The UK is an example of a modern, innovation-based economy whose success relies on its ability to maximise the value of, and protect, its intellectual property rights (IPRs). The economy is well integrated globally, through active participation in global value chains. A consequence of its high IP-intensity is its potential vulnerability to counterfeiting and piracy on the global stage.

The modern structure of the UK economy is largely based on knowledge, ideas and innovation. The innovative industries that rely on intellectual property (IP) rights (including trademarks) are the backbone of the UK economy. These industries are also an integral part of global value chains, which make the UK a significant contributor of value added in the complex structures of world trade.

Trade in counterfeit goods is a longstanding socio-economic problem that continues to grow in scope and magnitude. It gives rise to significant challenges to effective governance, efficient business and the well-being of consumers, while simultaneously being a key source of income for organised criminal groups.

The entire UK economy relies on some form of intellectual property (IP), because virtually every industry either produces or uses it. The flipside of the value of IP is the harm caused by IP theft, involving creating and selling counterfeit and pirated products. Information on the magnitude, scope and trends of counterfeit and pirated trade is critical to understand the nature of the problem and how the situation is evolving. It is also essential for designing and implementing effective policies and measures to combat illicit operations. This report describes an analysis conducted by the OECD of the economic impact on the UK economy of the global trade in counterfeit and pirated goods. This chapter takes a step-bystep approach to explain the unique methodology used for the analysis.

This chapter presents the quantitative assessment of effects of counterfeit trade on the UK economy, based on the methodology presented in Chapter 1. It quantifies: 1) the impacts on the UK of imported fake products; and 2) impacts of worldwide trade in goods that infringe the IP of UK rights holders. For both these impact pathways it quantifies the effect on consumers, sales, jobs and government revenues. It also outlines global trends in trade in counterfeits of products of relevance to the United Kingdom.

This study has highlighted some important, data-related issues. These include a lack of compatibility and completeness of existing datasets and need for greater harmonisation of data collection; information gaps concerning consumer behaviour, especially on substitution rates; and difficulties in quantifying certain impacts of counterfeiting, e.g. the effects on consumers’ health and safety.

The findings of this study should help both public and private sector decision makers to better understand the nature and scale of the trade in counterfeit goods for the UK economy, and to develop appropriate, cohesive, and evidence-based policy responses. Furthermore, the methodology developed for this report can lend itself to a number of additional exercises. These could include other country studies, which could eventually lead to a benchmarking exercise. This methodology could be also re-used to determine the scale of harm caused by counterfeiting on the UK economy once the new data become available.