"The statement is true, I will not retract" is not substantive and is effectively calling the bluff. If they take it beyond a letter, those costs will balloon further.
The "Defendant’s Response to Letter of Claim" section is very clear that it is actually that simple. The burden is almost entirely on the claimant, the defendant has very little to do. Can you provide any evidence that any individual has ever been sanctioned by a U.K. court for either not filing a response, or not filing a substantive response?
You are saying that "costs will balloon further" but you haven't yet established there are any costs. How can costs that do not exist balloon? Any individual could satisfy the "Pre-action Protocol for Media and Communications Claims" with ease, no expense necessary.
The courts are very kind to people who choose to represent themselves, especially when the litigants are obviously abusing the system to try and silence individuals. The point you're making seems to be that you must spend money to defend against spurious defamation claims so I have asked you to provide any evidence of a case where an individual is accused of libel and has suffered because they chose not to spend money.
I am not trolling. I disagree with the suggestion that the U.K. libel laws create an environment where people are scared to speak truth because there is a real threat of an expensive lawsuit. My position is that the fear people have of expensive lawsuits comes from other people fear mongering, in comments like yours, either based on a misunderstanding of a case they've seen publicised or because of information they've been given by legal professionals in a different context.
No, the chilling effect of UK defamation laws is not an artefact of scaremongering. No, you have not discovered the secret truth hidden by the legal profession. Yes, defamation cases are a real threat and expensive to defend as the burden of proof lies on the defendant, not the allegedly defamed.