UK, 25 May 2016 - The annual cost of fraud in the UK could be as high as £193bn per year according to a new report issued today. This dwarfs previous estimates produced by the UK Government which put the figure at around £50bn in 2013.
The Annual Fraud Indicator 2016 has been overseen by the UK Fraud Costs Measurement Committee (UKFCMC), supported by Experian and PKF Littlejohn and is based on research by University of Portsmouth’s Centre for Counter Fraud Studies, Europe’s premier research centre concerning fraud.
The UKFCMC has revised and renewed research undertaken by the Government up to 2013. It reveals the staggering true cost of fraud - an average of more than £3,900 per adult in the UK with losses taking place at a rate of £6,000 per second.
The private sector has been under the biggest attack from fraudsters, with both SMEs and large enterprises losing an estimated total of £144bn a year. By far the biggest source of fraud for these businesses relates to procurement - an enormous £127bn. Procurement fraud includes crimes such as the submission of false invoices or the awarding of contracts in exchange for bribes. The report highlights that procurement is so vulnerable because of the sheer size of expenditure which it accounts for, as well as the high volume, low value nature of transactions and the breadth of fraudulent activity it is susceptible to.
Chris Clark, UK&I CEO at Experian said: “The startling figures that have come out of the Annual Fraud Indicator illustrate the scale of the fraud problem currently facing the UK. £193bn per year underlines that there is much more still to do, despite evolving anti-fraud measures.
“And it’s not just a problem for UK government, businesses and charities. It has an impact on every individual in the UK. Although 95% of the fraud taking place is not a direct to end consumer cost, those lost funds are passed on to individuals in the form of higher costs on products and services. Every transaction we make, whether that is buying a washing machine or putting money into a savings account, is affected by the fraud epidemic”.
Jim Gee, Chair of the UK Fraud Cost Measurement Committee and Head of Forensic and Counter Fraud Services at PKF Littlejohn, said: “Fraud has a pernicious social and economic impact on the UK. Private sector companies are less financially stable and healthy than they would otherwise be; public sector organisations cannot provide the quality of public services that we pay our taxes to get; and even charities are deprived of the full value of the donations which we make.
“It is best seen as similar to a clinical virus – something which continually mutates and changes as fraudsters seek the greatest benefits for the least risks. The best way to reduce its extent and cost is to make sure our organisations are fraud resilient and able to protect themselves against a continually evolving threat.
“This report continues the Government’s work producing an Annual Fraud Indicator to provide a view of its total cost across the UK. It reflects a growing understanding that unless we understand the nature and scale of fraud we cannot apply the right solution to diminish it.”
In addition to procurement fraud, the biggest types of fraud impacting UK businesses identified by the Annual Fraud Indicator include:
Fraud in the public sector of around £37.8bn is equivalent to 5.5 per cent of the £694bn spent annually. Central government bears the majority of this cost at around £30bn per year. Procurement fraud is again a major source of losses, costing central and local Government a combined £10.5bn per year. Other key areas that are hitting Government purse strings include:
Professor Mark Button, Director of the Centre for Counter Fraud Studies, University of Portsmouth commented: “The level of losses suffered by the public sector and central Government as a result of fraudulent activity are immense. Government suffers in a similar way to the private sector from vulnerabilities in procurement but also telling is the more than £15bn lost annually to tax fraud largely from people and organisations not declaring and under-declaring income.”
The cost of fraud carried out directly against individuals is now £9.7bn per year with identity fraud being the single largest contributor at almost £5.4bn. It is estimated that there are up to 3.25 million victims. Given the rise in identity theft and the prevalence of cyber-crime, this is only expected to grow.
The Annual Fraud Indicator, thanks to the partnership between Experian, PKF Littlejohn and the University of Portsmouth’s Centre for Counter Fraud Studies, aims to help consistently gauge, analyse and quantify the true scale of fraud in the UK. For the full report findings please visit: http://www.experian.co.uk/assets/identity-and-fraud/pkfexperian-fraud-indicator-report.pdf
Also visit Experian’s new interactive Cost of Fraud tool, which illustrates what the cost of fraud could look if spent on other things: http://bit.ly/1RdhzTWor join the conversation on twitter #CostOfFraud - http://bit.ly/costoffraud
Notes to Editors:
About the Annual Fraud Indicator 2016
The Annual Fraud Indicator uses methodology developed in line with the ground breaking work of the National Fraud Authority. The estimates are intended to lay down a benchmark by which year-on-year sector-specific fraud analysis can now be made. The work is overseen by the UK Fraud Costs Management Committee, a group of cross-sector fraud experts who meet regularly to analyse fraud data, supported by a partnership between Experian, PKF Littlejohn and the University of Portsmouth’s Centre for Counter Fraud Studies,
We are the leading global information services company, providing data and analytical tools to our clients around the world. We help businesses to manage credit risk, prevent fraud, target marketing offers and automate decision making. We also help people to check their credit report and credit score, and protect against identity theft. In 2015, we were named by Forbes magazine as one of the ‘World’s Most Innovative Companies’.
We employ approximately 17,000 people in 37 countries and our corporate headquarters are in Dublin, Ireland, with operational headquarters in Nottingham, UK; California, US; and São Paulo, Brazil. Experian plc is listed on the London Stock Exchange (EXPN) and is a constituent of the FTSE 100 index. Total revenue for the year ended March 31, 2015, was US$4.8 billion.
About PKF Littlejohn
PKF Littlejohn is one of the leading firms of accountants and business advisers in the UK and the London member of PKF International.
We offer a full range of forensic services on a national and international basis including:
In the UK and Ireland, PKF International is represented by seven PKF member firms across the UK and Ireland with with a combined fee income of £116m, and with services delivered by 1,600 partners and staff.
The PKF International network has close to 300 member firms and correspondents in 440 locations in 150 countries providing accounting and business advisory services. PKFI member firms have around 2,270 partners and nearly 22,000 staff.
About the University of Portsmouth’s Centre for Counter Fraud Studies
The Centre for Counter Fraud Studies (CCFS) is one of the specialist research centres of the Institute of Criminal Justice Studies, formed in 2009 to accommodate the growing interest in counter fraud that has occurred within the Institute over the last ten years. The Centre aims to collate and present the widest possible range of information regarding fraud and the solutions applied to it, and to undertake and publish further research where needed. Additionally, the Centre’s Fraud and Corruption Hub gathers the latest thinking, publications, news and research in one central resource for counter fraud professionals.