Artificial intelligence is emerging as a new source of legal and financial pressure for UK businesses, with more than a third now reporting a rise in low-merit claims generated using AI tools, according to new research from Irwin Mitchell.
The study, based on a survey of more than 80 senior in-house lawyers, highlights how AI is reshaping the litigation landscape—creating not only new efficiencies, but also new risks. Businesses say AI-generated claims are increasing legal workloads, absorbing senior management time and driving up costs at a moment when many organisations are already operating under tight margins.
Around 35% of in-house legal teams reported an uptick in claims, particularly from customers, where AI tools are being used to produce lengthy, highly structured legal arguments. While many of these claims lack substantive merit, they are often sophisticated enough to require detailed review and formal response.
Katie Byrne, Head of Commercial Dispute Resolution at Irwin Mitchell, said these claims are rarely successful but still impose a material burden on businesses.
“In-house teams are dealing with a growing volume of AI-generated, low-merit claims. Many are lengthy, legalistic and built from templates. Businesses say they rarely stand up, but they still consume time and budget, and are driving greater spend on cyber cover and claims handling,” she said.
The result is a growing layer of administrative and legal friction, particularly for mid-sized firms without extensive internal legal resources.
Alongside the rise in AI-generated claims, the research underscores a broader shift in legal risk priorities. Data protection and privacy breaches are now seen as the most significant AI-related litigation threat, cited by 55% of respondents.
Cyber insurance costs are also rising sharply. Nearly 70% of businesses reported higher premiums, while two-thirds said they are either expanding their cyber cover or reassessing liability limits in response to evolving threats.
This reflects growing concern at board level that AI, while improving productivity, also introduces new vectors for data leakage, misuse and compliance failures.
Despite the challenges, businesses are increasingly deploying AI themselves to manage the rising complexity of disputes. The research found that 64% of legal teams are already using AI tools to support litigation workflows, particularly in areas such as document review, disclosure and early case assessment.
More than half (51%) have also introduced internal governance frameworks to regulate the use of AI in legal processes, reflecting a growing emphasis on responsible deployment.
Byrne said the response from leading organisations is not to resist AI, but to integrate it strategically.
“Boards shouldn’t panic—they should prepare. The immediate priorities we’re seeing are clear governance for AI use, staff training to avoid data leakage, and practical triage to separate credible claims from AI-padded complaints,” she said.
The findings point to a wider evolution in how UK businesses view legal risk. Litigation is increasingly seen as an operational necessity rather than a reactive last resort, with 69% of respondents describing it as a strategic investment.
This shift is being driven by a combination of factors, including rising cyber threats, regulatory complexity and supply chain disruption. Cyber-related risks were cited most frequently (35%), followed by supply chain issues (21%) and regulatory divergence (17%).
Environmental and greenwashing claims are also gaining prominence, identified as the leading ESG-related legal risk by 33% of respondents.
The report also highlights mixed adoption of alternative litigation funding. While just over half of businesses use it occasionally, concerns around cost, complexity and loss of control continue to limit wider uptake.
Looking ahead, the intersection of AI and legal risk is expected to intensify. As generative tools become more accessible, the volume of automated claims is likely to increase further, forcing businesses to invest more heavily in both defensive and operational capabilities.
For UK firms already navigating economic uncertainty, the emergence of AI-driven litigation represents another layer of cost and complexity, one that will require a more sophisticated, technology-enabled approach to legal risk management.
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AI-generated legal claims add to cost burden on British businesses
