Research and analysis

Estimating potential economic costs of flooding

Published 2 April 2026

Applies to England

1. Overview

The national flood risk assessment (NaFRA) brings together the latest information to help us understand the scale and nature of flood risk across the country. It is used to understand the potential impacts of flooding today and in the future on:

• people
• property
• infrastructure

The assessment estimates Annual Average Damages (AAD). This is an estimate of the average potential economic cost of flooding in any given year. It considers the probability and severity of different simulated flood events from frequent to rare-but-extreme.

There are uncertainties within these estimates, but they are the best we can produce with the data available today. Our understanding of these uncertainties informs how we use the estimates appropriately. We use estimates of potential economic costs from flooding (AAD) in the Environment Agency’s investment planning and scenario analysis.

Public bodies such as flood risk management authorities and infrastructure providers may use our published flood hazard information to make their own estimates of economic costs. Our data may be useful to the insurance sector but it is not appropriate for informing individual household insurance premiums. Insurance companies assess flood risk and set premiums using their own mix of:

• catastrophe modelling
• hydrological science
• geospatial analytics

2. Calculating potential economic costs (AAD) of flooding

Potential economic costs of flooding are determined by considering the:

• probability that a given flood event will occur
• consequences of that event

The consequences of a range of events with different probabilities and severities are assessed and combined to estimate an Annual Average Damage (AAD). These are the potential costs to the economy in an average year.

We calculated AAD using the full range of simulated flood events in NaFRA using standard methods set out in The Benefits of Flood and Coastal Risk Management: A Handbook of Assessment Techniques (Multi-Coloured Handbook) published in 2024. This was first published in 2010 by the Flood Hazard Research Centre, Middlesex University, with support from Defra and the Environment Agency and is regularly updated.

Using these methods we applied depth-damage curves from the Multi-Coloured Handbook to different property types. We did this using data on:

• probability and depth of flooding
• the type and location of properties in areas at risk

This allowed us to estimate the expected cost of damages relative to a flood depth inside a property. We also estimated other (indirect) impacts of flooding.

We then removed costs for very frequent flooding (probability of 33% (1 in 3) or greater). This is a similar approach to how the Multi-Coloured Handbook methods are used in FCERM project appraisal. The national results would be unrealistic if these were to be included. Often properties in these areas are resilient to flooding or built with occupied areas above the flood level.

3. Estimate of potential economic costs (AAD) from flooding

Our current estimates for the potential economic costs of flooding to properties in any given year are:

• £1.2 billion for flooding from surface water
• £1.1 billion for flooding from rivers and the sea

These consider the full range of probable floods from frequent and low impact, to rare-but-catastrophic.

For surface water flooding, the annual average property damages are £1.2 billion. This is our current estimate of the potential costs of property damage that could be caused from surface water flooding. It is the first time we have been able to publish a national figure, and it will be revised as we update the input modelling and mapping data we use.

For river and sea flooding, we estimate of potential economic damages to be around £1.1 billion.  This is our current estimate of the potential costs of property damage that could be caused from river and sea flooding.

4. Uncertainty

NaFRA uses the best available data and improved modelling methods to understand flood hazard. It does this alongside the latest property information and methods to understand the impact of flooding. There are inherent uncertainties within the AAD estimates due to the nature of modelling simulations, predictions and averages.

The estimates of potential economic costs (AAD) are naturally highly uncertain. This is because they bring together all the other uncertainties that exist in the:

• input data
• flood hazard scenario modelling
• impact calculation methods

The estimates are likely to change as:

• impact data changes, like the number of properties in areas susceptible to flooding or depth damage curves
• the scenario data on flood hazard changes over time

5. Comparing to observed data

Flood risk is not directly or fully observable. NaFRA simulates a range of hypothetical events across probabilities up to the very rare but potentially catastrophic probabilities. In contrast observed data, in terms of flood records and claims, are limited to a few of the simulated flood probabilities. Rare events have not been seen in historical records in most places but are critical for an accurate national risk assessment. Records of flooding and its impacts are incomplete.  Also, economic costs, expressed as AAD, are a smoothed long term estimated average, which are difficult to compare to observed annual losses.

6. Future updates

We expect the estimates of potential economic costs from flooding (AAD) to change when data that feeds the national flood risk assessment is updated and improved. There may be changes at a local or national scale, to data or methods. The Environment Agency has committed to continuously improving NaFRA using new local flood risk modelling as it becomes available.