Economic Impact of Industrial Fires in the United States



In any assessment of the total cost of fire, the challenge is twofold: to decide what fire impacts should be counted as costs, and to find good bases to include the selected elements. Some elements are fairly straightforward, such as the direct cost of career fire departments. Some are clearly costs involved in fire prevention or mitigation but are hard to estimate with available data, such as the portion of annual construction expenditures spent only to comply with fire-protection rules. Analysis of costs associated with fire losses used the following estimating rules:

  1. 2% of reported non-residential structure fires each year, excluding fires at storage facilities and special structures (e.g., vacant properties, properties under construction, structures that are not buildings) result in business closings. For the purposes of this analysis, a closing was estimated to imply indirect losses equal to four times the reported average direct loss in those types of fires.
  2. Indirect losses (principally business interruption costs) also add 65 percent in losses for manufacturing and industrial properties to direct loss, reported or unreported.

The economic impact of fires in the industry can be felt as losses in business sales and production. Employment can be impacted as workers who once worked in a facility involved in a fire may lose time at work waiting for operations to get back up and running. In some cases, they may never return to work since the business is forced to close following the fire. Thus, the loss of revenue is suffered by the individuals involved and their family members. The municipality is suffering tax losses since there is no income for the workers now. Loss of income means lower expenditures in local businesses and, as a result, lower revenues from sales-tax to local government as well. Since unemployment can increase as a result of job losses or employment in the area, increased demands upon social services are experienced. Finally, if the company ceases to exist after a major fire, unemployed workers may have no alternative but to move to another area to seek work, resulting in a region's population shifts.