lower cost to the Fire Service than in the Arson Scoping Study.
This is because of the way costs are allocated. This report uses an estimate of time spent at
incidents (for all incidents in each location). The Arson Scoping Study allocates a proportion
of Fire Service cost to arson based on the number of incidents attended.
The average cost of malicious fire is slightly higher then the overall average, reflecting the
different mix of fires [A greater proportion of malicious fires occur in buildings (30%
compared to 25% overall), which are relatively more expensive]. The average cost in
commercial and public sector buildings is higher, reflecting the higher property losses.
However, the average cost of casualties is lower in all locations. Vehicle fires in particular
have a lower cost of casualties, at around £450 per fire, compared to £1,500 overall.
These estimates have not included the cost of fire protection because it is difficult to allocate
these costs. In addition, since arson is a crime, some element of crime prevention and
protection should be included in the estimates. This is extremely difficult to attribute
specifically for arson. However, if the estimates of fire protection (explained in chapter 3)
are allocated based on the proportion of malicious to all fires, this would increase the cost
of arson to just under £2.1bn.
False alarms
In 1999 there were almost 470,000 false alarms in the UK. These are generally seen as
representing a small cost, although the Fire Service is increasingly becoming concerned with
the number of false alarms due to faulty apparatus (Home Office, 2001). False alarms
represent a cost of fire, although in this research they have not been allocated to particular
types of fire. The Fire Service must attend alarms, and they result in the evacuation of
premises and the disruption of business for companies.
A part of this report has allocated the cost of the Fire Service to all types of incident based
on an estimate of the average time in attendance at each incident. This has allowed an
initial estimate of the cost of false alarms of around £175m for the Fire Service alone,
based on estimates of the average time in attendance from the Fire Experimental Unit. This
has not been added to the current cost of fire estimates due to problems allocating the cost
to particular locations. However, it does represent a cost of fire, and as such should be
included.
27
28
£10
-
£10
£0
£10
£3
£170
£30
£30
-
£140
£30
£110
-
£560
£130
£130
-
£440
£100
£210
£130
In anticipation (£m)
Fire
Insurance
Property
Safety
Administration Losses
£110
£40
£20
£20
£70
£60
£10
£2
£80
£15
£4
£10
£70
£50
£10
£10
As a consequence (£m)
Fatality
Injury
Estimated Cost of Arson in England and Wales1,2
1 Excluding cost of fire protection and the Criminal Justice System.
2 Figures may not sum due to rounding errors.
Total
Non-Buildings
Vehicle
Other outdoor
Buildings
Domestic
Commercial
Public Sector
Location
Table 4.6:
£10
-
£10
-
Lost
business
£240
£60
£50
£80
£180
£60
£80
£50
£1,150
£330
£230
£100
£900
£290
£420
£180
In response (£m)
Fire
Total
Service
(£m)
response
90981
64063
57018
7045
26918
16732
6301
3885
Number of
fires
£13,500
£5,200
£4,000
£14,700
£38,300
£17,200
£67,400
£47,500
Average
cost (£)
The economic costs of fire
5.
Using and developing the estimates
Using the estimates
The research to develop average cost of fire estimates is an important step in undertaking
appraisal and evaluation of policies to reduce the level and impact of fire. Previous research
has focused on the overall size of the impact, which gives an indication of the scale of the
problem. However, such approaches give little information on what the major issues are, or
the most effective way to reduce the cost.
Using estimates of the cost per fire allow consideration of a range of policies, and help to
identify the most effective options. How can the cost of fire best be reduced? Should
response times be reduced, building regulations amended, or should there be more
education on the risk of fire? Indeed, should there be a focus on fires in particular locations?
The cost of fire estimates provides a starting point to answer these questions, allowing fire
policy to follow in the footsteps of criminal policy and the Crime Reduction Programme.
The aim of this study is to report the findings of the research so far to the Fire Safety
Advisory Board and to promote discussion into improving the estimates of the cost of fire.
There are a number of areas, identified below, where the estimates could be refined with
further research.
Notes of caution
It is important that a number of issues are considered when using the estimates, although
this should not preclude their use in policy development.
These estimates are based on the best available evidence. The weaknesses in the data and
assumptions have been highlighted throughout the report. This will inevitably result in
uncertainty over some of the figures. Where appropriate (and the data allows) upper and
lower bounds have been placed on estimates using alternative assumptions and data
sources. These should not be taken as implying either statistical confidence in the estimates,
or the highest or lowest possible outcomes.
29
The economic costs of fire
Fires are by nature unique, and individual fire events could have vastly different impacts.
Even within the same categories, slight differences in buildings and their content can result
in significant differences in losses due to the value of the content and rate of spread of the
fire. This will always be a problem for any ‘average’ estimate. This means that when using
the estimates it is important to consider any systematic differences from the ‘average’ in the
type of fire targeted by policies.
The cost of fire may fall differentially on different groups within society. This is both in terms of
the risk of fire, and the cost per fire. For example, elderly or disabled individuals may be more
susceptible to being injured in fires (due to difficulties in escaping) and have higher healthcare
costs. Where policies target particular types of fire it is important that differential impacts are
considered. For example, fires whilst cooking appear to have lower than average property
losses (BCS, 2000). A policy targeting these fires would need to take this into account.
Future developments
Although this report represents a first step to developing estimates that can be used in policy
appraisals and for measuring performance, there is much still to be done. There is a need to
improve the available evidence in order to make the current estimates more robust, and to
broaden the scope of the costs covered.
Property damage
The current estimates have made assumptions about the average claims from insurance
companies, and the coverage of the insurance market. These could be improved in two
ways:
Developing improved insurance data including average claims for different categories and
data on average excess levels (particularly for commercial property);
More extensive surveys of the experience of fire, such as the British Crime Survey (BCS) fire
module (both domestic and commercial property).
Increasing the amount of data from insurance companies would allow more detailed
analysis of losses for different causes and location of fire, as well as investigating the cost of
unreported fires. The use of surveys such as the BCS can provide information on the risk of
fire in uninsured property, along with estimates of the cost of such fire. This would be
30
Using and developing the estimates
particularly useful for the commercial sector, for which there is probably significant underreporting of fire losses to insurance companies due to large excesses and significant selfinsurance.
Two further areas for improvement are the estimates of property losses in public sector and
non-building fires. There is currently no evidence on these costs, with the exception of a few
large loss fires.
Preventing injury and fatality
The emotional and health impacts for victims of fire have been taken from studies of the cost
of road accidents. However the characteristics of these incidents and the likely injuries
clearly differ from those of fire. This can have three impacts on the estimate of the value of
injuries and fatalities:
• Differences in injuries will mean that the cost of treatment will differ. In particular,
lung damage from smoke inhalation could result in continuous treatment over the
lifetime of the victim, and could contribute to further illness in later life.
• Evidence also suggests that people are likely to value similar injuries in very
different ways, depending on the nature of the cause. For example, the degree of
control the victim has over the incident appears to influence valuations (Jones-Lee
and Loomes, 1995). This means that the willingness to pay element of this cost is
likely to be different from road accidents, and indeed could vary with the
category of fire.
• Some element of the value of avoiding fatalities and injuries is the gain made by
society in terms of increased output (less time off work). In general, this is a
function of the age profile of those at risk (number of potential years in work).
Again, this differs in road accidents to fires.
The use of road accident data in fires is not an ideal measure, but is the best evidence
available to date. There is a need to research this area of cost to improve the estimates,
particularly because of the size of variation in these values.
Lost business
There is little evidence of the value of lost business to the economies of England and Wales.
The ABI record claims for business interruption, but this does not reflect social costs because
of transfer of business within companies, and to competitors. The only loss to England and
31
The economic costs of fire
Wales is where output is not captured by competitors, those competitors are foreign, or the
firm relocates production to a foreign centre.
Assumptions have been made in the past that there is no lost business to the economy as a
whole. In an increasingly global economy, it might be expected that the cost of lost business
to England and Wales will rise. It is clear that further work is desirable in this area.
Fire Service costs
The breakdown of the cost of fire to the Fire Service has been estimated in this study using
FDR1 returns for primary fires. However, this contains only limited information on how long
individual appliances are in attendance at different incidents. One solution to this problem
may be to use information collected by individual brigades’ Management Information
Systems (MIS). It would appear that many brigades have MIS that record varying degrees of
information with varying degrees of accuracy.
If all brigades hold electronic forms of data that can identify individual appliances attending
different incidents, and the nature of those incidents, it may be possible to improve
significantly the estimates of the cost of responding to both fires and false alarms. This
would allow analysis of the number of appliance hours in attendance, without the
assumption that all appliances attend for a constant proportion of that time.
This is to some extent constrained by the data held by brigades, and would certainly be a
huge data collection exercise. However, with the brigades moving towards ensuring that all
returns are completed electronically, this may become a simpler exercise in the future.
Other costs
Table 3.1 on page 6 shows the range of costs that have not been estimated in this report.
All of these are due to lack of evidence that future research could help to address:
• Environmental costs
Fire gives off a variety of waste products, from water run-off associated with
extinguishing the fire, to gas and particle emissions that pollute the atmosphere.
These have a variety of impacts, from damage to flora and fauna in local
watercourses, to adding to greenhouse gases in the atmosphere. In addition,
there may be impacts on businesses and residents if toxic emissions cause the
evacuation of local areas.
32
Using and developing the estimates
• Fire protection in consumer items
Many products bought by consumers have some form of fire protection built in.
For example, most furniture is made of fire-resistant foam. This increases the cost
of manufacture and is a cost of fire. However, many of these measures have
multiple purposes. For example, what part of insulation on wiring is to prevent fire
from a short circuit, and how much is to prevent electrocution?
• Fire safety education
The cost of fire safety campaigns by fire brigades has been included in the
estimates so far. However, there is also a cost to firms who train individuals in fire
safety as a part of induction and health and safety courses. This costs time and
money.
• Heritage and cultural costs
Fire can destroy or damage property with unique cultural or heritage value. It is
difficult to replace or repair these pieces, and their loss has a greater value to
society than merely its replacement cost.
• Clean-up costs
This study has not included the cost of cleaning up after fire, other than to the
extent that such costs are included in insurance claims. However, these costs
could be large, householders may have to move out whilst damage is repaired,
local authorities must remove burnt-out cars and repair road surfaces. These are
just a few of the possible costs of cleaning up.
• Wider economic distortions
Fire, and arson in particular, can significantly affect local communities. Large
numbers of burnt-out cars and buildings can discourage new businesses and
residents. This in turn can lead to higher unemployment and lower property
values, reducing the ability of the community to carry out the necessary repairs.
Thus there may be a vicious cycle that damages communities and increases social
exclusion.
• Private fire brigades
Many large firms and industries have on site fire services to deal with incidents.
These are a potentially significant cost, but there is no clear evidence of how
many firms use internal services. In addition there are firms that have specially
trained employees to tackle fire, even if they don’t have a fire service.
Environmental costs and fire protection in consumer items in particular are likely to be
significant costs. Estimates for the USA suggest that fire protection in consumer goods might
cost as much as $20bn in 1991 (around 20% of US fire losses) (Schaenman et al, 1994). If
the same ratio were true in England and Wales, this could add over £1bn to the estimates.
33
The economic costs of fire
Improving the breakdowns
This study has only considered costs broken down by broad categories of the location of
fire, due to the lack of evidence to allow more detailed analysis. An attempt has been made
to quantify the cost of malicious fires. However, this has assumed that most of the average
cost of these fires is similar to the overall average cost estimates. Such an assumption is
unlikely to be true, particularly where accelerants are involved.
The cause of fire has important policy implications, with accidental dwelling fires and arson
being the primary focus of policies. Improving the breakdown will allow more detailed and
accurate appraisal of policies aimed at tackling these, as well as other causes of fire.
34
Appendix 1.
Best, lower and higher estimates
Cost estimates for building fires
Table A1.1: Average Cost Estimates for Property Losses (£ per fire)
Domestic
Commercial
Public sector
Lower
Best
Upper
£4,900
-
£5,300
£28,400
£28,400
£7,700
£34,800
£34,800
Table A1.2: Average Cost Estimates for Lost Business (£ per fire)
Lower
Domestic
Commercial
Public sector
-
Best
Upper
0
£2,100
0
£4,300
£4,300
Table A1.3: Total Cost Estimates for Fire Protection (£m)
Lower
Domestic
Commercial
Public sector
£790
£240
Best
£0
£1,600
£930
Upper
-
35
The economic costs of fire
36
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39
The economic costs of fire
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40