Ukip is teetering on the brink of bankruptcy after it was presented with a legal bill of £175,000 for its part in a libel action involving three Labour MPs in the run up to the 2015 election.

If the party does not appeal, it must find the cash in the next fortnight, which may leave it unable to field candidates in the local elections in May.

The party has been hovering on the edge of insolvency since its support collapsed following the resignation of Nigel Farage as leader after the EU referendum.

Last month it lost a complex legal case involving its role in preventing a libel action settling before the general election of 2015.

Last year, a long-running action was finally settled against the Ukip MEP Jane Collins and in favour of Sarah Champion, Sir Kevin Barron and John Healey, whom Collins had accused in 2014 of ignoring child sexual abuse in Rotherham. Ukip became involved, initially paying Collins’ costs.

But at the hearing in February, the judge, Mr Justice Warby, concluded that the party’s role then changed. He said in his ruling that it then took a “deliberate, informed and calculated decision, for reasons of party political advantage, to ensure that the case was not settled before the general election”.

The judge said that may have meant the party prevented a swifter settlement of the case, meaning legal costs had risen significantly. Ukip must pay the costs accrued between March 2015 and June 2015, and costs from the assessment hearing, he ruled.

The judge has set those costs at £175,000. Ukip can appeal, but if it does not it must find the cash in the next fortnight.

The party’s finances are thought to be in a perilous condition. It is also in turmoil after Henry Bolton resigned as leader last month following a vote of no confidence because his former partner apparently sent racist messages about Prince Harry’s fiancee, Meghan Markle.

A new leadership election is pending but no date has been set. No one at Ukip headquarters could be reached for comment on Monday night.

According to the Electoral Commission’s records, the party received donations of about £240,000 last year, most of it in the final quarter.



A statement released on behalf of the MPs said: “Ukip’s actions behind the scenes forced the costs of this case to soar and compounded the damage from Jane Collins’ unfounded and hurtful allegations. This deliberate strategy hugely increased the legal costs and it is right that Ukip are today held liable for a large share of these costs.



“Ukip used the unfounded allegations by Jane Collins for political advantage. At the highest level Ukip knew Jane Collins’ case was ‘hopeless’ but blocked any settlement in our favour before the 2015 general election because they believed it would win them votes.”

Their lawyer, Gerald Shamash, said on Monday: “The MPs have been through nearly four years of litigation. Ukip has to pay £175,000. The party has put the MPs through misery and if the result of that is that Ukip no longer exists, then Ukip no longer exists.”

Collins faces a bill for costs and damages of more than £600,000.

Nominations to stand in local elections close on 6 April. The law is not clear whether a party facing insolvency is allowed to put forward candidates, and many former Ukip councillors have either returned to one of the main parties or have become independents.

It will lose its MEPs in 2019, after the UK leaves the EU. If it fails to contest English local elections, Ukip will be reduced to a rump of six Welsh assembly members.