New research highlights increasing threat of US-style litigation culture to British business SMEs

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The American taste for litigation is spreading beyond its borders, and it is coming for British small businesses next – this is the key finding of new research by Fair Civil Justice.

Fair Civil Justice (FCJ) commissioned quantitative and qualitative research to better understand legal actions against British SMEs and to inform recommendations that mitigate the risk of predatory claims.

Our research, derived from in-depth interviews highlight how SME decision makers experience wide-ranging and often very severe impacts from legal action, often entirely disproportionate to the purported wrongdoing. Key findings include:

  • In total, 15% of UK SMEs have faced legal action or the threat of it in the last five years – estimated to represent a total of around 120,000 businesses.
  • By contrast, only 8% of SMEs have had proceedings initiated against them via an ombudsman and only 7% have had an alternative dispute resolution (ADR) procedure brought against them in the past five years.
  • The vast majority (90%) of SMEs who have been subject to legal action or the threat of it claim to have experienced at least one impact – while 41% of SMEs who have not themselves been subject to legal action or the threat of it in the past five years nonetheless claim to have been impacted in some way.
  • A majority of SMEs (62%) have some form of complaint resolution mechanism in place already.

There is also a clear sense that the legal process is weighted against SMEs defending a claim, leading many to settle, and a lack of support and guidance for SMEs facing legal action for the first time.

Seema Kennedy, Executive Director of FCJ, said: This timely research shows how the litigation culture developing in the UK is felt by SMEs and the personal impact it has on entrepreneurs who are an essential part of our communities. Everyone who wants to see economic growth should read the findings and recommendations and take action to protect small businesses from the effects of speculative legal action.

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