UK Class Action Regime Faces Scrutiny as Economic Costs Mount to £18bn
LONDON – A new report warns that the UK’s burgeoning class action regime is hindering economic growth, potentially costing the economy as much as £18bn – including £11bn in lost market capitalisation for innovative firms – due to diverted investment and stifled innovation. The findings raise questions about the sustainability of the current system, despite a pipeline of claims worth £135bn.
the report, authored by Dr. Michael Dnes, highlights a “substantial economic cost” stemming from the current regime, which is seen as increasingly susceptible to speculative litigation. This diverts funds away from research, development, and investment as companies brace for costly legal battles.
Dnes cited analysis from the European Centre for International Political Economy, pinpointing the £18bn economic impact. he argues that the system’s incentives are “misaligned,” focusing too heavily on pursuing claims rather than demonstrable harm.
“Class actions can play a vital role in deterring anti-competitive behavior and protecting consumers, but the UK’s regime has gone off course,” Dnes stated. “there is a real risk of kind fire especially when innovative companies are sued. It is indeed time for a course correction.The system can be fixed, by fixing the misaligned incentives built into the system, to restore focus on genuine harm, speed up justice, and support growth.”
The concerns echo those raised last October by the Adam Smith Institute (ASI), which warned the current system was eroding trust in UK businesses and the legal landscape.
The report suggests reforms including requiring funders to deliver upfront payouts, creating a market for claims, and tightening certification tests to filter out weak cases and reduce wasteful disputes.These measures aim to curb speculative litigation and ensure class actions effectively address anti-competitive practices without unduly burdening economic growth.
