LARGE firms are losing up to £2.5 million each a year because workers use office computers to surf the Internet for their own purposes, according to a new report discussed by the Chartered Institute of Personnel and Development.

Nearly nine out of ten staff have unlimited access to the Internet and e-mail systems, which are seen as valuable business tools.

But such access also brings problems, highlighted by recent sackings of City of London workers for passing on explicit sexual images downloaded from the net.

In another case a woman worker successfully complained of sexual harassment because her managers took no action against staff who called up obscene images from the Internet.

New government regulations granting firms powers to monitor staff e-mails and phone calls came into power this week.

But Clare Hogg, who wrote the report, said employers should have solid policies in place so that workers knew where they stood.

"This way both parties can get the best out of the Internet and e-mail while being aware of the consequences in the case of misuse," she said at the Chartered Institute of Personnel and Development conference.

"If employers don't review their policies, they could find themselves liable for anything from sexual harassment to being in breach of copyright laws." Ms Hogg said the scale of the problem was huge, and surveys showed many workers visited adult sites.