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A new European Union-funded report has declared that buying designer goods can benefit consumers and the companies whose brands are being ripped off.

They are an impulse holiday purchase that many buyers later have second thoughts about – the fake Louis Vuitton bags and Rolex watches picked up for a song abroad.

While shoppers are happy with the price, there are often nagging doubts about the items' quality, their legality and who ends up profiting.

However, such worries are, it seems, over. A new EU-funded report has declared that it is OK to buy fake designer goods.

The study, co-written by a Home Office adviser, says consumers benefit from the market for knock-off designer clothes at knock-down prices.

It also rejects the complaints of designer companies, claiming that losses to the industry as a result of counterfeiting are vastly exaggerated – because most of those who buy fakes would never pay for the real thing – and finding that the rip-off goods can actually promote their brands.

The report adds that the police should not waste their time trying to stop the bootleggers.

It disputes claims that the counterfeiting of luxury brands is funding terrorism and organised crime, and argues there is little public appetite for tough law enforcement measures as consumers enjoy the bargains offered by the illegal trade, which has been estimated to be worth £1.3 billion in the UK.

Professor David Wall, who co-authored the report and advises the government on crime, said the real cost to the industry from counterfeiting could be one-fifth of previously calculated figures.

"It's probably even less," he said. "There is also evidence that it actually helps the brands, by quickening the fashion cycle and raising brand awareness."

He added: "We should be focusing on the trade in counterfeit drugs, dodgy aircraft parts and other stuff that really causes public harm.

"At a time when there is no more public resources for police, and they are being asked to do more, law enforcement should be focusing on other things."

While the UK authorities target those who trade in fake goods, the government has decided against criminalising consumers who buy them.

But tourists purchasing counterfeits in other countries can face prosecution. In France, the maximum fine for buying fake goods is 300,000 euros (£246,000) or three years in jail.

During a crackdown in Italy earlier this summer, a tourist was fined 1,000 euros (£825) for buying a fake Louis Vuitton bag for seven euros (£6) from a vendor at the resort of Jesolo, near Venice.

Holidaymakers also face having counterfeit purchases seized at ports and airports as they return to Britain, if they are detected by the UK Border Agency.

According to the report, up to three million consumers every year buy counterfeit goods carrying one of the top designer labels, such as Louis Vuitton, Yves Saint Laurent, Burberry or Gucci. Nearly a third of the sales are over the internet.

Prof Wall, from the University of Durham, says consumers are rarely duped by the black market manufacturers, instead welcoming the choice offered by fakes.

"I've just come back from Corfu and I saw Breitling watches being sold for ten euros (£8). No one in their right mind will think that is a real Breitling watch."

The quality of many of the fake goods has "improved greatly", the report, for the British Journal of Criminology, adds.

It concludes there is "little public interest support for using public funds for policing and prosecuting the commissioning and manufacture of counterfeits" and argues it should be up to the industry – not the police – to halt the trade.

But police and leading designer brands last night rejected the study's findings.

A spokesman for Louis Vuitton said: "The sale of counterfeit goods is a serious offence whose revenue funds criminal organisations at the expense of consumers, companies and governments."

A representative from Burberry added: "Counterfeiting is taken extremely seriously. Where a case is proved, Burberry will always push for the maximum penalty."

The Association of Chief Police Officers said faking fashion goods was "not a victimless crime".

"Businesses, individuals, and the public purse all suffer as a result of such activities," said a spokesman.