Jade Tess Weiner of Angeion Group International and Dr Steffen Sirries of Solve Economics examine a defence of the impact of mass litigations on the UK economy.<\/strong><\/p>\n As mass litigation becomes more prominent in the UK, its economic role is being scrutinised. The current debate rarely moves beyond the supposed \u2018costs\u2019 imposed on defendant companies. That view is incomplete, and public discourse and analysis should reflect depth and nuance, not just headline figures. The stakes are too high for access to justice, economic competitiveness, and the UK\u2019s position as a global legal and financial centre to let misinterpreted data drive regulatory decisions and public opinion. Our commentary brings together perspectives often absent from the debate: mass litigation can unlock trapped value, increase efficiency, and incentivise better behaviour across markets.<\/p>\n In this article we investigate whether the story is one of net cost or one of net contribution.<\/p>\n The\u00a0 European Centre for International Political Economy (ECIPE)\u2019s recent and often quoted Impact of Increased Mass Litigation in the UK<\/em> Report<\/em> contends that potential private enforcement costs could reach GBP 18 billion, alongside projected market capitalisation losses exceeding GBP 11 billion, deterring foreign direct investment (FDI) and diverting resources from growth sectors (Guinea et al.<\/a>, 2025).\u00a0\u00a0<\/p>\n Suggesting that mass litigation may cause economic losses of this magnitude and slow UK growth is generating significant discussion in legal, financial, and policy circles (Law Gazette<\/a>, 10 June 2025).\u00a0<\/p>\n We review three key components of the report: its characterisation of costs and losses; its review of the principal-agent problem; and its economic framework, specifically focusing on how it captures the fuller macroeconomic picture.\u00a0<\/p>\n The report\u2019s three cost scenarios of GBP 5.9 billion, GBP 11.9 billion, and GBP 17.9 billion, where UK costs reach 10%, 20%, and 30% of US levels, systematically overstate the economic impact. By applying US growth multipliers directly to UK data without accounting for fundamental differences in market structure, labour markets, capital requirements, and legal systems, the report introduces methodological flaws. It did not consider the UK\u2019s distinct legal framework, including differences in collective proceedings rules, litigation funding structures, and the absence of punitive damages in most UK civil claims. Thus, the report does not provide a sensitivity analysis, a meaningful justification for this approach, or a specified timeframe, weakening its analytical credibility.<\/p>\n More fundamentally, the report presents multi-billion-pound litigation costs as a net drain on the economy, failing to distinguish between resource reallocation and genuine economic loss. Successful claims primarily transfer capital from infringing firms to harmed parties \u2013 compensating consumers affected by anti-competitive behaviour or remedying wrongdoing. This is not wealth destruction but a recalibration of economic relationships in line with the rule of law.<\/p>\n The \u2018losses\u2019 for infringing companies are offset by settlements and damages received by claimants, who reinject this capital into the economy through consumption or corporate reinvestment in the case of legal entities. A further portion flows to litigation funders, law firms, and insurers, generating revenue, employment, and gross value added (GVA) within the UK\u2019s high-value legal and financial services sector whilst attracting foreign investment (Law Society<\/a>, 28 November 2024). Based on ONS data on service sector value added, the UK legal services sector contributed approximately GBP 36.5 billion to the economy in 2023, which is consistent with UK Blue Book<\/em> series 2025.<\/p>\n Regarding the mass litigation regime, it expanded significantly between 2015 and 2022. This timeframe is applied consistently across all figures presented in this article and was chosen because 2015 marked the start of the relevant reform period, while 2022 was the latest year for which data were available at the time of writing. Furthermore, this regime followed reforms to collective proceedings and litigation funding. Although litigation costs are often characterised as pure economic loss, this assumption has been questioned. For example, an opinion piece argues that settlements are not themselves a cost to the economy, and that genuine economic costs arise only where overall output, efficiency, or societal resources are reduced (Law Gazette<\/a>, September 2025).<\/p>\n During this regime, the share of legal activities\u2019 contribution to UK GDP via UK GVA increased from below 1.1 percentage points in 2015 to 1.4 percentage points in 2022. Meanwhile, the mass litigations industry\u2019s share of UK GDP via UK GVA rose from below 9 percentage points in 2015 to almost 12 percentage points in 2022, as shown in Graph 2. Over the same period, legal activities were classed as one of the top 20 contributing industries to UK GVA, moving from 18th<\/sup> place in 2015 to 16th<\/sup> place in 2022, as illustrated in Graphs 3 and 4. In addition, the UK\u2019s inward FDI position continued to grow (discussed in Section 3, below). Such statistics counteract the report\u2019s suggested causal link between mass litigation and economic harm (loss) and demonstrate that the correlation is, in fact, far from causal. By focusing almost exclusively on defendant costs, the report neglects the economic stimulus and redistribution benefits, thereby overstating net economic damage.<\/p>\n Graph 1- Legal activities \u2014 share of GDP by year (line)<\/strong><\/p>\n Built by the authors from the annual Office for National Statistics (ONS) Supply and Use Tables consistent with the UK Blue Book series 2024 for 2015\u20132022. For each year, the chart plots legal activities\u2019 contribution to the economy on a GVA-at-basic-prices basis. One observation per year after cleaning and de-duplication; values are shown in percentage points of GDP. Totals across industries do not sum to 100% due to the shares being on a GVA basis.<\/p>\n Graph 2 \u2013 \u2018Mass Litigation\u2019 bucket \u2014 share of GDP by year (line)<\/strong><\/p>\n This series combines a custom set of six finance\/legal\/professional industries that together capture mass-litigation-related activity built by the authors with data taken from the ONS Supply and Use Tables consistent with the UK Blue Book series 2024. For each year, their GVA was aggregated and expressed as a percentage of GDP, producing a single time series from 2015 to 2022. Shares are on a GVA-at-basic-prices basis and therefore do not sum to 100% of GDP.<\/p>\n Graph 3 \u2013 Top 20 industries by GVA share \u2014 UK 2015 (bars)<\/strong><\/p>\n Shows the 20 largest individual industries in 2015 ranked by their GVA-based share of the UK economy, sorted highest to lowest. This bar chart was built by the authors and has industry labels directly taken from the ONS Supply and Use Tables consistent with the UK Blue Book series 2024 detail; values are displayed as percentage of GDP. Shares are GVA at basic prices, thus the sum across industries is below 100%.<\/p>\n Graph 4 \u2013 Top 20 industries by GVA share \u2014 UK 2022 (bars)<\/strong><\/p>\n Same construction as the 2015 chart, using the latest year available (2022) in the UK Blue Book<\/em> series 2024 published by the ONS. Bars show each leading industry\u2019s GVA-based share of the economy, sorted highest to lowest. As elsewhere, figures are on a GVA-at-basic-prices basis and will not sum to 100% because taxes less subsidies are not included.<\/p>\n Genuine macroeconomic cost is a deadweight loss \u2013 a real reduction in total welfare that occurs when productive activity is discouraged, and value is permanently lost, rather than merely transferred. Deadweight loss represents an economic inefficiency where the equilibrium outcome is not achieved, resulting in a loss that is not regained by anyone else. For a comprehensive explanation, see INOMICS on deadweight loss and Number Analytics\u2019 Guide to Deadweight Loss in Law & Economics<\/em><\/a> (2024).<\/p>\n In mass litigation, this could arise when fear of legal action leads businesses to make economically inefficient decisions, distorting business behaviour away from what would otherwise be profit-maximising or welfare-maximising choice. Suppressed innovation\u00a0is one of the most significant ways this fear materialises.\u00a0Companies may avoid developing high-potential but legally complex products \u2013 new medicines, AI services, or advanced engineering components \u2013 because litigation risk appears greater than expected return. The resulting lost innovation represents wealth never created.<\/p>\n Deadweight loss may also arise from excessive defensive compliance when firms devote disproportionate resources to legal safeguards, diverting investment from R&D, capital upgrades, or market expansion. Empirical evidence of such effects in the UK remains limited. Compliance costs are difficult to quantify (often offset by improved risk management and operational efficiency) and largely internal to firms, making assumptions about wider economic impacts speculative.<\/p>\n By contrast, where legal standards are clear, litigation mainly enforces compliance rather than reducing productive output, generating social benefit rather than deadweight loss. Without robust data demonstrating that companies are forgoing innovation or over-investing in compliance due to litigation fears, these assertions remain unsubstantiated.<\/p>\n The report raises concerns about misalignment of incentives between claimants, litigation funders, and legal representatives, arguing that legal fees and funder profits consume much of the settlement, leaving claimants with inadequate compensation. This is framed as a principal-agent problem, suggesting tension between claimants (the principals) and the agents acting on their behalf.<\/p>\n It is infeasible to make a definitive claim regarding proportionality. There is no reliable UK-wide average recovery rate available for claimants, with the opt-out regime being nascent and distribution results varying considerably. Available evidence from CAT proceedings indicates that claimants typically recover substantial portions of their economic losses. For instance, in Merricks v Mastercard<\/em><\/a>, the CAT ringfenced at least GBP 100 million (50%) of the GBP 200 million settlement for the class, with the funder\u2019s return permitted at approximately GBP 68 million (around 1.5 times costs plus an uplift), with the remainder covering approved legal fees and administration. The CAT expressly scrutinised these arrangements to ensure they were \u201cjust and reasonable\u201d, demonstrating active judicial oversight rather than systematic disadvantage to claimants. At the time of writing, a dispute over the distribution of the Mastercard settlement remains ongoing, with funder Innsworth challenging the settlement\u2019s distribution and elements of the process, including via judicial review and arbitration, which has delayed the release of funds to the claimant class.<\/p>\n The fees paid to funders and lawyers reflect genuine financial risk. Funders typically bear litigation costs upfront with no guarantee of recovery. In cases that fail, they absorb losses (however, the provision of after-the-event and other insurance wrappers may help shield against losses), whilst successful cases must generate sufficient returns to cover both failed cases and provide competitive returns on capital. Similarly, law firms operating on conditional fee arrangements commit resources to cases in the hope of a success fee. Without this risk-sharing, many claimants would have no viable means of pursuing complex or high-cost claims. This system ensures that compensation reaches those who need it whilst enabling cases to proceed that would otherwise be economically infeasible.<\/p>\n The risk of inappropriate returns and distribution structures is further mitigated by regulatory and governance frameworks. The Civil Justice Council\u2019s Review of Litigation Funding \u2013 Final Report<\/em><\/a> (June 2025) recommends a \u2018light-touch\u2019 statutory framework that promotes transparency, aligns incentives, and maintains the balance between justice and economic integrity. Their 58 recommendations include statutory regulation, enhanced transparency requirements, and judicial oversight of funder returns, particularly in collective proceedings and consumer cases. The European Law Institute\u2019s Principles Governing the Third-Party Funding of Litigation<\/em><\/a> (October 2024) complement this by setting standards for transparency, capital adequacy, and conflict management. The 12 principles address transparency, capital adequacy, control over proceedings, funders\u2019 fees, and conflicts of interest, providing a framework for light-touch regulation across European jurisdictions. Together, these measures strengthen confidence in the UK litigation market, attract responsible investment, and ensure that access to justice operates efficiently and sustainably.<\/p>\n Where misalignment does occur, regulatory oversight and judicial scrutiny of fee arrangements provide important safeguards. The CAT\u2019s powers to review and, where necessary, adjust fee arrangements ensure that principal-agent tensions do not systematically disadvantage claimants. As evidenced in the Merricks<\/em> case, the CAT actively ensures terms and pushes back against disproportionate funder demands. The CAT stated it had \u201cno doubt\u201d the settlement was just and reasonable, and commended the class representative for prioritising maximum class member take-up. The settlement arrangements were heavily contested by the funder, Innsworth Capital, which sought a larger share (\u2018agreed minimum floor\u2019). The CAT rejected these submissions and approved distribution that prioritised class member compensation whilst providing the funder with recovery of costs plus a limited return.<\/p>\n In Gutmann v Stagecoach<\/em><\/a>, the CAT similarly scrutinised distribution arrangements and reserved decision on the allocation of unclaimed funds for further hearing, demonstrating continued judicial vigilance. The central challenge lies not in the allocation of funds but in their effective recovery. In Gutmann<\/em>, where less than 1% of available compensation was claimed (approximately GBP 216,000 out of GBP 25 million), low claimant participation \u2013 rather than funder or legal fees \u2013 was the primary constraint on consumer recovery. This reframes the discussion towards the operational and administrative effectiveness of redress mechanisms rather than the structure of litigation funding itself. Industry research on consumer behaviour indicates low awareness of mass litigation. This suggests that improving awareness and education about mass litigation mechanisms and active cases is likely to increase claimant participation.<\/p>\n When viewed in this fuller context, the principal-agent concern, whilst meriting ongoing attention, does not undermine the macroeconomic benefits of mass litigation. By enabling claimants to recover losses and stimulating activity in the legal and financial services sectors, UK mass litigation contributes to economic growth and reinforces the rule of law, rather than creating a net economic drain as suggested by the report.<\/p>\n By focusing narrowly on costs borne by defendants and potential dampening effects on business innovation, the report overlooks broader macroeconomic and welfare considerations crucial to assessing economic impact. Long-run economic growth depends not solely on capital and labour accumulation, but critically on total factor productivity (TFP) \u2013 the efficiency with which an economy converts inputs into outputs \u2013 alongside high institutional quality and robust rule of law. The research of Nobel laureates Daron Acemoglu, James Robinson, and Simon Johnson provides a rigorous framework demonstrating how strong institutions underpin sustainable prosperity (Acemoglu et al.<\/a>, 2001).<\/p>\n Leading scholarship and Organisation for Economic Co-operation and Development (OECD) guidance both recognise that collective enforcement mechanisms play a critical role alongside public enforcement (OECD<\/a>, 2015; Cseres<\/a>, 2015; Mulheron<\/a>, 2024). Private actions, particularly in mass claims, address misconduct that would otherwise go unaddressed because individual losses are too small or widely spread. The resulting deterrence effect leads companies to invest in stronger compliance, discouraging future harm and reducing misconduct across entire markets.<\/p>\n Real-world cases like Kent v Apple<\/em><\/a> demonstrate the value of robust processes. Apple was held liable for GBP 1.5 billion in damages, with the tribunal providing close scrutiny to ensure claimants\u2019 interests and governance were protected. This is evidence that successful mass claims could spark regulatory improvements and system-wide behavioural change. Rather than penalising business, the process catalyses higher standards and discourages harmful conduct, creating benefits that reach well beyond those compensated.<\/p>\n Claims that litigation deters investment are not supported by the evidence. Sophisticated investors place greater weight on institutional quality, legal certainty and property rights than on litigation risk alone. International research consistently finds that countries with robust enforcement and effective mass litigation regimes attract higher-quality, longer-term capital. The World Bank Group (2020), in its Policy Research Working Paper on foreign direct investment<\/em><\/a>,<\/em> shows that institutional indicators (control of corruption, rule of law, regulatory quality) have a significant, positive impact on inward FDI, particularly in developed economies.<\/p>\n Empirical data confirms this for the UK context. Since the expansion of mass litigation, there has been no material change in the UK\u2019s World Governance Indicators<\/em> score for rule of law; comparative data with Germany, France and the Netherlands reveals stable scores even as UK reforms progressed, as observed in Graph 5. Meanwhile, UK inward FDI grew from GBP 1.032 billion in 2015 to GBP \u00a32.193 billion in 2022 according to the ONS<\/a>, demonstrating that neither the country\u2019s institutional standing nor its attractiveness to investors has suffered, as observed in Graph 6.<\/p>\n Graph 5 \u2013 Rule of Law \u2014 estimate by year (lines)<\/strong><\/p>\n This figure was exported by the authors from the World Bank Worldwide Governance Indicators<\/em> (WGI) website and displays the Rule of Law indicator for the United Kingdom, Germany, France, and the Netherlands over the period 2015\u20132022, based on WGI\u2019s own data. The WGI Rule of Law index<\/em> captures perceptions of the extent to which agents have confidence in and abide by the rules of society \u2013 particularly the quality of contract enforcement, property rights, the police, and the courts \u2013 as well as the likelihood of crime and violence. The indicator ranges from approximately 0 (weak rule of law) to +2 (strong rule of law).<\/p>\n Graph 6 \u2013 UK Inward FDI Positions\u2014 amount by year (line)<\/strong><\/p>\n This figure, built by the authors, presents the inward foreign direct investment (FDI) positions of the United Kingdom between 2015 and 2022, based on data from the ONS 2024 FDI statistics. The data follow the directional measurement principle and represent the value of investments held by foreign investors in UK enterprises. Amounts are expressed in \u00a3 million.<\/p>\n Finally, traditional GDP accounting might capture direct litigation costs, but it misses these offsets: improved compliance, enhanced consumer protection, better judicial processes, and stronger institutional resilience. These diffuse yet enduring gains form the bedrock of modern economic strength. Leaving them out presents a narrow and misleading view of what benefits mass litigation actually delivers for the UK economy.<\/p>\n The report presents only a partial view of mass litigation\u2019s economic impact, focusing too heavily on cost and principle-agent problems while giving too little consideration to positive counterbalances. This is a nuanced and complex issue and by thorough empirical research we prove that headline costs and incentive issues alone cannot capture the net effect on capital redistribution, risk-sharing by funders and law firms, or broader benefits. When mass litigation is viewed through the lens of capital flow, access to justice and robust institutions, it is clear that the regime supports economic activity, fortifies the rule of law and attracts responsible investment.<\/p>\n<\/div>\nThe cost of mass litigation in the UK<\/strong><\/h3>\n
Section 1: The difference between true economic cost and reallocation\u00a0<\/strong><\/h3>\n
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<\/figure>\nUnderstanding deadweight loss<\/strong><\/h3>\n
Section 2: Overstating the principal-agent case<\/strong><\/h3>\n
Section 3: Narrow focus excludes economic reality<\/strong><\/h3>\n
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<\/figure>\nConclusion<\/strong><\/h3>\n
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