Officials urged to tackle boom in illegal working

May 28, 2004

The UK's shadow economy now employs the equivalent of up to 9 million full-time workers, yet academics claim that policy-makers are continuing to ignore the growing national impact this is having.

University researchers and Whitehall officials met in Nottingham this week to discuss the extent of underground activities, which range from cash-in-hand work to large-scale use of illegal immigrants to pick fruit.

The conference, hosted by the Nottingham Policy Centre, is an attempt to take the lead in sparking debate over how the problem might be tackled.

Addressing the issue would raise vast sums in taxes, reduce levels of official corruption and help to prevent tragedies such as the drowning last February of Chinese cockle-pickers in Morecambe Bay.

Friedrich Schneider, professor of economics at Johannes Kepler University in Linz, Austria, told the meeting that he calculated that the UK's shadow economy was now as large as 9 to 13 per cent of the nation's gross domestic product.

This translated to the equivalent of between 6 and 9 million full-time workers.

About two-thirds of people employed in the shadow economy also had legitimate jobs, moonlighting to earn an average of £300 extra a month. Some 17 per cent were illicit immigrants.

"It is not illegal workers who drive the shadow economy - it is British workers," Professor Schneider said.

Colin Talbot, professor of public policy at Nottingham University and co-organiser of the conference, believed that more than 1 million people were full-time illicit workers. Up to 100,000 of them were employed in agriculture, and more worked in the construction and service industries.

Once driven underground, few were able to return to the official economy, he added.

This threatened not only taxation but also pensions, healthcare, crime, economic policies and governance, and increased the likelihood of official corruption .

"Policy-makers are aware of the issue but are reluctant to address it, because it would open a can of worms," Professor Talbot said.

Michael Samers, lecturer in geography at Nottingham, who has looked at the issue for the Home Office, said that more research was now required into how the shadow economy might be effectively and ethically regulated.

Dr Samers' work and research at Middlesex University, carried out for the Office of the Deputy Prime Minister, found the shadow economy thriving in affluent neighbourhoods, but it is more significant in poorer areas.

Lynette Kelly, a research fellow at Warwick University, said many asylum-seekers were forced into the shadow economy because they wanted to be independent from the state, but they were banned from taking legitimate work.

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