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Fraud costing UK £85 billion every year

The UK is losing around £85.3 billion to fraud every year, according to a survey from an accountancy and business advisory firm

The Financial Cost of Fraud Report 2013 from BDO LLP, which is based on 15 years of data, finds the global cost of fraud for the period between 1997 and 2007 was 4.57% of gross domestic product (GDP), a broad way of measuring the total economy.

However, taking account of data from the five years since the start of the recession in 2008, this figure has risen dramatically by almost 20% to 5.47% - an implied total loss to fraud of £85.3 billion a year in the UK or £2.91 trillion worldwide.

Jim Gee, director of Counter Fraud Services at BDO LLP, said: “Fraud remains a challenging and expensive problem, and its economic effects are clear - affected public services, less financially stable and profitable companies, reduced job security and lower disposable incomes for us all.

He added: “The financial crisis, where fraud has risen significantly, has clearly provided the ideal conditions in which fraud can grow.”

The increase in losses reflects a common picture found in previous recessions, the report said.

In 1980-1981, UK GDP shrank by 6.1% and reported fraud and forgery rose by 9.1% and between 1990-1991 UK GDP shrank by 2.5% and reported fraud and forgery rose by 30.5%.

Elsewhere, the Director of Public Prosecutions (DPP) warned it was time for a “tough stance” against the people who carry out benefit and tax credit fraud as he set out new guidelines for the Crown Prosecution Service.

Benefit cheats will face increased jail terms of up to ten years in the latest crackdown, Keir Starmer QC said.

Suspects can now be charged under the Fraud Act, which carries a maximum sentence of ten years in prison, the Crown Prosecution Service revealed.

In the past, benefit cheats have often been pursued under specific social security legislation which carries a maximum term of seven years.

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