Class action lawsuits could cost uk economy £18 billion pounds

Class action lawsuits could create economic damage to the tune of £18 billion in the UK, according to findings by the European Centre for International Political Economy. This alarming figure surpasses the scope of several sector-specific public investment programmes and raises concerns over the economic resilience of the country.

The report warns of a potential £11 billion loss in market capitalisation for UK businesses due to waning investor confidence linked to mass litigation. Class action lawsuits, which were almost non-existent in the UK until the Consumer Rights Act of 2015, are now being described as a growing threat to the country’s economic stability and capital market competitiveness.

Baroness Bowles of Berkhamsted, a former MEP and non-executive director of the London Stock Exchange Group, underlined the economic imbalance caused by these lawsuits. While settlements are often substantial, claimants seldom receive proportional benefits. Much of the settlements are consumed by legal fees and funder profits. Bowles highlighted the need for value-driven redress mechanisms that ensure fair compensation for claimants while maintaining legal and economic balance.

The negative implications of unchecked class actions extend beyond immediate economic concerns. Key sectors such as life sciences, advanced manufacturing, digital services and clean energy are at risk of investment deterrence if reforms to the legal framework are not implemented. Critics have also pointed to the inflated costs of these actions, where legal and administrative expenses outweigh genuine claimant payouts.

Seema Kennedy, head of the campaign group Fair Civil Justice and a former Conservative minister, added that the current system fosters a challenging environment for innovation and investment. Kennedy stressed that recalibration of the legal approach is vital to safeguard long-term growth, attract capital, and ensure justice for claimants. Without meaningful reform, the UK risks becoming unfavourable for enterprise and economic advancement.

A recent incident involving the £200 million Mastercard settlement illustrates the rising disputes surrounding class action cases. Innsworth Capital, a US-based litigation funder, has contested a ruling about the allocation of unclaimed funds from the deal. Disputes such as this underscore broader concerns about fairness and effectiveness in the current legal framework for mass litigations.

As the UK continues to contend with the rising trend of class actions, policymakers face pressure to address issues of transparency, claimant outcomes, and overall economic impact. The need for reform is critical to restore balance between access to justice and the country’s economic priorities.