The UK is losing around £85.3bn to fraud every year, while since the start of the recession the global average cost of fraud has increased by almost 20% according to research by BDO.
The firm's Financial Cost of Fraud Report 2013 shows that average losses, based on total expenditure, for the period between 1997 and 2007 were 4.57%. However, taking account of data from the five years since the start of the recession in 2008, BDO says this figure has risen dramatically by almost 20% to 5.47%. In terms of UK GDP, this implies a total loss to fraud of £85.3bn and on a global basis, a total loss of £2.91 trillion.
Jim Gee, BDO director of counter fraud services, said: 'The financial crisis, where fraud has risen significantly, has clearly provided the ideal conditions in which fraud can grow. Assessing the true cost of fraud, as opposed to the cost of reported fraud, presents some very scary numbers. Putting in place pre-emptive measures could make very significant improvements to the financial health and stability of UK plc.'
BDO says the increase in losses reflects a common picture found in previous recessions. Between 1980-1981, UK GDP shrank by 6.1% and reported fraud and forgery rose by 9.1%; between 1990-1991 UK GDP shrank by 2.5% and reported fraud and forgery rose by 30.5%.
The report looks at examples where losses have been reduced by up to 40% within 12 months through initiatives designed to pre-empt fraud, including actions taken within the NHS. These have included the development of strong anti-fraud cultures, the creation of meaningful deterrents and the revision of processes that remove system weaknesses which provide opportunity for fraud. Gee says a 40% cut in the UK losses to fraud would represent around £34bn which is the equivalent of the UK government's 2012 budget for education.