Buried treasure: The British shadow economy is worth £200bn

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The shadow economy is predicted to shrink in the next decade (Source: Getty)

The British shadow economy accounted for more than £200bn last year, according to new estimates of goods and services kept away from the eyes of authorities.

The murky world of the legal goods and services deliberately concealed from governments was worth 11.3 per cent of the UK’s GDP in 2016, according to the Association of Chartered Certified Accountants (Acca).

That would make the shadow economy worth £222bn for 2016 as a whole, compared to a total legal economy of £1.9 trillion, as measured by the International Monetary Fund.

Although measurement of the shadow economy is notoriously difficult, this would represent an increase in its size compared to 2013 estimates by the Institute of Economic Affairs think tank, which said it was worth 10 per cent of GDP, or £150bn.

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The UK’s shadow economy is smaller proportionally than rival developed nations, the research shows, although it lags well behind the US.

Australia’s shadow economy is currently worth 11.4 per cent of GDP, while Ireland’s ratio stands above 14 per cent. The US, however, measures only 7.78 per cent, Acca said.

Meanwhile less economically advanced nations have a far larger proportion of output outside of government reach. The equivalent of 48 per cent of Nigeria’s GDP is estimated to be hidden, while in Russia the figure is 39 per cent.

The global shadow economy, which was estimated to be worth around $10 trillion in 2011, is set to decline as corporate governance improves and developing economies broaden their tax base.

The global shadow economy will decline from 22.66 per cent of GDP in 2016 to 21.39 per cent in 2025, Acca forecasts.

The UK’s shadow economy is forecast to shrink slowly over the next decade to reach 10.83 per cent in 2025.

“The prevalence of shadow economy activity throws up considerable practical and ethical issues for both business and government,” said Helen Brand, Acca chief executive.

“The UK has a relatively small shadow economy compared with other countries around the world, but it is quite worrying that by 2025 it won’t have fallen by much.”

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