Can the UK economy cope with the rising cost of fraud?
Before the EU referendum, the University of Portsmouth’s Annual Fraud Indicator 2016 report estimated the UK economy is losing £193bn to fraud. The private sector’s impact is valued at £144bn, while the public sector is £37.5bn. In 2013, the National Fraud Authority approximated the country’s entire fraud losses at £52bn.
Following Brexit, the economy is also coping with decreases in the value of the pound, FTSE 250 and banking shares. Meanwhile, market research specialist GfK has reported an eight-point fall in consumer confidence since the vote, with some UK consumers ready to cut back on non-essential purchases.
Businesses and consumers alike are dealing with challenging economic conditions, but can the UK cope if the issue of fraud is overlooked at this distracting time?
Businesses losing out on procurement
When analysing the non-financial private sector, the Annual Fraud Indicator 2016 estimated businesses are losing £127bn to procurement fraud. For perspective, this figure represents 4.78% of the £2.7tn in total spending. The next major concern is payroll fraud, which is said to be costing £12bn a year.
In the workplace, email phishing scams accounted for 77% of reported fraud, with phone calls representing 12%. The report explained how fraudsters commonly impersonate legitimated organisations in their efforts.
To combat the threat, the National Fraud Intelligence Bureau has partnered with UK banks and cyber security advice website Get Safe Online on a campaign warning how fraudsters use emails, social media and phone calls in their scams. However, time will be needed before workers can gradually be educated of the risks.
Consumers falling victim to identity fraud
UK consumers are also struggling with fraud. According to the University’s report, citizens lose approximately £9.7bn each year. At present, individuals are said to lose £5.4bn to annual identity fraud. The next largest threat was the £3.5bn attributed to mass marketing fraud.
In the coming months, the Financial Times has suggested consumers could be faced with rising prices for retail goods, increasing petrol costs and weakened exchange rates. If such circumstances do transpire, then fraud victims will find it more difficult to cope.
Commenting in the Annual Fraud Indicator 2016, Experian Director of Fraud and Identity Solutions Nick Mothershaw called for the introduction of “a single, strongly verified digital identity” within online commerce. However, the innovation is unlikely to materialise in the short-term, with Mothershaw advising consumers to remain vigilant.
Fraud will add to economic strain
The University of Portsmouth concluded its report by saying: “Fraud in Britain is taking place on an industrial scale,” and “it is likely annual fraud estimates are being under-evaluated.”
With Theresa May having taken over from David Cameron as UK prime minister, the country is poised for a transitional period as she proceeds with Brexit. Unfortunately, businesses and consumers could be left to rely on their own vigilance before the government can address the rising cost of fraud.
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