Fraud costs UK businesses £158 billion each year

05 July 2023 Consultancy.uk 3 min. read
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Fraud is costing the UK more than £200 billion each year, according to a new report. As the economy struggles with the cost of living crisis, more than £157 billion in fraud impacted businesses, while a further £8 billion targeted individuals.

With businesses struggling to stay afloat amid record rates of inflation, a growing number of firms are being pushed to the brink of insolvency. In this context, the cost of fraud is arguably its highest in decades – and also has far-reaching impacts on the employees of those firms, who are facing pay-freezes or even redundancy.

According to conservative estimates from Crowe, Peters & Peters and the University of Portsmouth, the UK’s private sector lost £157.8 billion to fraudsters in 2021. This represents a 12% increase from the rate of fraud reported as hitting businesses in 2017 – which reportedly cost £140 billion. However, the figure may in fact be higher, as private sector operators often lack the tools to properly measure fraud, or obscure it for fear of running foul of regulatory measures that would penalise them for breaches in data and financial security.

Fraud costs UK businesses £158 billion each year

Procurement fraud represented a notably large proportion of private sector fraud. Due to the vast amounts spent on procurement activities in the wake of the pandemic, amid the strained supply chains of global business, that even a low fraud rate could see a sizeable losses – and demonstrating that, businesses lost £133.6 billion to procurement fraud.

Further impacting on households across the country, fraud committed directly against individuals has also seen double-digit increases. It rose by more than 22% from £6.8 billion to £8.3 billion over the same period – at a time when consumers are already having to drastically downsize their weekly spending – both essential and non-essential – to make ends meet. Fraudsters taking even more cash from these households will have a major impact on their ability to meet their basic needs, while also seeing them scale back their spending further – further suppressing the UK’s broader economic growth.

Fraud costs UK businesses £158 billion each year

The state was not exempt from the attentions of criminals either. According to the researchers, public sector fraud stands at an estimated £50.2 billion for 2021, compared with £40.3 billion for 2017, an increase of approximately 25%. That is even more than the UK government spent on defence for 2021-2022 – £45.9 billion.

With government spending having risen as a result of the pandemic, and many of the checks and balances relating to contracts having been waived through for the sake of speed during the crisis, the largest part of this fraud is also related to procurement. The amount of procurement fraud against the central government alone cost £8.8 billion

Jim Gee, founding CEO of the NHS Counter Fraud Service and current forensic and counter-fraud specialist at Crowe said, “Unless our country is clear about the cost of fraud, it cannot prioritise and coordinate a response, particularly as other problems clamour for resources. The sums are stark, but can be hard to grasp. In the UK alone, the amount lost to fraud is higher than the Government’s Health expenditure. It is three times the cost of the furlough scheme and it even outweighs the wealth of Elon Musk. A total figure of £219 billion simply cannot be ignored. The time has come for a carefully planned, professional and strategic effort to tackle this problem.”