This has come up before so for the avoidance of doubt...
While it is not an offence to own medals which have not been awarded to you, it is illegal under section 197 of the Army Act 1955 to use these to pretend to be a member of the armed forces. (This act will be superseded by the Armed Forces Act 2006 in November.)
The act makes wearing any military decoration, badge, wound stripe or emblem without authority a criminal offence. It is also illegal to wear a replica "as to be calculated to deceive", and to falsely represent yourself as someone entitled to wear any such award.