29.09.2022

A third of UK construction companies lose employees as a result of fraud

A quarter of construction companies fell victim to fraud in the last year, a new report has revealed. Half of the larger construction companies surveyed (with more than 100 employees) have lost employees due to fraud, whilst a quarter of medium-to-large companies said their industry reputation was tarnished by this illegal activity.

With a quarter of construction companies experiencing fraud in the last year, two in five didn’t report it, suggesting that fraud is far more widespread than the authorities believe.

The study also found that larger construction companies were twice as likely to experience fraudulent activity, in comparison to only one in five small companies or sole traders. However, the impact on smaller companies can be much greater as three in five were close to bankruptcy following fraudulent activity.

The report, collated by Herts Tools, specialist providers of plant hire in London, surveyed 39 construction companies about their experience of fraud in the industry. With fraud costing construction businesses upwards of £10bn a year, the report exposes the shortfalls in fraud protection.

The need for employee support systems at construction firms is clear. Once hit by fraud, companies often struggle to keep employees on board, which further impacts the industry as a whole.

Stefano Lobban, Director at Herts Tools, said: “We, along with many businesses in our industry have been the victims of fraud in different forms over the years. We have noticed a significant rise in attempted fraudulent hires over the last two years which may have some relation to the COVID-19 pandemic.

"Fraud negatively impacts our business, our customers and our staff, as well as potentially damaging our reputation. In order to tackle this growing issue and protect our business and assets and support our team we have taken steps to enhance our checks and implement staff training across all departments. Our compliance team regularly audit and update our policies to ensure our business is best protected. We communicate with our staff, other businesses in our industry and members of The Hire Association as well as reporting details however small to the police and we would encourage other businesses to do the same.

"We believe fraud prevention training is an essential tool for any business in the current climate. Staff are the first line of defence in preventing fraud and a valuable asset to the business - training and awareness enables our employees to feel confident in their decisions and roles and ensures they can carry out their work with confidence even if the worst should happen. All our staff are trained and updated with the many possible ways fraud can occur, how to prevent fraud and how to deal with fraud should they come across a potential fraudulent hire or financial fraud. Communication is key in this area of business and always staying one step ahead.

"Tackling fraud in our industry is something we can all work together to stamp out by awareness, training and vigilance.”

Tracey Hudson, Director at the HR Dept, said: “When the company is a victim of fraud and the financial loss is significant, this can really knock the confidence of an employee in terms of their vision of long term job stability.

"Significant financial losses tend to mean redundancies, no pay rises and cutting costs wherever possible. So, this can result in your best employees moving to your competitors because they seek stability. Particularly when we have a cost of living crisis, everyone needs to know that they can pay their bills.

"The solution in this scenario is to be really transparent about what has happened and how it has happened. Then, its important for mechanisms or processes to be put into place to avoid it happening again. It’s not about shaming any individuals, it’s about learning what went wrong so that everyone is educated on the risks.”

How to reduce the impact of fraud on employees

Communicate clearly what’s happened and answer any questions or concerns
Share information on fraud prevention and how to recognise the signs of fraud
Invest in your compliance team to reduce the risk of fraud
Supervise workers to make sure they have the skills and health & safety knowledge required
Place an emphasis on teamwork and the importance of looking out for fraudsters
Work to maintain your industry reputation following fraud