Study reveals a whopping £193 billion fraud bill for UK in 2016
The annual cost of fraud in the UK could be as high as £193billion per year, nearly quadruple the previous estimates produced by the UK government, which put the figure at £52billion in 2013, according to the Annual Fraud Indicator 2016 report.
The report, overseen by the UK Fraud Costs Measurement Committee (UKFCMC) and supported by Experian and PKF Littlejohn, is based on research by the University of Portsmouth’s Centre for Counter Fraud Studies. It renews the research previously undertaken by the UK government in 2013.
The private sector suffered the biggest losses from fraudsters, with both SMEs and large enterprises losing an estimated total of £144billion a year. By far the biggest source of fraud for these businesses relates to procurement – an enormous £127billion.
Procurement fraud included crimes such as the submission of false invoices or the awarding of contracts in exchange for bribes. The report highlighted 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.
In other areas, payroll fraud accounted for losses of £12billion per year, while the charity sector was hit with fraud costs of nearly £2billion per year.
Mortgage lending suffered losses equivalent to £1.3billion annually, with 84 applications out of every 10,000 suspected to be fraudulent, while insurance sector fraud cost £1.3billion a year.
The research found fraud also has an impact on every individual in the UK. Although 95 per cent of the fraud taking place is not a direct-to-end-consumer cost, those lost funds were passed on to individuals in the form of higher costs on products and services.
Elsewhere, fraud in the public sector came to about £37.5 billion and was equivalent to 5.5 per cent of the £694billion spent annually. Central government bore the majority of this cost at around £30billion per year, with tax fraud costing £15.4billion every year, equal to 3 per cent of the total tax revenue.
The study also revealed the cost of fraud carried out directly against individuals was now £9.7billion per year, with identity fraud being the single largest contributor at almost £5.4billion.
Jim Gee, chair of the UK Fraud Cost Measurement Committee and head of Forensic Counter Fraud Services at PKF Littlejohn, says: “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.”