An epidemic of fraud costs the UK economy as much as £125bn every year

 
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Fraud costs the world economy trillions, according to the report (Source: Getty)

An epidemic of fraud since the global financial crisis has cost the UK economy £125bn every year, according to new research.


Business losses from fraud and error have increased by 43 per cent since 2008, according to the research by Crowe Clark Whitehill and the University of Portsmouth’s Centre for Counter Fraud Studies.

The research showed losses accounted for 6.54 per cent of business expenditures, up from 4.57 per cent in 2008. Over the 19 year period for which data is available the average percentage loss was 5.85 per cent.

Read more: This is the type of fraud you should be worried about the most

The report finds the UK economy could be boosted by £50bn per year if businesses concentrated on reducing fraud by 40 per cent.


Government statistics show fraud and cyber crime now account for almost half of all crime in the UK, with 3.6m individual computer fraud incidents reported in the year to September 2016. However, this does not include fraud against organisations, and misses many low-value frauds.

Jim Gee, head of forensics and counter-fraud at Crowe Clark Whitehill, said: “The problem with fraud is that most of the cost is high-volume and low-value,” with many organisations unclear as to the value of their data.

“The nature of fraud is continually changing,” he added. “Because of that it’s very hard to detect it.”

Read more: Official UK crime statistics show massive increase in financial fraud cases

The report estimates the total cost of fraud to the world economy at around £3.55 trillion, larger than the entire output of the UK economy, the report says.

Increasing fraud levels could be blamed on technological change, as fraudsters are more insulated from the consequences of their crimes, as well as the increased complexity of systems, which allow frauds to be more effectively hidden, the report’s authors say.

Gee said: “The sums involved are huge. Organisations’ behaviour towards measuring and countering fraud can be the difference between a mediocre annual performance and stable growth. Businesses can no longer afford to bury their heads in the sand.”