Mass litigation 'could cost UK economy £18bn'

An economic study suggesting that the explosion in collective litigation could cost UK economy £18 billion by undermining industrial innovation and deterring investment is the latest contribution to the debate on litigation funding. 

The study published today, The Impact of Increased Mass Litigation in the UK, was carried out by Brussels free-market thinktank European Centre for International Political Economy (ECIPE) and funded by industry lobby group Fair Civil Justice. It notes that the UK has by far the largest number of collective actions in Europe, with 47 brought last year - up from six in 2014. The most active form of litigation is under collective proceedings orders in the Competition Appeal Tribunal, mainly financed by third-party funders.  

According to the report, many of the businesses targeted by these actions operate in sectors identified by the government as critical to economic growth: life sciences, advanced manufacturing and digital services. The perceived threat of mass litigation is likely to hit investment in these sectors, the report claims. Meanwhile direct economic losses would come from the cost to business of litigation and private encorcement, as well as a reduction in market capitalisation. The £18bn figure - for which no timescale is given - is based on the calculation that UK costs will reach 30% of those in the US. 

The report authors say they are not arguing against collective actions per se, but for a careful weighing of the benefits against broader economic costs. 

In a foreword, Baroness Bowles of Berkhamsted (Liberal Democrat former MEP Sharon Bowles), writes: 'Legal frameworks designed to support justice and accountability are now being repurposed to create a parallel economy where litigation becomes a commercial enterprise. We must ensure our legal system is a support, not a drag, on the UK’s economic ambition.'

The study's publication follows the Civil Justice Council's report on litigation funding, which proposes soft-touch regulation in the sector. Fair Civil Justice, a lobby group supported by the British Chambers of Commerce, the UK Finance & Leasing Association and 'an array of British businesses and consumer groups' will use its findings in its campaign to level the playing field in group litigation by promoting accessible dispute resolution, sensible safeguards, and greater transparency in cases funded by third parties'. 

Its chair, former MP Seema Kennedy OBE, said: 'This is no longer just a legal issue, it’s a matter of economic resilience. If policymakers fail to act, the UK risks becoming a hostile environment for innovation, long-term investment, and fair access to justice. We urgently need to recalibrate our system.'