Theft and fraud rose by 10% last year costing UK retailers £3.4 billion, a new study has found.

Shrinkage accounted for 1% of sales according to the Retail Fraud study from Martec which surveyed 100 of the UK’s largest retailers including John Lewis, Marks & Spencer and Tesco.

The research showed guards are used by 60% of retailers while dishonest employees are detected by other members of staff 40% of the time, potentially saving the sector £1.4bn.

The study also showed online purchases now account for 9% of total sales. It also said collaboration between retailers has been hampered by data protection rules – although 55% collaborate on some level.

Martec managing director Brian Hume said: “The level of loss through theft and fraud is further bad news for the retail sector after they saw a 2.2% slump in sales during the first quarter of 2012.

“It is common that in times of recession theft increases but this theft is costing UK retailers £3.4bn on top of the tough times they face with reduced sales, painting a worrying picture for UK retail.”