UK cash-in-hand culture 'booming'

Hundreds of thousands of workers are failing to declare income

The UK black economy could be worth more than £100bn a year, according to new research.

A report in the Economic Journal estimates cash-in-hand work is the equivalent of 10.6% of GDP.

Blue-collar workers are the least honest, declaring 46% of their income, while white-collar workers are slightly better, reporting 61% of income.

The government is trying to clamp down on evasion, following a report on the black economy by Lord Grabiner.

The report, by Panayiota Lyssiotou and Panos Pashardes of the University of Cyprus and Thanasis Stengos of the University of Guelph, Canada, however, warns against raising taxes to make up the shortfall.

"A country trying to curtail the loss of tax revenue by raising tax rates can create a vicious cycle, as this reinforces the incentive not to declare economic activities to the public authorities," they said in the report.