The fastest growing financial crime in the country is corporate identity theft, according to research from a leading economic organisation.

The study by the Centre for Economics and Business Research predicted that corporate identity crime is set to cost UK firms in excess of £700 million a year by 2020.

These costs represent an increase of 1,300 percent according to the Risk Uncovered Index operated by insurer Royal & SunAlliance (R&SA).

Companies in the UK now believe corporate identity theft is the fastest growing threat they face.

The insurer commissioned the Centre for Economics and Business Research to make future predictions on the impact of corporate identity theft, and the results have shocked many said R&SA.

Corporate identity theft happens when fraudsters steal the identity of a company and then trade under a legitimate company’s credit and name. It can affect companies through assets being stolen and bank accounts emptied by fraudsters trading on a company’s creditworthiness, for example.

According to the research, large businesses, with over 250 employees, will pick up the biggest share of costs from corporate identity theft and London firms are forecast to be hit by the greatest increase in costs at £140 million by 2020. The sectors most likely to be affected are communications, banking, finance and insurance.

It is the speed with which corporate identity and reputation can be damaged that concerns many in an age of 24 hour media coverage, said the research. It found that the increase in the number of businesses affected by the crime is mirroring that in personal ID theft, with one in ten people seeing their personal details used by thieves to obtain credit.

Although factors such as data security breaches may not be at the centre of many risk strategies at present, their influence is increasing rapidly. Without sufficient foresight and the necessary protections put in place there is the potential for many businesses to be caught out, resulting in a loss of competitive edge and significant under-performance, according to the research.

Jon Woodman, director of Risk Solutions at R&SA, said: "Companies are increasingly being affected by corporate ID theft and many are worried about the risks of fraudsters stealing their company identity, as this could lead to a loss of competitive advantage or public confidence. With identity theft a growing risk facing businesses, it is important to take measures to minimise exposure to fraudsters and have a good security policy in place."

Simon Wallace of the Centre for Economic and Business Research added: "We are on the cusp of a potential boom in corporate identity theft. With almost universal computer usage and internet coverage in the business environment the potential for corporate identity theft is more significant than ever. Those willing to hack, scam and defraud will find new and technically advanced methods to open up the necessary loop holes and steal a firm’s identity. Business will need to adapt to this risk and must be willing to increase their spending on new and improved IT security systems in order to fend off attacks and stay one step ahead."