Business fraud up 74 per cent

Business fraud is up 74 per cent from last year and is at record levels, research has found.

The latest figures from accountants and business advisers BDO Stoy Hayward show reported fraud cost UK businesses over £705 million in the last six months alone, a whopping 74 per cent increase on the same period last year.

Fraud levels are worst in the finance and insurance sectors, the study found.

In those same six months, reported fraud cost the UK’s bankers and insurers more than £636 million – a massive 90 per cent of the total cost of fraud in the first six months of 2008 – representing a 15 fold increase from fraud levels last year.

Simon Bevan, head of BDO Stoy Hayward’s fraud services team said: “The fraud problem facing all UK business could be bigger still.

“Our latest figures, while grave enough, show only the value of reported fraud - the fraud we actually know about.

“What is really scary is that these figures don’t even include losses that may have been incurred by rogue traders.

“When you add in the fraud that’s not yet been uncovered, or which businesses have discovered but don’t wish to expose, the real cost to UK industry could be much, much higher.”

BDO Stoy Hayward said a tougher line on custodial sentencing may help reduce the figures. “While we know from our own research that UK custodial sentences for fraud have increased, from 2.88 years in 2005 to 3.14 years in 2008, these are still low when compared with those of other countries such as the US, where large frauds can result in prison sentences of up to 20 years,” Mr Bevan said.

London and the south-east is the fraud hotspot of the UK with £634 million (nearly 89 per cent of the total value of reported fraud in the UK), reflecting the density of financial services in the capital, the company said.

Greed is still the main motive for fraud at 36 per cent, BDO Stoy Hayward said. However, debt is a close second at 25 per cent followed by gambling at 24 per cent.