A recent study conducted by global risk management and insurance broker, Gallagher, has shed light on the growing concerns among UK businesses regarding the escalating levels of litigation.
The research, which surveyed 764 senior leaders from large UK businesses, uncovered a significant rise in legal disputes, with seven in ten (71%) expressing worry about the impact on their trading.
Over the past five years, nearly three quarters (72%) of the surveyed firms reported an increase in litigation, a trend that is expected to persist, with 60 percent anticipating a further surge in cases over the coming 12 months.
The surge in litigation appears to be fuelled by various factors, including the escalating cost of living (47%), economic instability (36%), and a society that is becoming increasingly litigious (35%).
Notably, since 2019, more than two in five (43%) UK businesses have faced legal threats, with many experiencing multiple occurrences. Alarmingly, more than a quarter (28%) of respondents stated that litigation cases have surged by over 40 percent in the past five years.
What are the most common legal issues?
Employee disputes (38%), contractual disagreements (35%), and financial conflicts (34%) were identified as the most common legal issues faced by UK businesses. Mid-sized companies with 501 to 1000 employees were the most vulnerable, with over half (55%) reporting legal threats. However, even smaller businesses, lacking in-house legal expertise, were not spared, with almost two in five (38%) stating they had been subjected to legal action.
Employee litigation emerged as a particularly pressing concern, with individual cases costing businesses substantial amounts, reaching hundreds of thousands or even millions of pounds in some instances. According to legal firm Morton Fraser MacRoberts, awards for unfair dismissal and discrimination cases have reached staggering amounts.
Despite the escalating risks, nearly a fifth (19%) of senior UK business leaders admitted feeling unprepared to handle accusations or claims of unlawful behavior against their companies.
Reputational damage
The impact of litigation extends beyond financial repercussions, with respondents citing reputational damage (65%), operational disruptions (63%), management time constraints (63%), and strategic setbacks (62%) as significant consequences. A majority (58%) also reported a substantial financial impact on their firms.
Gary Fletcher, Managing Director of the South at Gallagher UK & Ireland, warned of the significant risk that litigation poses to the operational and financial health of UK businesses, particularly within vital service sectors. He emphasised the importance of businesses proactively managing these risks through measures such as purchasing insurance.
The study also revealed variations in the susceptibility of different sectors to litigation, with industries such as energy, scientific operations, IT, and finance facing higher-than-average rates of legal disputes.
As litigation continues to pose a growing threat to businesses across the UK, experts advise companies to prioritise risk management strategies and consider legal expenses insurance to mitigate potential financial burdens associated with legal disputes.
Amelia Brand is the Editor for HRreview, and host of the HR in Review podcast series. With a Master’s degree in Legal and Political Theory, her particular interests within HR include employment law, DE&I, and wellbeing within the workplace. Prior to working with HRreview, Amelia was Sub-Editor of a magazine, and Editor of the Environmental Justice Project at University College London, writing and overseeing articles into UCL’s weekly newsletter. Her previous academic work has focused on philosophy, politics and law, with a special focus on how artificial intelligence will feature in the future.
