UK Class Action Regime โFaces Scrutiny as Economic Costs Mount to ยฃ18bn
LONDON – A new report warns that the UK’s burgeoning class action regime is hindering economic growth, potentially costing โthe economy as much as ยฃ18bnโข – includingโ ยฃ11bn in lost market capitalisation โฃfor innovative firms – due to diverted investment and stifled innovation. โขThe findings raise questions about the sustainability of the current system, despite a pipeline โof claims worth ยฃ135bn.
the report, authored by Dr. โMichael Dnes, highlights a “substantial economic cost” stemming from the current regime, โwhich 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, โฃpinpointing โขthe ยฃ18bn economic impact. he argues โthat the system’s incentives are “misaligned,” focusing too heavily on pursuing โขclaims rather than demonstrable harm.
“Class actions can play โฃa vital role in deterringโ anti-competitive behavior and protecting โconsumers, but the UK’s regime has โgone off course,” Dnes stated. “there is a real risk of โkind 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 raisedโ last October by the Adam Smith Instituteโ (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, โขcreating a market โคfor claims, and tightening certification tests to filter out weak cases and reduce wasteful disputes.These measures โaim to curb speculative litigation and ensure class actionsโฃ effectively address anti-competitive practices without unduly burdening economic growth.
