Insolvency litigation grows 50% to £1.5bn

The insolvency litigation market has increased by 50% in the past four years to £1.5 billion per annum, with litigation funding fast catching up with ‘no-win no-fee’ arrangements, research has revealed.

The research report by Professor Peter Walton of Wolverhampton University found that the value of insolvency claims has risen by 50% to £1.5 billion since 2015. The study analyses the market since the Legal Aid, Sentencing and Punishment of Offenders Act 2012 came into force in respect of insolvency proceedings in 2016, when conditional fee arrangement success fees and after the event premiums were no longer recoverable from the defendant.

The report was commissioned by Manolete Partners Plc and examined the impact of the Jackson Reforms on the insolvency litigation market. It includes survey data from 173 Insolvency Practitioners and other industry professionals. It was also supported by the leading professional organisations, the Institute of Chartered Accountants in England and Wales (ICAEW) and the Insolvency Practitioners Association (IPA).

The main findings in the report were that:

• A 50% increase in the value of insolvency claims since 2015 to £1.5bn per annum
• Third-party financing of insolvency cases has increased significantly in the past four years
• There has been a significant shift to financing cases by third parties from ‘no-win no-fee’ methods (‘Conditional Fee Arrangement’ or ‘CFAs’).
• The use of funders provides a far quicker resolution, reducing costs and leading to a higher recovery for creditors
• Manolete Partners Plc is the clear market leader of the third-party insolvency litigation market with a 67% share.

The report can be viewed here.