Four per cent of UK imports are counterfeit, which is having a "significant" impact on the British economy, says a new report from the Organisation for Economic Co-operation and Development.
The results in the study – titled Trade in Counterfeit Products in the UK Economy: Fake Goods, Real Losses – refer to 2013, which is the most recent year that the latest data is available.
According to the report, imports of counterfeit goods imported to the UK accounted for as much as £9.3 billion in 2013, representing 4 per cent of UK imports, which is above the 2.5 per cent global average for the import of fake goods.
Electronic and electrical equipment, clothing and footwear were the most frequent counterfeit products smuggled into the UK, followed by toys and games, and leather goods, with China, Hong Kong and India the main sources of the bogus goods.
The OECD found that fakes made up at least 3 per cent of the total value of products with UK trademarks and patents that are traded worldwide, although toys, clothing and footwear exceeded 10 per cent.
The findings from the report, which aimed to measure the direct economic effects of counterfeiting on UK consumers, the retail and manufacturing industry, and government, came from customs seizures data as well as interviews with trade and customs experts.
In terms of the impact on the UK, the OECD found that the total volume of lost sales of genuine products in the UK wholesale and retail sector as a result of fakes amounted to £4.2bn ($5.52bn), equivalent to 1.37 per cent of total sales. Meanwhile, the lost sales by UK IP rights owners amounted to £8.6bn or 1.95 per cent of their total sales in 2013.
The illicit trade also resulted in 60,000 lost jobs in the UK, while the UK government lost £3.8bn in tax revenue, of which £2.4bn was due to counterfeit imports to the UK and £1.4bn due to illicit trade in goods that infringe the intellectual property rights of UK residents.
The long-term effects on the economy from an impact on innovation or health and safety were not included in the study but the authors speculate the economic cost would be much higher.
The OECD notes that the risk of counterfeit trade has been growing in recent years and the UK, with its trademark-intensive economy, is highly susceptible to counterfeits. It said the consequences of counterfeiting on the UK were "significant".
"This report has presented a state-of-the-art quantitative analysis of the scale of counterfeiting in the UK context and of its negative impacts in certain areas, such as jobs, consumers and public revenue. The magnitude of the issue, and the scale of its impact, should be of concern to both policy makers and the private sector [as] it has significant implications for the future," the report concluded.
"In order to design effective policies to tackle the threat of counterfeit trade in the UK context, the problem needs to be identified and assessed… The findings [of this report] should help both public and private sector decision makers to better understand the nature and scale of the trade in counterfeit goods for the UK economy, and to develop appropriate, cohesive, and evidence-based policy responses," the OECD said.
However, the report also noted that the study highlighted data issues such as the lack of compatibility and completeness of existing datasets and the need for greater harmonisation of data collection and information gaps on consumer behaviour.
"Even though information on counterfeit and pirated trade has significantly improved in recent years, it still falls far short of what is needed for robust analysis and policy making. Further research on measurement techniques and data collection methods could help to refine the analysis and close the data gaps," it recommends.
The study was carried out by the OECD's Task Force on Countering Illicit Trade and is the first of a set of country and regional case studies on the scale and impact of counterfeiting.