ACCA estimates shadow economy value at £223bn

The UK’s shadow economy - the production of and trade in legal goods and services that are deliberately concealed from HMRC and government authorities - is estimated at £223bn and is unlikely to reduce from the current 11% of GDP without concerted action, according to research from ACCA

The analysis suggests the underground economy in the UK represented 11.5% of GDP in 2016 and is expected to fall only slightly in the coming years, to 10.8% by 2025. The global average is expected to fall from 22.5% to 21.39% of GDP over the same period.

In a survey of business leaders two thirds (66%) of respondents believed that the shadow economy would grow by 2025, with one third (31%) expecting that it will grow significantly.

Less than one in 10 (7%) said they are making efforts to improve processes to spot and handle shadow economy activities among their clients and customers.

Opinion was split on where responsibility lies for tackling the shadow economy. While 76% said it lies with governments, 60% believed that it is up to individuals to refrain from and report shadow activity, and 45% wanted local communities to combat the issue.

Among the factors driving increasing use of the shadow economy is the use of technology like 3D printers, the sharing economy and the proliferation of gig working.

Helen Brand, chief executive of ACCA, said: ‘The UK has a relatively small shadow economy compared with other countries around the world, but it is quite worrying that by 2025 it will not have fallen by much. The current factors contributing to the UK’s shadow economy are high unemployment and low GDP.’

Faye Chua, ACCA’s head of business insights, said: ‘The shadow economy presents an enormous challenge for society and a huge potential opportunity for the profession to play an active role across the entire value chain from measurement and monitoring through to helping shadow firms and individuals manage their financial affairs and possibly make the transition from informal to formal.

‘Effective management of the underground economy requires action at all levels – government, cities, local communities and individuals.’

ACCA’s report, Emerging from the shadows: the shadow economy to 2025, is here

Report by Pat Sweet

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