Scottish Government

Crime and Criminal Justice Research Findings No. 35
1999Counting the Cost: Crime against Business in Scotland

John Burrows (Partner, MHB), Simon Anderson (Associate Director, System Three Social Research), Joshua Bamfield (Director, Centre for Retail Research), Matt Hopkins (MHB Research Lecturer, Nottingham Trent University) and Dave Ingram (Researcher, System Three Social Research)

While the Scottish Crime Survey routinely collects data about crimes against individuals and their households, there has never been any equivalent investigation of the impact of crime on Scotland's businesses. This report presents the findings of the first research enquiry into the extent, nature and costs of crime as it affects businesses in Scotland. The research was carried out to help develop the Business Crime Reduction Strategy for Scotland, the objective of which is "to reduce crime in Scotland to create a safe and secure trading environment in which businesses flourish".

Main Findings

• about six in ten businesses experienced crime during 1998.
• those businesses which had experienced crime suffered, on average, 9 incidents in that time.
• crime is heavily targeted at a relatively small proportion of businesses: one in ten premises account for two-thirds of the total crime count (66%) and one in twenty premises account for over a half (54%).
• the analysis of crime risks at the level of the business sub-sector indicates that the most victimised business sub-sectors are restaurants and take-aways, and public transport and taxi firms. Below these, the highest risks are faced by motor and fuel retailers; post and telecommunications concerns and pubs and clubs.
• well over a half of all cases of repeat victimisation occur within eight weeks of the preceding incident.
• as well as the type of business carried out, various other issues affect crime risks: amongst them the region of Scotland in which a business is located, socio-economic features of the surrounding area, the hours staff work and the type of goods held on the premises.
• taking all these factors into account, the strongest predictors of likelihood of victimisation are region (for example, businesses in the Islands are significantly less likely to fall victim to crime than those in the Central Belt) and staff working patterns (those business premises whose staff work shift work or weekend work are more at risk).
• the examination of highly localised risk factors suggests that these can be significant in determining a business's vulnerability to crime. Indeed, they indicate that security precautions should not be viewed as a panacea that will eliminate risk.
• the survey suggests crime cost Scottish businesses in the region of £678 million in 1998. This total comprises: some £149 million loss incurred from 'witnessed' crime; some £236 million loss incurred from 'unwitnessed' crime (i.e. losses businesses attributed to crime, but they were not sure exactly how this occurred); some £293 million spent on crime prevention measures.

Introduction and background

The approach

Research aimed at establishing businesses' experience of crime remains in its infancy, but several different approaches have been adopted to date. Two in particular stand out: surveys directed at eliciting responses from a cross-section of business premises, and those directed at eliciting responses from the head offices of businesses with more than one set of business premises. These different approaches each have their strengths, but also some shortcomings. Based on this experience, the research reported here incorporated three components. The main component was:

• an in-depth 'premises' survey of 2,500 businesses within Scotland. The interviews - conducted by phone - covered the characteristics of their business, their experience of crime and their investment/use of crime prevention equipment and techniques. This achieved a response from some 64% of those businesses approached.

Subsidiary elements of the study were:

• a major 'head office' survey of a cross-section of larger businesses. This was conducted by post and focused in particular on the costs businesses incur from crime in Scotland, both from victimisation, and the amount they spend on prevention. This survey drew responses from 148 large businesses, operating through 3,680 business premises and employing some 110,000 staff in Scotland.
• a smaller and more qualitative series of 'site visits' and focused interviews with those businesses that have a contrasting experience of crime, exploring in greater detail the factors that determine their vulnerability and the implications for prevention. These assessments used a derivative of the 'Problem Analysis Triangle' to assess how the characteristics of the location, victim and offenders produce crime problems.

The 'premises' and 'head office' surveys investigated all the main types of crime businesses experience (with the exception of computer-based crime), the financial costs they incur as a result of crime and their investment in crime prevention. Although the surveys were complementary, the profile of the typical respondent varied: the 'premises' survey largely drew responses from independent businesses operating only from one set of business premises, the head office survey from businesses operating through, on average, 25 different premises.

The business sectors examined

The research examined the experience of crime across five principal business sectors:

• manufacturing
• construction
• wholesale and retail
• hotels and restaurants
• transport and telecommunications.

These five business sectors account for some £24 billion turnover, at factor cost, or just under half (46%) of GDP in Scotland. In aggregate, they account for some 65,000 VAT-registered firms within Scotland and employ a workforce of about one million.

Crime risks for business premises in Scotland

One priority of the research was to consider in particular how many businesses experience crime at all (that is, crime prevalence), and how many crime incidents are experienced across all the business targets 'at risk' (that is, crime incidence). It concluded:

• 58% of the businesses under review experienced crime during 1998.
• those businesses which had experienced crime suffered, on average, 9 incidents in 1998.
• the types of crime most likely to be repeated were threats of violence, thefts by employees and thefts by 'outsiders'.
• crime is heavily concentrated in its impact: one in ten premises accounts for two-thirds of the total crime count (66%) and one in twenty premises accounts for over a half (54%).
• over half of the businesses surveyed had experienced some form of property crime (with vandalism and break-ins proving the most common crimes), but only about one in seven had experienced violent crime.

Figure 1 - Prevalence of property, violent and all crime

Source: SBC - Premises Survey

• it can be estimated that the businesses in the sectors under review experienced some 207,000 incidents in 1998.
• where comparisons can be drawn, it is clear that rates of crime are much higher than those experienced by individuals and their households: for example the likelihood of any business premises experiencing a break-in is some six times higher than that of a house, and the total number of commercial break-ins per 100 targets is 10 times higher.
• rates of business crime in Scotland nonetheless appear to be significantly lower than in other parts of the UK.

Differences in the prevalence and incidence of crime across business sectors

• the overall prevalence of crime - that is, the number of businesses affected by crime at all - generally varied little between sectors. At one extreme 62% of businesses in the hotels/restaurants sector experienced crime in 1998. At the other, 53% in the construction and transport/telecommunications sectors experienced crime.
• the prevalence of violent crime, however, displays much greater variation. Here the hotels/restaurant sector (which includes pubs and clubs, and restaurants and take-aways) experienced the highest risk, with just over a quarter of businesses affected in 1998.
• most broad business sectors have their own 'crime profile', with one or more forms of crime to which they are particularly vulnerable.
• when the incidence of crime is examined - that is, the total number of crimes spread across all the targets at risk - the variation between the main business sectors is more marked. Using this measure, the sector most at risk from crime - hotels and restaurants - experiences twice as much crime as the sector least at risk, the construction industry.

Figure 2 - Incidence rates

Source: SBC - Premises Survey

• the analysis of crime risks at the level of the business sub-sector presents a much more precise ranking of the incidence of crime, in terms of 'labels' that are much more widely understood. The most victimised business sub-sectors are restaurants and take-aways, and public transport and taxi firms. The next most vulnerable sub-sectors, but with much lower overall experience of crime, are: motor and fuel retailers; post and telecommunications concerns and pubs and clubs.

Patterns of repeat victimisation

• substantially over a half of all cases of repeat victimisation (for example, 55% of break-ins) occur within eight weeks of the preceding incident.
• some 40% of businesses believe the repeat incidents they experienced were connected to one another.
• an analysis of break-ins in 1997 and 1998, suggests that the targets of repeat attacks do not change substantially: over this two year period 10% of premises still accounted for 40% of all incidents.

Figure 3 - Time lapse between incidents

Source: SBC - Premises Survey

Other factors, beyond the type of business conducted, associated with crime risk

The results of the survey work carried out, together with the lessons drawn from the site visits and interviews with those businesses reporting contrasting experience of crime, led to the findings that:

• businesses located in the East Central region of Scotland are more likely to experience any form of crime, followed closely by those in the West Central region. The Islands are least at risk.
• when the overall incidence of crime is considered, the East Central region remains most at risk. However the Northern region experiences a higher incidence of crime than the West Central region.
• in terms of their more immediate surroundings, those businesses most at risk from crime tend to be located in the same areas as the poorest council housing estates, and council estates with older residents. Those located in the same areas as private tenements and flats (which are largely located in inner cities) experience nearly the same risk.
• these area patterns are not dissimilar to those relating to personal and household crime, as identified by the Scottish Crime Survey (SCS).
• at an aggregate level, larger business premises are no more at risk from crime than smaller business premises.
• the goods stored or manufactured by business premises seem to be a potent predictor of crime risk: those holding drugs, cigarettes/tobacco or jewellery/precious metals are more vulnerable.
• the hours worked at any business premises - whether measured in terms of weekend or shift working - are strongly associated with crime risk. Generally, the incidence of crime increases in line with the hours worked, with a particularly marked impact on violent crime.
• taking all these factors into account, the strongest predictors of likelihood of victimisation are region (those in the Islands being significantly less likely to fall victim to crime than those in the Central Belt) and staff working patterns (those business premises whose staff work shift work or weekend work being more at risk).
• the scrutiny of highly localised factors that affect risk suggests that these can be significant in determining a business's vulnerability to crime. Indeed they indicate that security precautions should not be viewed as a panacea that will eliminate risk.
• for businesses with little 'customer contact' (such as manufacturing or construction concerns) locational and surveillance considerations appear to be critical. In particular the proximity to large housing estates seems to increase the risk of crime.
• for businesses which are dependent on customer contact (such as retailers, pubs or taxi firms) the major influences seem to be linked with location - particularly the 'type of customer' the location attracts - and business practices, such as the hours worked.
• the examination of localised risk factors lends weight to the significance of considering 'opportunity' in the commission of crime, and in the value to be gained from adopting 'opportunity reduction' techniques.

The costs borne by Scottish businesses as a result of crime

The costs of crime borne by businesses can arise in various forms, and be measured in different ways. The issue was investigated in both surveys and - as predicted - the 'head office' survey indicated higher costs in every case. Main findings were:

• the different forms of crime to which business premises fall victim inflict widely different costs. Thefts of vehicles, followed by break-ins, incur the highest cost per incident. Thefts by 'outsiders' inflict the lowest.
• the average costs of all forms of incident targeted on business premises tend to be much higher than the equivalent crimes against individuals and their households. The survey findings also indicate that the losses incurred in the typical incident are higher than those reported in previous surveys of business crime within the UK.
• the average annual cost of 'witnessed' crime borne by the typical business surveyed was some £2,300. The highest average costs were sustained in the manufacturing sector (at more than double this sum), and the lowest in the hotels and restaurants sector.

Figure 4 - Average cost of crime (victims and non-victims)

Source: SBC - Premises Survey

• it can be estimated that the 'witnessed' crime covered in the two surveys cost Scottish businesses between £58 and £81 million in 1998. The latter figure probably represents the more comprehensive estimate.
• businesses also reported falling victim to other forms of 'witnessed' crime, beyond those covered in the categories defined in the two surveys. It can be estimated that these cost about £68 million in 1998.
• businesses will frequently fall victim to crime but not know precisely how a loss occurred. Estimates of the cost of these 'unwitnessed' crimes in surveys of retail crime have suggested the sums involved can be much higher than those of witnessed incidents. The head office survey suggested they totalled some £236 million in 1998.
• the costs of preventing crime, too, are substantial. For all the businesses under review some £293 million was spent on crime prevention in 1998.
• combining all these components, it can be estimated that, in 1998, the total cost of crime to Scottish businesses in the five sectors under review was in the region of £678 million.

Figure 5 - Total costs of crime (£ million)

Source: SBC - Premises Survey

What businesses currently do to prevent crime, and the scope for partnership working

• just over a half (55%) of the crime incidents experienced by business premises came to the notice of the police. The police are much more likely to be advised of incidents like break-ins, but only just over a third of all incidents involving violence come to their attention.
• this pattern is not dissimilar to that for individual and household crimes. The primary reasons given for not reporting incidents to the police are that matters are not sufficiently serious, or that the police can do little to assist.
• like businesses elsewhere in the UK, Scottish businesses invest widely in different types of security devices. Those business premises that are controlled by larger business interests also invest considerable sums in specialist security personnel or services. Relatively few business premises, however, give their staff training in security matters.
• business premises - particularly those in sub-sectors most at risk - are well used to taking a variety of precautions to reduce crime risks. Across all the business premises surveyed, one third reported that they "exclude certain people" to reduce their risks and one in five that they have "something available to use in self defence".
• a smaller proportion change their business practices to reduce risk: about one in ten have changed (or are considering changing) their business hours because of crime.
• about one in ten business premises rate business break-ins as 'serious' in their area, but this problem does not rank as high as many other neighbourhood problems. The implication is that business premises in Scotland do not regard crime as seriously as many of their counterparts elsewhere in the UK.
• about one third of business premises have experience of working in partnership with other organisations to prevent crime.
• nearly two-thirds of all businesses, however, indicated they would be interested in being involved in such schemes in the future.

A way ahead?

The objective of the current research was to document "the extent, nature and costs of crime as it affects business" in the five sectors under review, and not to identify the implications for prevention. Nevertheless some general recommendations - largely identifying some broad issues which should receive priority attention in this area - are made.

For individual businesses, concerned to reduce their risk of crime, any course of action has naturally to be based on a considered assessment of that risk. Some businesses, either unaffected - or rarely affected - by crime in the past, may not need to take significant action. But for those who are, what is needed is a relatively straightforward 'problem solving' approach, similar to that adopted in tackling any business challenge:

1. it is essential to routinely collect data about all incidents of crime experienced, and for this record to not only encompass the full costs involved, but the means by which the incidents occurred. Information about the 'modus operandi' is critical in deciding how to prevent similar incidents in future.

2. this data needs to be subjected to regular analysis, so as to glean the implications for prevention. In particular, attention needs to be given to monitoring any repeat incidents against the same targets - for example, to look at the 'time lapse' between each occurrence. Targeting these incidents can yield a considerable payback.

3. an intrinsic part of this regular 'crime audit' procedure must be to review the defences - physical and other - that are taken to reduce crime. An important lesson of this research is that many Scottish businesses could benefit from instigating staff training. It may be appropriate to consider the scope for partnership working with the police, with neighbouring businesses or houses, or with other businesses in the same sector. Above all, businesses may derive significant value from adopting 'opportunity reduction' techniques.

For those concerned to support businesses in this area - such as the police, central and local government, the Scottish Business Crime Centre, or localised/specialist trade associations - the primary value of the current research is that it offers, for the first time, a mechanism by which they can target their efforts on those businesses at greatest risk. Findings about the concentration of crime - for example, that one in ten businesses suffer two-thirds of all incidents - are particularly important. Equally the evidence that the majority of repeat incidents occur within a short time lapse has very significant implications for both crime prevention, and the detection of offenders.

But the lesson that, despite the high incidence of crime amongst Scottish businesses, only about one in ten seems to be either moderately or seriously concerned about the issue, represents a challenge. On the face of things, it suggests that there is considerable scepticism amongst businesses that crime can be effectively tackled. Arguably, it suggests the priorities in the immediate future might need to encompass:

• raising the 'profile' given to crime against business - both as a drain on business profitability, and as a cause of unease (or fear) amongst those who work within the business community.
• investigating more comprehensively whether the perceptions of crime amongst business owners and managers (as reported here) fully reflect those of their staff - particularly amongst high risk business sub-sectors, or in high risk areas.
• probing how businesses have tackled crime to date, with a view to documenting and publicising 'what works'.

On a positive note, the finding that many Scottish businesses are ready to take part in partnerships aimed at tackling crime suggests there is a solid foundation on which work of this kind can build.

Previous Papers in the Crime and Criminal Justice Series

10	Proactive Policing: An Evaluation of the Central Scotland Police Crime Management Model
11	Foreign Language Interpreters in the Scottish Criminal Courts
12	Grounds of Appeal in Criminal Cases
13	Listening to Victims of Crime: Victimisation Episodes and the Criminal Justice System in Scotland: An Examination of White and Ethnic Minority Crime Victim Experience
14	The Use of the Compensation Order in Scotland
15	Examining the Test: An Evaluation of the Police Standard Entrance Test
16	The 1996 Scottish Crime Survey: First Results
17	Drug Misuse in Scotland: Findings from the 1993 and 1996 Scottish Crime Surveys
18	Information Needs of Scottish Jurors: Evaluation of the Scottish Courts Service Booklet
19	Facing Violence: Assessing the Training and Support Requirements of Police Constables in Scotland.
20	Service Provision to Women Experiencing Domestic Violence in Scotland
21	Children, Young People and Offending in Scotland
22	Feasibility Study of Legal Representation among White and Ethnic Minority Criminal Accused
23	From Citation to Witness Stand: A Study of Police Witness Duty at Court
24	Evaluation of the Hamilton Child Safety Initiative
25	Victim Witness Support in Scotland: An Evaluation of Three Projects
26	Making it Safe to Speak? A Study of Witness Intimidation and Protection in Strathclyde
27	Mentally Disordered Offenders and Criminal Proceedings
28	Attitudes Towards Crime, Victimisation and the Police in Scotland: A Comparison of White and Ethnic Minority Views
29	Life Sentence Prisoners in Scotland
30	The Effect of Closed Circuit Television on Recorded Crime Rates and Public Concern about Crime in Glasgow
31	Working with Persistent Juvenile Offenders: An Evaluation of the Apex CueTen Project
32	The Work of Precognition Agents in Criminal Cases

'Crime Against Business in Scotland', the research report summarised in this Research Findings Paper, may be purchased (price £10.00 per copy). Cheques should be made payable to The Stationery Office and addressed to: The Stationery Office Bookshop, 71 Lothian Road, Edinburgh EH3 9AZ Tel: 0131-228 4181 or Fax: 0131-622 7017 This report can also be ordered online from www.thestationeryoffice.co.uk Further copies may of this Research Findings may be obtained, free of charge, from: The Scottish Executive Justice Department Central Research Unit, Room J1-0, Saughton House, Broomhouse Drive, EDINBURGH, EH11 3XA Tel: 0131 244 2112 This document and other Research Findings Papers and Reports may be viewed on the internet at http://www.scotland.gov.uk/cru/