A recent survey revealed that two thirds of Britons are happy to buy designer rip-offs. But that's only the start of our addiction to fakery. Susie Rushton reports on the rise and rise of the imitation industry

Any receptionist at one of the big hotels in Shanghai can give you directions to the "Fake Market". It's located right next to the mall which houses flagship stores for Prada, Fendi and Louis Vuitton. Authentic must-have totes and their cut-price simulacra sell side-by-side here. Tourists and fashion-conscious Shanghaiese can identify the new bag they want either in shop windows or in the advertising hoardings that cover the city, then head straight into the shabbier five-story Fake Market and haggle over its $20 counterfeit twin. Just because it couldn't exist in the UK doesn't mean there isn't the demand. Far from it.

Back in the UK, at Whitechapel underground station in the east-end of London, a passer-by can pick up any of the biggest movies on cinema release on pirate DVD from a squad of Chinese economic immigrants who linger there from morning to night. The films are recorded on camcorders from the back of the cinema. The quality is appalling but, as a spokesman for Fact, the Federation Against Copyright Theft, says, "People are prepared to put up with poor quality to be able to view a film exactly when they want to." On a copy of Simpsons – The Movie you can hear the guy with the camcorder laughing at the gags in the background. Still, the anti-counterfeiting bodies say that the DVD hawkers are doing better trade than ever.

Then there's the great British high street. Selling not exactly counterfeits of designer goods (it is assumed that, to get around Intellectual Property law, the chains' solicitors routinely check that one crucial feature of a dress or bag is altered) but "lookalikes", the fast fashion retailers have managed to propagate the widely held belief that the cut-price version of a catwalk look is even cooler than the original. Jimmy Choo and Chloé are among those who have in the past month brought successful law suits against high-street imitators.

Copies, whether of movies or Gucci watches, are now far from being the illicit perk of the long-distance traveller to Hong Kong or New York's Canal Street. These days, according to the latest research, we Britons actively love fakes. We are buying them while on holiday in Europe but also in online auctions and in markets here in the UK. Research shows that we perceive it to be a victimless crime and that perception isn't changed by the fact that very little seems to be being done to stop it.

"Even just 10 years ago, if you wanted to get a knock-off, you had to be connected, have a source. A little bit like scoring ecstasy," says Tim Phillips, author of Knock Off: The Deadly Trade in Counterfeit Goods. "Now you only have to go outside your front door and go to your local market. It's not legal, but it has become legitimised."

Even celebrities, those privileged beings who are routinely loaned hot-off-the-catwalk looks for free by fashion houses, are now admitting to buying fake designer accessories. The actress Renée Zellwegger has said that she bought a counterfeit bag in Hong Kong. She may not be the pinnacle of chic but when multi-millionairess Britney Spears carries a pale-pink fake Chanel bag, tweens everywhere get the message that cheating the luxury goods houses is cool.

This is a potentially disastrous turn of events for companies that trade on their aura of exclusivity and carefully nurtured relationships with Hollywood stars. No wonder that brands such as Louis Vuitton and Chanel (which, with Burberry, are the most copied) are fighting back on the A-list front. When Courtney Love was photographed at a party earlier this year wearing a fake Chanel dress, the fashion house was said to be incensed. In this month's US Harper's Bazaar, Love does penance, posing with jewellery just covering her nipples over the headline, "I'd rather go naked than wear fake". Love claims she wore the copycat Chanel "inadvertently". If so, she would be rather more gullible than the rest of us.

The reason Chanel et al have a problem with forgeries is that there is such a huge demand for them. More than ever, Britons are buying fake goods, knowing that they are fake – and not giving a damn. We are put off neither by the loss to those brands' businesses nor – apparently – by any thought of the organised crime that inevitably props up a global trade worth as much as $200bn each year. And as the standard of those fakes improves, no longer is poor quality such a big issue for buyers.

While a minority will always prefer to know that they own and carry the real thing, there is a growing group who will buy both fake and authentic luxury goods. It's a misconception these days to think that the woman who carries an ersatz Louis Vuitton Monogram or Chloé Paddington bag is a young, low-income consumer who can't afford authentic goods. According to a new study by the law firm Davenport Lyons, two thirds of those who buy counterfeit watches, handbags and clothes also buy genuine designer goods. In demographic terms, there is very little to distinguish the fake-buyer from the genuine-only buyer.

And increasingly, we Britons are openly confessing that our Gucci watch or Mulberry bag isn't the real thing. Researchers say that up to two thirds of us are happy to admit we buy fake goods – an increase of 20 per cent on last year. As the global trade booms, an even wider range of spurious items gets shipped across borders, with piracy affecting not just luxury goods but even everyday items such as toothpaste, toys and batteries.

Is fakery losing its stigma and, particularly in the realms of image and self-presentation, even becoming a kind of status symbol? And if authenticity has become strictly optional, into which other realms of culture will that attitude spread?

In the past decade British attitudes towards that other celebrity perk, plastic surgery, have also changed dramatically. Increasingly it is no longer shameful to fake a younger, sleeker, sexier physical appearance, particularly if "only" temporarily erasing crow's feet and facial creases with non-surgical injectibles such as Botox and Restalyne. Clinics report that men, for whom even make-up remains taboo, are increasingly turning to minor surgical procedures in the name of presentation.

"I saw my first client in London in 2000 and it was very different then. Secretive," says Wendy Lewis, a New York-based cosmetic surgery consultant who advises women in both the US and the UK. "People weren't talking about it. The mainstream broadsheet media and glossy magazines were only just starting to write about it. Now, there's so much information and so many clinics. It's a radical change." With increased accessibility, says Lewis, fewer patients care about hiding the fact that their smooth foreheads or pert bosoms aren't quite as nature intended. "I see far more women now who say, 'I don't care who knows, I just want to do it for me,'" she says. The difference is no longer split so obviously by nationality, with British women now taking similar attitudes to their American counterparts. Instead, Lewis says, the divide is generational.

We can attribute changing attitudes to what used to be called "going under the knife" partly to easier access to procedures such as Botox but also, again, to an increasing openness among celebrities about their use of fakery. In American Vogue last summer, Ellen Barkin and Linda Evangelista admitted to using Botox and fillers. The arrival of high-definition television means that every weather girl and quiz show presenter is likely to follow suit. It's only sensible they admit it, thinks Lewis, because, "We're too savvy now to believe that it's down to healthy living and good genes". She encourages even her clients who don't want anybody to know about their surgery to admit "to something – but not everything. Just to deny it will make you look foolish. There was a time when you could get away with saying you'd been in a spa. But those days are long gone."

Eventually, Lewis warns, we may find ourselves – like New Yorkers – intolerant of naturally aged faces and prefer fake youthfulness. "Where I live in the Upper East Side, if you see a woman with a lined forehead, she looks so old. And that effect will become more mainstream. In certain places in the world, everybody's had something done. And I think the trend will continue." As surgery becomes more affordable, so will the frozen foreheads multiply. And it will be pointless to deny needles have played their part.

Another piece of fakery we're only too aware of but tolerate none the less is the art of the retoucher. If celebrity wrinkles aren't smoothed out in the Botox clinic, they will inevitably be obliterated by the retoucher's hand. We know about it because Kate Winslet complained that her thighs had been "slimmed" down for the cover of GQ magazine; because we have the Photoshop application on our own home computers; because the majority of fashion models appear to have entirely non-porous skin on their faces; because we don't only buy airbrushed glossies but also celebrity magazines with paparazzi shots of unretouched stars with mottled thighs and angry red zits. It's our duty, of course, to pass this information on to impressionable children – although chances are they've already airbrushed their own pictures for the approval of their fake Facebook friends.

The art of removing unwanted shadows, creases in clothing or even entire people from photographs is nothing new: Stalin used retouching in the cause of propaganda to erase out of official photographs those comrades who had fallen from favour. But in the past decade, advances in technology have not only made fakery of our own snapshots possible, but the imagery in advertising and magazines ever-more unreal.

"There was little awareness about retouching when we started up in the Nineties," says Colin Hume of Shoemakers Elves, a company that specialises in retouching fashion shoots and beauty advertising campaigns. He perfects skin tones, brightens eyes and smooths out unsightly wrinkles on clothes for glossy magazines and fashion houses including Prada, Chloé and H&M – yes, unattainable perfection now sells high-street clothes as well as designer labels. "Now even children are aware it goes on. I went on a kids' show on T4 a few months back to demonstrate how we do it."

In his darkened studio, Hume flicks up an image on his screen on which he's just spent an afternoon doing what he terms "the normal amount" of digital manipulation. The "before" and "after" shots are drastically different. A woman in a red dress leans casually on a counter. At the request of the photographer, Hume has changed her dress from pink to red ("because it clashed"), changed the tone on her face, slimmed her neck and arms and countless other minor alterations to colour and silhouette that result in what is, in the end, a prettier picture. " With celebrities, yes, some of them are overweight and we're doing quite a bit of work, squeezing them," he says, although Hume prides himself on his relatively restrained re-modelling. "If they've just had a baby, for reference we'll try to find shots of how they looked before they had their baby, for their size."

It's up to the client, says Hume, how much manipulation is acceptable: " It's about what they want to say, what they want to put across." Advertisers contend that they are simply following what consumers say they want to see, gathered in market research. In Italy, fashion clients are still demanding a rather heavy-handed style of retouching – what those in trade term "plastic fantastic". American advertisers, too, tend to want an evenness of skin tone that is more cyborg than biologically accurate.

Glossy magazines in the US may be about to face a backlash, however: the website www.jezebel.com recently offered $10,000 to an editorial mole who could send them the best pre-airbrush shot destined for a magazine cover (a shot of the singer Faith Hill before retouching was duly posted on the site, next to the radically altered cover that was actually published). In the UK, the market demands a more subtle effect (although we're certainly not ready to see real pores and wrinkles in our ads). Perhaps because Dove's " real women" campaign has been effective, or perhaps simply because trends in photography can change as quickly as the clothes themselves, Britons currently prefer a more sophisticated type of retouching – let's call it "flawless with flaws". Hume says that this demands no less work, and actually requires more skill. It can surely be no coincidence that when Chanel launched their new ad campaign for Coco Mademoiselle earlier this month starring Keira Knightley, the accompanying press release praised her "natural flaws" – although, of course, the photographs show the English actress looking nothing less than miraculously smooth-skinned and fresh.

Hume doesn't see retouching as fakery. "What is authentic anyway?" he asks. "When a woman has her hair done, has all this make-up applied, has amazing lighting by a top photographer who takes a really flattering picture of her – a little retouching on top isn't much. It's all a cheat anyway. I see it, now, that I'm able to give a level of kindness to someone, a nicer viewpoint."

Given viewers' and consumers' increased knowledge of retouching and acceptance that the photographs in beauty ads in particular are " aspirational" (adspeak for more fake than the contents of a Big Brother contestant's bra), the revelation last month that Penelope Cruz's lovely lashes were extended not with L'Oréal's £8 mascara but with the help of stick-on false eyelashes could hardly have been less shocking.

What was surprising, though, was to see an international giant like L'Oréal caught on the hop and forced to reveal the workings of its smoke-and-mirrors marketing campaigns. The story caused so much publicity that some even wondered whether the complaint to the Advertising Standards Authority was a plant, a PR stunt for their product. The complaint stuck, though, because it was made in the current climate of heightened sensitivity to the " misleading" of viewers and consumers.

What began with the Queen's horror at finding that the TV production company RDF had edited tape to imply she had stormed out of a photoshoot with Annie Leibovitz, now encompasses underwater footage from the blockbuster film Titanic used by Russian news channels to "sex up" reports of claiming the North Pole; then there's the misleading marketing of a documentary about Alzheimer's to suggest a death had taken place on camera when it hadn't; and even a Discovery Channel volcano-hunter who used dry ice to add a little extra drama to on-camera lava flows. The television industry is now under pressure to be able to verify all material. Editors and producers are wondering whether this scrutiny could be to the detriment of pithy story-telling and the entire notion of the "edit", which by definition warps the "reality" recorded on film – if you can describe the studied way human beings behave in front of a camera as " real".

Serious documentaries have a moral duty to be truthful and yet the biggest entertainment phenomenon of the past decade, reality TV, isn't particularly real at all. By now, most adult viewers of formatted fly-on-the-wall shows are aware that they're not watching absolutely unmanipulated footage of real-life events.

"I think that viewers buy into what the set-up is in a reality show," says Wendy Rattray, a freelance producer, who worked on the first two series of Big Brother. "Everybody knows that reality TV isn't real, but there are certain aspects of it that are real. I think viewers understand more than the industry gives them credit for. Think of a programme like Supernanny . Every week she would go into the house, see the unruly children, the family wouldn't cope, she'd win the kids round, the family would have a difficult time again, she'd sort out the last few niggles and everybody would be happy – the same pattern, every week. I don't think the viewer believed the same pattern happened every time, but does that matter? You're getting a concept – the tips, the learning from mistakes. You tell the story and you get the result. I think the viewer accepts that. For high-brow documentaries, people want authenticity, but in entertainment they want just that – entertainment."

The temptation for inexperienced editors and producers is to edit their material so that the story not only becomes more interesting, but eventually becomes patently untrue. That's risky. Wider access to information and technology means that even as we buy into fakery, we delight in revealing pretence.

So we are in a curious position. In many different ways – some subtle, some less so – Britain is becoming more fake with each passing year. But at the same time we don't like being duped. As one TV editor notes, "It's all right for the Russians to fake news reports with footage from Titanic, but there's a feeling that such behaviour isn't very British." Whether it's a knock-off handbag, a newsreader's youthful forehead or a trashy reality show, we've never been so accepting of fakes, and it's never been easier to falsify. But these days only the fool won't admit that they're faking it – because it has also never been easier to get caught out.

F is for Fake: Accept all substitutes?

By Charlotte Philby

Fake celebrities

Countless agencies offer celebrity doppelgangers to masquerade as the rich and famous. Whether they're enlisted as light entertainment at a social event or used as a decoy to distract awaiting fans while the real thing escapes through the back door, celebrity body-doubles can earn thousands for simply showing up.

Fake reviews

Checking comments and star ratings on websites such as Amazon helps us judge products and services based on the experiences of others. Except that in recent months a string of businesses have been caught posing as independent customers and posting fake reviews. As of December this year, such behaviour will fall foul of a European directive banning companies "falsely presenting [themselves] as a consumer", and offenders will be subject to naming and shaming.

Fake existence

Second Life is not a game; there is no points system, no score, no reward. It is a constructed environment, the sole purpose of which being the " personal enjoyment of its users" (of which there were 8.9 million at the time of going to press). In this internet-based virtual world your character or "avatar" can explore, socialise and trade with other users. With its own currency, the Linden Dollar (fully convertible with the US dollar) users can buy and sell non-existent land and products.

Fake friendships

The discrepancy between the volume of phone numbers in our mobiles compared to the number of "friends" listed on social "notworking" sites such as Facebook is well documented. The latest crime against friendship is a wave of "friend theft", executed to artificially boost your own social circle. Pilfering acquaintances from the friend lists of others is both a rife and socially unacceptable modern phenomenon.

Fake software

Fake Nation, a government-funded report, revealed that most people do not perceive downloading pirated material as theft. Despite campaigns highlighting the link between organised crime and pirated material, consumers continue to favour illegal copies, costing the games industry more than £2bn a year in the UK alone.

Fake websites

Surf the web for the latest gossip on celebrities such as Paris Hilton and Pete Doherty and you may unwittingly expose yourself to identity thieves. Fraudsters have created fake websites containing spyware, bugs and viruses, which request details from subscribers that allow hackers to access personal information, including bank details, which is then sold to criminals.

Fake qualifications

With student debt at an all-time high, the temptation to fork out hundreds rather than thousands of pounds to obtain a first-class degree is stronger than ever. Websites offering qualifications from GCSEs to doctorates promise certificates barely distinguishable from the real thing.

Fake music

Joyce Hatto was called a "national treasure" when, in her seventies – and crippled by ill health – the former concert pianist produced some outstanding interpretations of complex works. After her death in June 2006, the music industry and media were up in arms when it was found that many of these "interpretations" were the work of other well-known pianists.

Fake information

Wikipedia sees itself as the future of encyclopedias: open to anyone, quickly updated, consensual, and with accuracy on a par with Encyclopedia Britannica. Not according to some critics, who have branded it an unrivalled vehicle for the dissemination of misinformation and responsible for the devaluation of research. Especially when the Vatican and the CIA are editing their own pages.

Fake winners

Mark Thompson, director-general of the BBC, conceded that the organisation deliberately deceived viewers by having fake competition winners in a number of its programmes. Blue Peter presenters were forced to apologise after selecting a child in the studio audience to call in live on-air, after a technical failure prevented the producers selecting a genuine winner for a phone-in competition.