Firms growing concerned about increase in litigation

Seven in ten (71 percent) UK businesses are concerned about rising business litigation, with nearly three quarters (72 percent) reporting an increase in cases brought against their companies over the past five years and three in five (60 percent) anticipating a further rise over the next 12 months, according to a new poll from insurance broker Gallagher. The multi-sector survey of 764 business leaders claims to have found an upsurge in litigation is being driven by a number of factors, notably the rising cost of living (47 percent), economic instability (36 percent) and a more litigious UK society generally (35 percent).

Since 2019, more than two in five (43 percent) UK business say they have been subjected to legal threats, with many facing multiple occurrences; more than a quarter (28 percent) said they had seen cases of litigation increase by more than 40 percent over the past five years.

According to the Gallagher research, the most common types of legal issue cited by UK businesses are employee disputes (experienced by 38 percent of respondents), contractual disputes (35 percent) and financial disputes (34 percent). Mid-sized companies with between 501 and 1000 employees are the most likely to have faced litigation over the past five years with over half (55 percent) reporting being subject to legal threats. These rates remain high even among smaller businesses, who are less likely to have in-house legal expertise, with almost two in five (38 percent) smaller firms saying they have been subject to action.

Employee litigation is a particular growing threat to UK businesses, with individual cases costing businesses hundreds of thousands or even millions of pounds. According to legal firm Morton Fraser MacRoberts, the largest award for unfair dismissal in the year 2022/23 reached more than £184,000 while the largest award in a discrimination case stood at over £1,750,000.

Despite these rising risks, nearly a fifth (19 percent) of senior UK business leaders surveyed said that they do not feel their businesses are prepared to handle accusations, claims or allegations of unlawful behaviour.

When asked which areas of their business had been hit by litigation, almost two thirds cited reputational damage (65 percent), over six in ten (63 percent) said it had an effect on business operations and management time and a similar number (62 percent) said it impacted their strategy. The majority (58 percent) said there was a significant financial impact on the firm.