Fraud levels up in the wake of the downturn

Marion Dakers
FRAUD levels have surged since the start of the recession, costing the British economy more than £85bn a year, research out today shows.

The study found that between 2007 and 2011, the amount of money lost through fraud jumped from 4.57 per cent of spending to 5.47 per cent.

BDO and the University of Portsmouth, which compiled the figures from 15 years of fraud cases across nine developed countries, found similar spikes after previous downturns, and pointed out that “significant increases [were] being maintained even four years after the onset of the recession”.

Between 1980 and 1981, UK GDP shrank by 6.1 per cent and reported fraud and forgery soared 9.1 per cent.

“On the basis of the evidence, it is clear that fraud and error losses in any organisation should currently be expected to be at least three per cent, probably more than five per cent and possibly more than 10 per cent,” the researchers added.

Applied to GDP, fraud losses across the UK economy totalled £85.3bn last year, and globally fraud is costing £2.91 trillion a year.

Fraud activity is notoriously difficult to estimate, and today’s figures are much higher than official ones. The National Fraud Office said in June that the UK lost £52bn through fraud in the past year, though the organisation conceded that there were gaps in its numbers.

The Office for National Statistics found that recorded fraud offences in England and Wales shot up 27 per cent to 229,018 in the year to March 2013, though part of the spike was caused by new recording rules.

Meanwhile the National Fraud Intelligence Bureau reported 326,609 cases in the same period.

“Assessing the true cost of fraud, as opposed to the cost of reported fraud, presents some very scary numbers,” said Jim Gee, BDO’s director of counter fraud services and one of the report’s authors.

“Putting in place pre-emptive measures could make very significant improvements to the financial health and stability of UK plc.”