2023 UK litigation analysis: Fewer High Court claims, less firms instructed, and a spike in insolvency cases as the economy bites 

The volume of newly issued UK High Court claims fell in 2023, while the number of insolvency applications was dramatically higher than in 2022, painting a clear picture of the tough underlying macro-economic conditions over the past year. Data shared with Legal IT Insider by litigation analytics provider Solomonic also shows that the number of law firms instructed on High Court claims is down, although a handful of firms have seen their workload increase, with a combination of competitive forces creating a “perfect storm” for litigators.

In 2023 there were 6,598 newly issued High Court claims, a drop of 6% on the 7,028 claims issued in 2022, according to Solomonic’s data for the periods January to November 2022 and 2023.

Solomonic’s CEO Edward Bird said: “Litigation is down mainly due to general macro-economic conditions. Litigants are holding off on claims that they may well progress in 2024.” The High Court is home to the UK’s largest civil cases and Bird says that there have been some very big disputes this year, particularly in the insurance sector. He observes: “The past few years of economic turmoil has been a busy time for litigators, but it isn’t as simple as suggesting that litigation is counter cyclical.”

It is often said that in a tough market where corporate deals are down, there is a counter-cyclical spike in litigation activity, but Bird says: “Litigation is expensive and risky, so where there is uncertainty it’s not surprising to see caution.”

Having said that, market turbulence and litigation inevitably go hand-in-hand and Solomonic’s data shows that the next wave of Covid-19 disputes are flowing into the courts. This largely follows The Supreme Court ruling in FCE v Arch Insurance (UK) Ltd and others [2021] – more commonly known as the FCA test case -which led to an estimated 370,000 policy holders who are able to recover losses relating to  business interruption due to Covid. Baring Solicitors issued just shy of 120 claims in September against major insurers. Bird says: “Disputes have a long tail and we have had and continue to have crises and underlying factors (from Covid fallout, war, crypto, fraud and class actions) that will keep the market busy for the foreseeable future.”

Covid has also contributed to the sharp rise in insolvency applications this year: there were 11,338 new insolvency applications issued up to November 2023, an increase of 38% on the 8,238 claims issued during the same period last year.

Bird says: “It’s a slightly depressing tale when it comes to the huge rise in insolvency actions. A lot of money was spent propping up businesses during Covid but since that support was withdrawn, businesses in construction, leisure and hospitality haven’t been able to recover, and increasing energy prices and interest rates haven’t helped.” He adds: “HMRC is also taking a much tougher approach. Intuitively it seems illogical to use public money to support businesses and then close them quite aggressively not long after but that’s what we’re seeing.”

In terms of how law firms have been impacted by the drop in High Court cases, the new claims have been spread among fewer law firms: 1952 law firms were instructed this year compared with 2132 in 2022, a drop of just over 8%. Those numbers do not include insolvency claims, where there has been slightly less consolidation: 946 firms were instructed, compared with 1,004 in 2022.

Bird says: “It has always been fairly competitive but you have the making of a perfect storm. There are fewer new disputes in the first instance, and add to that, US firms are very active and poaching litigators from English firms. Anecdotally, we’re hearing that there is less client loyalty. Whereas in the past lawyers would do a good job and expect the client to keep coming back, now law firm business development activities have had to really sharpen up.”

On this latter point, Bird adds: “Procurement within corporates is sharper when it comes to legal services and professional services more generally. They are shopping around more on price and volume, and relationships are harder. This means a lot of change in terms of client management; retention; and winning new business, and whereas half a dozen firms including Weightmans and Trowers & Hamlins are up year-on-year, many are down.”

In terms of the new opportunities that have arisen for firms this year, Solomomic’s data also shows:

  • Insurance and aviation litigators have found themselves increasingly busy as a result of Russo-Ukrainian induced claims – firms involved with the highest volume include Morgan, Lewis & Bockius UK LLP (22 claims), HFW (16 claims), Weightmans (15 claims), DAC Beachcroft (8 claims), and Shoosmiths (6 claims);
  • A steady flow of public sector procurement disputes in the last three years – 44 in 2021, 31 in 2022, 32 to date in 2023

With regard to public sector procurement, Bird says: “There is a broader point here. We’ve seen it a bit with regard to PPE and HS2, but public sector procurement isn’t looking good. You routinely see cases that relate to government departments not following their own processes. There is also arguably an opportunity to disrupt the procurement process if you don’t win, which is part of a bigger problem. With the cancellation of HS2 and political focus on areas like PPE procurement we will expect to see more of this in the future.”

Solomonic predicts that in 2024 there will be an increase in the use of predictive modelling; a rise in ESG claims; and generative AI-based litigation, including copyright claims. There is likely to be more litigation-funded disputes and, potentially, the first big opt-out success, following the rise in UK class actions in which claimants can opt out rather than have to opt in following the landmark Merricks Supreme Court judgment in 2020.