A recent economic study released today, titled The Impact of Increased Mass Litigation in the UK, indicates that the surge in collective actions may cost the UK economy 18 billion GBP by hindering industrial innovation and discouraging investment.

The study highlights that the UK possesses the highest number of collective actions in Europe, with 47 cases initiated last year. The predominant type of litigation occurs under collective proceedings orders in the Competition Appeal Tribunal, primarily funded by third-party investors.

According to the report, numerous businesses targeted by these actions are situated in sectors deemed essential for economic growth by the government, including life sciences, advanced manufacturing, and digital services. The report asserts that the perceived risk of mass litigation is likely to adversely affect investment in these critical sectors.

Additionally, direct economic losses would arise from the expenses incurred by businesses due to litigation and private enforcement, along with a decline in market capitalization. The 18 billion GBP estimate—without a specified timeframe—is derived from the assumption that UK costs will reach 30% of those in the United States.

The authors of the report clarify that they are not opposing collective actions outright but rather advocating for a careful assessment of the benefits in relation to the wider economic implications.

The release of this study coincides with the Civil Justice Council’s report on litigation funding, which suggests a light-touch regulatory approach in this area.

A representative from the International Legal Finance Association remarked that the collective action framework fosters a competitive business landscape, holding a limited number of wrongdoers accountable for defrauding consumers and engaging in anti-competitive behaviour, while also encouraging sound corporate governance.