- Study of 750 senior leaders in large UK businesses found that seven in ten (71%) are concerned about the rise in business litigation and the impact on their trading.
- Nearly three quarters (72%) of firms have experienced a rise in litigation over the last five years with the majority (60%) saying they are expecting cases to further increase over the coming 12 months.
- Almost a fifth (19%) said that they are not prepared to handle legal cases brought against their business, despite the rising prevalence.
- Corporate litigation increasingly considered a significant threat to the reputation, operation and strategy of UK businesses.
Seven in ten (71%) UK businesses are concerned about rising business litigation, with nearly three quarters (72%) reporting an increase in cases brought against their companies over the past five years and three in five (60%) anticipating a further rise over the next 12 months, according to new research by global risk management and insurance broker, Gallagher.
The multi-sector survey of 764 senior leaders found the upsurge in litigation is being driven by a number of factors, notably the rising cost of living (47%), economic instability (36%) and a more litigious UK society generally (35%). Since 2019, more than two in five (43%) UK business say they have been subjected to legal threats, with many facing multiple occurrences; more than a quarter (28%) said they had seen cases of litigation increase by more than 40% 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% of respondents), contractual disputes (35%) and financial disputes (34%). 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%) 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%) 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%) 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%), over six in ten (63%) said it had an effect on business operations and management time and a similar number (62%) said it impacted their strategy. The majority (58%) said there was a significant financial impact on the firm.
Gary Fletcher, Managing Director of the South, Gallagher UK & Ireland, said: “Litigation poses a considerable risk to the operational and financial health of UK businesses, with service sectors vital to the economy coming under particular strain. This data would appear to be evidence that British society at large is becoming increasingly litigious – and businesses are bearing the brunt.
“While larger companies are more likely to face legal threats, even businesses with less than fifty employees are reporting high levels of litigation against them, challenging the general assumption that legal disputes are only a worry for big business. Concerningly, despite the established upward trend of business litigation cases and a consensus that this will persist, many companies do not feel prepared to manage incoming legal threats, potentially leaving them open to hundreds of thousands of pounds in awards and legal fees.
“Firms are able to help protect their business from the cost of litigation by taking purchasing insurance. There is a broad range of cover available to handle costs of a legal dispute either made by or against the company. From an issue with a supplier contract, an employment dispute, property damage or a personal injury claim, legal expenses insurance will help protect businesses from the huge expense of professional fees. Companies should speak to their broker to see what cover might be right for them.”
When it comes to how individual sectors are being impacted, responses suggest that industries more likely to face litigation than average include energy firms (67%), scientific operations (57%), IT (50%) and finance (49%).
