Action needed to tackle £222.5bn shadow economy, accountancy body says
Britain's "shadow economy" of undeclared trade in goods and services is worth around £222.5 billion and is not set to fall significantly by 2025 without action at "all levels", a report has warned.
The Association of Chartered Certified Accountants (ACCA) estimates the underground economy represented 11.5% of UK gross domestic product (GDP) last year.
It said the so-called shadow economy - the production of and trade in legal goods and services that are deliberately concealed from public authorities - will only fall to 10.8% by 2025.
This underground market is being driven by a number of factors, including the rise of the sharing economy - where consumers exchange food and services - online selling platforms and 3D printers, which are making manufacturing more affordable on a small scale.
In its report, entitled Emerging From The shadows: The Shadow Economy To 2025, the ACCA said this market presents an "enormous challenge" for society.
It is a market which is "unregulated, untaxed and unlawful", according to the report.
"Taxes go uncollected, fair wages are undercut, health and safety standards are not enforced and lives are put at risk," it added.
Helen Brand, chief executive of ACCA, said: "The prevalence of shadow economy activity throws up considerable practical and ethical issues for both business and government.
"The UK has a relatively small shadow economy compared with other countries around the world, but it is quite worrying that by 2025 it won't have fallen by much," she said.
The ACCA said the accounting profession could play its part in helping bring the sector out of the shadows, although more action is needed across the board.
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."
She added: " Effective management of the underground economy requires action at all levels - government, cities, local communities and individuals."
The report said the UK's shadow economy is small compared with many other countries, and globally accounts for 22.5% of GDP on average.
It estimates this will fall to 21.4% of worldwide GDP by 2025.