Reform delayed, opportunity lost: Why the UK must act on litigation funding now. A system stuck in limbo

At LIDW26, Freeths and Miller Insurance hosted “Litigation Funding Under Pressure – Funding on Trial: Capital, Control and Ethics in 2026”, bringing together industry and legal perspectives to explore the uncertainty around the UK’s litigation funding market.

Moderator Nick Sutton was joined by Michael Tomlinson KC (3 Paper Buildings), James Gowen-Smith (Miller Insurance), Tets Ishikawa (LionFish Capital) and Jamie Molloy (Ignite Specialty).”

Nearly three years on from the Supreme Court’s decision in PACCAR, the UK’s litigation funding market remains in a state of prolonged uncertainty. Despite clear recommendations from the Civil Justice Council (CJC) and an apparent willingness from government to act, legislative reform has yet to materialise.

This delay is no longer a procedural inconvenience - it is a strategic misstep. A market that depends on clarity, predictability and confidence cannot operate effectively in a vacuum. And as the UK hesitates, other jurisdictions are moving decisively to capture both capital and cases.

The growing cost of inaction

The CJC’s recommendation to reverse the effects of PACCAR “at the earliest opportunity” was rooted in a recognition of both legal and economic reality. Litigation funding is no longer peripheral; it is a core component of modern dispute resolution.

Nicholas Bacon KC’s warning that further delay risks “greater damage” should not be taken lightly. The longer uncertainty persists, the more it erodes the UK’s competitive advantage as a global disputes hub.

At stake is not just a technical question of damages-based agreements, but the broader attractiveness of England and Wales as a forum for resolving complex, high-value disputes. A jurisdiction that cannot provide reliable mechanisms for funding litigation risks losing relevance in a market that is increasingly global and mobile.

Capital is mobile - and it is moving

One of the clearest signals emerging from the market is that capital is already beginning to shift.

Funders are not ideological - they are commercial. As Tets Ishikawa of LionFish Capital highlighted, jurisdictions such as Australia offer something the UK currently does not: certainty. Predictable frameworks for collective actions and funding arrangements allow risks to be priced accurately, which in turn lowers costs for claimants and improves returns for investors.

By contrast, uncertainty in the UK has made it harder to attract institutional capital. Fundraising challenges among established funders are not just cyclical - they are symptomatic of a deeper lack of confidence in the regulatory environment.

If this trend continues, the UK risks entering a negative cycle: less capital leads to fewer funded cases, which weakens the market further, driving yet more investment elsewhere.

Access to justice: The missing lens

Too often, debates around litigation funding are framed narrowly as questions of finance or control. This misses the central point: litigation funding is, fundamentally, about access to justice.

The retreat of civil legal aid has left a structural gap in the system. Into that gap has stepped private capital, enabling claims that would otherwise never be brought. This is not theoretical - it is evidenced by cases such as the Post Office Horizon litigation, where external funding was critical to exposing one of the most significant miscarriages of justice in recent UK history.

Criticism of funders, while not without merit in some cases, often fails to engage with this reality. As Jamie Molloy observed, there is a contradiction at the heart of the current discourse: the state withdraws funding, yet private actors who step in to fill the void are subject to scrutiny and resistance.

If access to justice is indeed a fundamental right, then the mechanisms that enable it must be supported, not undermined.

A market under pressure

The practical consequences of the current uncertainty are already being felt across the ecosystem.

Securing single-case funding has become more difficult, driven by a combination of legal ambiguity, rising costs and increased competition for capital. As litigation budgets grow and adverse costs exposure expands, funders, insurers and law firms are being forced into ever more complex structuring arrangements.

This complexity has two effects. First, it increases transaction costs, making some claims economically unviable. Second, it raises the barrier to entry for claimants, particularly those without sophisticated legal representation.

In short, uncertainty is not neutral - it actively restricts the availability of funding and, by extension, access to justice.

The reality of a market-based system

The UK has, whether by design or default, moved toward a market-based model for financing civil litigation.

As Michael Tomlinson KC noted, the erosion of civil legal aid is effectively irreversible. “The market solution is here,” he observed - and that reality carries policy implications.

A government that relies on private capital to support litigation cannot simultaneously make that market unworkable. Doing so risks creating a system where claims exist in theory but cannot be pursued in practice.

The question, then, is not whether litigation funding should exist, but how it should be supported and regulated.

The case for swift, light-touch reform

There is broad consensus within the market that legislative intervention is both necessary and inevitable. The real issue is timing - and approach.

Delay is the more damaging option. Each passing month reinforces uncertainty, weakens market confidence and strengthens competing jurisdictions.

At the same time, reform does not need to be heavy-handed. As Tomlinson suggested, a “light touch” regulatory framework is both achievable and desirable - one that restores clarity without stifling innovation or discouraging investment.

The objective should be simple: create a stable, transparent environment in which funders, lawyers and claimants can operate with confidence.

A defining moment for the UK’s disputes market

The UK has long been a global leader in dispute resolution, underpinned by a trusted judiciary, a robust legal framework and deep professional expertise.

But leadership cannot be taken for granted. In a competitive international landscape, it must be continually reinforced.

The failure to act on PACCAR reform risks signalling complacency at precisely the moment when agility is required. Other jurisdictions are not waiting - and neither is capital.

The government now faces a clear choice: act decisively to restore certainty and support access to justice, or allow delay to erode one of the UK’s most valuable legal and economic assets.