The holiday season has passed once more, presents have been opened, mulled wine has been drunk, Olde Lang Syne has been sung and New Year promises made – and by now many of these same promises broken.
So it seems only fitting to stick with one of those January traditions to attempt to predict what the New Year holds, in particular for the UK legal finance industry – what do we think will happen? What would be good to happen?
In 2025 we saw the release of the Civil Justice Committee’s Final Report into the legal finance industry – a mixed bag of sweets from where we stand. We welcome its release, we welcome its stance on fixing PACCAR, but its’ views on such a fix having retrospective effect do not sit so well with us. It’s views on litigation control are at best challenging. But overall, it is a good body of work.
But what is clear is that beyond anything else what we all need for 2026 is for the effects of PACCAR to be fixed. Government have indicated that they will pass legislation in 2026 to fix PACCAR, however as always the answer will lie in the detail. Sarah Sackman KC MP, Minister of State for Courts and Legal Services has previously indicated that any legislation will not have retrospective effect, that it will have prospective effect only so as not to override the general rule of law principle. It is a stance we believe to be right.
We also believe that we should use the opportunity of legislation to clarify other issues of law which may not be quite as clear as we would like. The legal finance industry would benefit from having an effective secondary market, to achieve that it could do with certainty on issues such as the protection of legal privilege. If we are passing legislation effecting the legal finance industry why not use it to clarify such issues?
We have seen some existing players exit the market and others contract, whilst a core group of funders seem to have consolidated their positions.
2025 saw an attempt led by Senator Tillis to raise the tax treatment of legal finance in the US, aimed primarily at foreign investment in the funding of litigation in the US. Although this attempt was halted, Tillis and others have vowed to carry on the fight.
This attack on the industry is one of a number of attacks which raised their head in 2025 including the call for greater disclosure and regulation. We can expect these calls for change to continue in 2026 and beyond.
2025 seemed to continue a trend we have seen in the last few years of decreasing fund raising. I don’t think this is necessarily a cause for long term concern. Although longer than ideal case timelines must surely be a factor in fund raising, I think it can also be explained by an increase in understanding and in focus – as an industry we are better understanding what is working and what is not, which ultimately must be better for our investors.
As a result of that greater understanding, some of the other trends of 2025 do not seem surprising – a continued increase in portfolio deals over single case investments and deeper due diligence reviews being two factors that are signs of increasing maturity in the market. Are these signs that we are entering a new more responsible legal funding market? That certainly seems to be the case from what we see.
Tech litigation we think is only going to continue, a reflection of nothing more than the growing importance of tech generally.
AI is a topic that will remain on everyone’s lips during 2026. It’s simply too big an issue for that not to be the case. AI will eventually change everything we do, but how it will do that and at what speed, how we control it, verify it and ultimately learn to live with it are all open questions. But they are exciting ones. AI has a power we could all only have dreamed of just a few years ago. It will change the way we learn, how we interact, how we think. It will improve the speed of understanding and as a result the speed of progress. It will thus change literally everything.
Over the years litigation funders and insurers have worked well together to build up an arsenal of weapons which can be deployed in the contingent risk space. 2025 saw some of that come under challenge with several mainstream insurance companies questioning the legal finance industry, blaming it in effect for the rise in certain premiums. However, for the most part litigation funders and insurers continue to work well together, both driven to innovate new products for a market that is increasingly sophisticated
There are some things we can do better in 2026 and I want mention just a couple with the most obvious one being that of leadership.
If we are to make the most of what we have, if we want to lobby Government effectively to create the industry that is going to maximise success then we need to be more joined up in the way we use our voice. We need an effective industry body – one that all the major players in the market support. The top funds need to come together and lend their support to one body, properly fund that body to make sure that the voice of the industry is heard with consistency and sense.
We need to come to terms with regulation of our industry, but we need the industry to help Government to come up with the best regulatory structure, one that brings the best standards of governance, sets best standards of behaviour with an effective sanctions regime. Regulation should be seen as an opportunity. It is part of the growing up process and we need to embrace it.
Government can’t do it all on their own. We need to help them reach the right conclusions to put the right framework in place to empower our industry. If we leave them to get on with it we miss the opportunity to help them come to the right conclusions.
So let’s find our “joined up” voice in 2026 and let’s start to truly shape the future of our industry. 2026 is a big year for the legal finance industry and we should not miss the opportunities that can be created if we do some simple things right.
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