UK suffering from £130 billion fraud bill…
Fraud is costing businesses and individuals in the UK £130 billion each year, according to 2019 The Financial Cost of Fraud Report, researched and published by national audit, tax, advisory and risk firm, Crowe, in conjunction with the Centre for Counter Fraud Studies at the University of Portsmouth. This reveals that fraud is costing the global economy £3.89 trillion, with losses rising by 56% in the past decade.
The report, first published in 2009, draws on over 20 years’ extensive research, reviewing a total of 690 loss measurement exercises across a range of industries, expenditure, organisations and countries. The data reviewed by the research represents the largest database in the world of its type. It reveals the truth that fraud is one of the last great unmanaged business costs. It isn’t a sporadic event which you hope to avoid. It is an ever present, high volume, low value problem in any organization of any size – and only a small proportion is detected.
Jim Gee, Partner and National Head of Forensic Services at Crowe, said:
“In the ten years since the first Financial Cost of Fraud report was published, the UK and global economy has suffered rising losses each year, owing to a multitude of new and diverse threats. Losses in 2018 averaged 7.15% of expenditure, compared to 4.6% in 2007.
“The figures quoted in the 2019 report are stark. For the UK, fraud losses equate to £130 billion each year, while the global figure represents more than 80% of the UK’s entire GDP.”
Prior to 2007 the cost of fraud tended to increase in a recession and plateau and decrease during the following period of economic growth. The reasons for this continuing include the additional opportunities opened up by digitisation, a faster pace of business life meaning that ‘controls’ fall further and further behind, and a declining adherence to moral and ethical norms.
The report also highlights that, for many businesses, fraud is a problem that can be tackled. It is estimated that, were organisations to correctly measure, manage and introduce procedures to reduce fraud, potential savings of up to £76 billion could be made annually – a sum 57% greater than the UK Government spent on defence in 2018/19.
Jim Gee added:
“Sadly, too many organisations adopt a reactive approach to fraud and only look to tackle it once it has taken place, and losses have already occurred. A change of perspective is needed. The question is not if it is taking place, but at what level. We need to view fraud as a business cost – by understanding the nature and scale of the cost, we can reduce its extent – enhancing the profitability of companies and ensuring better funded public sector and charitable organisations.”
The full report, ‘The Financial Cost of Fraud 2019’, can be accessed here.
Partner, National Head of Forensic Services
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