U.K. companies' legal liabilities soared 12 percent in 2013, driven by the hefty fines slapped on the banking sector, according to Thomson Reuters' legal business.
FTSE 100-listed companies set aside £24.6 billion ($40.5 billion) in 2013 to deal with complaints and lawsuits, up from £22.1 billion in 2012.
"There is a perception that regulators and government have responded to public pressure to show no mercy for large corporates that have been caught breaching laws and regulations," Raichel Hopkinson, head of dispute resolution at Thomson Reuters, said in a news release.
"Businesses hope that as the U.K. economy grows and memory of the recession fades that they will face lower levels of legal risk but that hasn't happened yet," she added.
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Banks under spotlight
The increase in provisions was fueled by the banking sector, which in 2013 suffered an increase in claims by customers over the miss-selling of interest rate hedging products, as well as a flood of fines handed out by authorities.
(Read more: Banks slapped with $2.3 billion fine for rate manipulation)
The four biggest U.K. banks — Lloyds, Royal Bank of Scotland (RBS), Barclays and HSBC — set aside nearly £2.5 billion in 2013 to cover the cost of settling customer claims over miss-selling. This came after Britain's Financial Conduct Authority ruled that banks had miss-sold products to around 40,000 small businesses, triggering a mass compensation payout.
This Monday, RBS announced it had set aside an further £3.1 billion to cover legal costs and customer compensation claims, on top of its 2013 provisions.
"RBS is yet another example of how a series of past mistakes can come back and haunt a company for years to come," Hopkinson said.
"Banks on both sides of the Atlantic are being hit by huge litigation costs, with some investors taken by surprise by the high legal provisions announced recently by other companies such as JP Morgan and Deutsche Bank."
(Read more: Another week, another banking scandal)
