Millions of businesses in flood-risk areas may lose affordable insurance under a new deal being brokered by the government and insurance companies.

Ministers and trade body the Association of British Insurers (ABI) have been arguing over the cost of flood insurance for months.

An agreement between the two ran out in June and a new Flood Re pact is on the table.

However, businesses were included in the old ‘statement of principles’ but the new agreement only covers homes.

Businesses and employer groups are concerned that omitting them from the new proposals could mean sky-high premiums for many firms; while others fear they will become uninsurable.

The main concerns lie with small businesses, which do not have the financial clout to negotiate deals with insurers who may find cover unaffordable or withdrawn, leaving them at risk to flooding.

Small businesses employ around 14 million people and the fear is bad weather could force many out of business.

Liz Peace, chief executive of the British Property Federation, said: “We appreciate priority has been given to ensuring the availability and affordability of flood insurance to the millions of homes across the country, but we are concerned SMEs find themselves excluded from the proposals.

“SMEs employ over 14 million people in the UK, and have already seen a marked increase in their property insurance premiums and excesses. Those in high risk areas will see the cost of their insurance increase considerably, and in some cases they may not be able to secure it at all unless government extends Flood Re.”

Flood Re works pools around £10 a year from all home insurance policies to fund homes at high flood risk who might otherwise struggle to find affordable insurance. In return for the levy, insurers will agree to set cover at affordable prices.