For more than a decade, litigation funding has been sold as a modern solution to an old problem. By allowing third parties to finance legal claims, supporters argue, claimants gain access to justice while funders simply provide the capital that makes legitimate cases possible.

That narrative has always overlooked an uncomfortable reality.

Litigation funding is not simply about access to justice. It is a commercial industry that profits from legal disputes. Like any other investment market, it depends on generating returns, attracting capital and finding new opportunities for growth.

The collapse of Woodville Consultants should force policymakers to confront that reality.

According to reports, the company has entered administration with a loan book approaching £250 million after raising substantial sums from investors to finance law firms pursuing claims, including those linked to the motor finance scandal. Thousands of investors now face uncertainty while administrators investigate the company’s affairs.

For an industry that often presents itself as a force for good, the irony is striking. A business built on financing legal risk has itself become a source of financial risk.

It is tempting to dismiss Woodville as an isolated failure. That would be a mistake.

The real significance of this case lies not in one company’s collapse, but in what it reveals about the direction of the litigation funding market. Over the past decade, funding has evolved from supporting occasional high-value claims into financing large portfolios of litigation. Collective actions, group claims and mass consumer litigation have increasingly relied on commercial capital, creating a market in which legal disputes themselves have become investment opportunities.

That changes the economics of litigation.

Funders are not charities. They invest because they expect returns. Law firms seek external capital because it enables them to pursue larger volumes of claims. Investors commit money because they are promised attractive yields. None of those commercial objectives is inherently improper, but together they create a powerful incentive for more litigation.

That is rarely acknowledged in debates about litigation funding.

The conversation is almost always framed around access to justice, yet far less attention is paid to the fact that an expanding litigation funding market also creates an expanding claims market. More available capital means more cases can be pursued, more group actions become commercially viable and more businesses find themselves defending claims that may last for years before liability is ever determined.

For businesses, the costs begin long before judgment is handed down. Significant management time is diverted into disclosure exercises, regulatory engagement and lengthy legal proceedings. Investment decisions are delayed, reputations are placed under pressure and legal budgets continue to grow. Those costs ultimately work their way through the wider economy, affecting consumers, shareholders and employees alike.

Woodville also highlights another overlooked issue: who ultimately bears the risk when litigation funding goes wrong. Reports suggest thousands of investors may now be exposed to losses after backing a business whose fortunes depended on the progress and outcome of complex legal claims. Litigation is inherently uncertain. Cases are delayed, appealed, settled on different terms or abandoned altogether. That uncertainty is an accepted feature of the justice system. It is a far less comfortable foundation for an investment portfolio.

The response to Woodville should not simply be calls for tighter regulation of litigation funders, important though transparency and oversight undoubtedly are. The bigger question is whether policymakers have become too comfortable with the increasing financialisation of litigation itself.

The justice system exists to resolve disputes fairly and efficiently. It was never intended to become a marketplace in which lawsuits are financed, packaged and monetised for investor returns.

Supporters of litigation funding will argue that one corporate failure does not invalidate the sector. They are right.

But nor should one collapse be dismissed as an unfortunate anomaly.

Woodville is a reminder that litigation funding is no longer a peripheral feature of the legal system. It is now a significant commercial industry with its own investors, financial products and growth ambitions. As that industry expands, so too do the incentives to generate more litigation.

That should concern businesses, regulators and policymakers alike.

The debate should no longer be confined to how litigation funding is regulated.

It should be whether the continued expansion of litigation funding is taking the UK further away from what every justice system should ultimately seek to achieve – resolving disputes quickly, proportionately and without creating an ever-growing commercial market in legal conflict.