One in five of Britain's biggest firms admit to suffering security breaches due to identity theft, and the damage in more than half of these cases has been worse than that caused by any virus.

According to the Department of Trade and Industry's 2004 Information Security Breaches Survey, 15 per cent of these attacks cost about £100,000 and disrupt businesses for more than a month.

The report, conducted by PwC, said the breaches occurred because of "weaknesses in [companies'] approach to identity management", and stressed the value of authentication measures such as tokens, smartcards and biometrics in foiling such attacks.

Only six per cent of firms - predominantly large corporates - currently use such systems. The study found only three per cent of them were successfully hit.

"The cost savings for authentication technology really kick in when you're a big company," said Rhodri Davies, head of security technology at reseller Vistorm.

"But as security budgets grow SMEs can also make the case for adopting such technologies."

Chris Potter, the PwC partner who led the survey, said: "This is a demonstration of the benefits of authentication systems."

iain_thomson@vnu.co.uk