CEDR Member
Benefits in this section:
  • Password-protected EDR Law case summaries
  • Free access to premium articles

News

26 May 2006

Conflict is costing business £33 billion every year

Announcement at the CBI shows the damage UK business inflicts on itself through poor conflict management 

Comparable amounts:

  • Gross Domestic Product – If the cost of conflict to British business were a country it would have the world’s 57th biggest economy (out of 180 countries)
  • Entertainment – three times the amount that California makes each year from the TV, Movies and Entertainment business
  • Government spending – over half the total budget for the National Health Service last year 

Last night at the CBI (Confederation of British Industry), CEDR revealed the results of its study into the true amount business wastes on conflict each year. From an unhappy customer to a disgruntled director, business can have the challenge of conflict come from any direction – a challenge that is not always adequately faced-up to. According to the research by CEDR it is how you approach conflict that makes the difference and - as the 200 guests from top British companies heard - the UK is failing to manage its conflicts adequately. 

The key conclusions from CEDR were:

  • British business conflict costs £33 billion a year
  • 80 percent of disputes have a significant impact on the smooth running of business
  • In a case that is a million pounds in value a company will consume an average of over 3 years of managers time trying to sort it out
  • Over a third of managers would rather parachute jump for the first time (35%) than address a problem with their team at work, and just under a third would rather shave their head for charity (27%). Some even said they would rather eat ‘bush tucker’ bugs for a week (8%)
  • Many managers do not feel comfortable addressing conflict. Half (49%) would rather attend an event at which they knew no one than tell a client a home truth and over two thirds (69%) would rather send back a bottle of wine in a restaurant than confront a boss’s underperformance directly   

Few managers, only 37%, feel trained to cope with business conflict. The lack of confidence in managers feeling prepared to deal with disputes is worrying given that the significant consequences of conflict include the following business headaches:


  • Damage to company reputation
  • Exposure in the public domain
  • Effects on company morale
  • Effects on personal reputation
  • Damaged business relationships
  • Lost customers
  • Increased staff turnover
  • Failure to meet targets
  • Missed opportunities 

Chief Executive of CEDR Karl Mackie said, “Conflict is part of working life but it is how we deal with it that is important. Effective management of conflict can reduce the amount of time and money spent in trying to sort out a problem, reduce the damage it could cause to those involved and enable decision makers to make smarter choices earlier on. It is time that business woke up to the wastage that lack of proper conflict management causes.” 

The event commemorated CEDR’s foundation with the backing of the CBI and the support of organisations in business, public and legal sectors.  In the last 15 years CEDR has raised the profile of alternative dispute resolution and mediation in commercial disputes that reach the legal system, trained 2,800 mediators and had over 11,500 disputes referred to it for mediation.  

At the CBI CEDR also announced its new effective conflict management approach, rooted in its experience as conflict resolution specialists, with services designed to assist organisations address conflict early and effectively, cutting the cost of conflict, and thereby improving organisational productivity. 

About the research 

Sources for the research are a survey of over 600 British organisations conducted by CEDR in 2006 and secondary use of research by CEDR and CMS Cameron McKenna (2005). 

1 “Business disputes cost £33 billion a year”

This statement is based on new research and analysis by CEDR.

The cost of business disputes comprises not only amounts paid in legal fees but also the damage incurred by business as a consequence of those disputes – in fact the cost of this damage (£27bn) far outweighs the legal fees (£6bn).

These statistics were derived from a combination of sources.  Our estimate of expenditure on legal fees is based on published figures from The Office for National Statistics and the reported earnings of major law firms.  Our estimate of the additional damage caused to business is derived from an original research project conducted by CEDR in November 2005 in which we gathered data from lawyers and business people involved in over 300 separate business disputes. 

2.“80 per cent of cases have a significant impact on the smooth running of the business”

This statement is also derived from our November 2005 survey.  We identified nine possible adverse consequences of business disputes, and surveyed the extent to which each may have been significant in the over 300 separate business disputes referred to above.

The nine possible consequences we identified were:

  • Effects on company reputation
  • Exposure in the public domain
  • Effects on company morale
  • Effects on personal reputation
  • Damaged business relationships
  • Lost customers
  • Increased staff turnover
  • Failure to meet targets
  • Missed opportunities

Damaged business relationships and public exposure were the two most commonly cited adverse consequences of business disputes, but since different disputes have different characteristics it is not therefore surprising that no single consequence dominated.  We did, however, identify that in 80% of the disputes surveyed, at least one (but frequently more) of these consequences were described as being “significant” or “very significant” to the business. 

3 “The average £1m+ case causes 3.2 years of distraction for key managers”

This result is also based on our November 2005 survey.

Corporate managers reported the extent of staff time which had been consumed in managing individual disputes.  The averages of their responses were as follows:

  • In house legal team (average 172 days)
  • Managers directly involved in the dispute (430 days)
  • Other managers becoming involved (259 days)

(The comparable figures for disputes of under £1 million were 30, 30 and 15 respectively).

Whilst the in house legal team may be paid to manage disputes, the other managers’ time (totalling 689 days, or approximately 3.2 working years) represents a distraction cost – time taken away from their main jobs. 

4. Managers prioritisation of conflict

Managers were asked to rate against each other the following tasks that either involved conflict or were unpleasant:

  • Giving a speech in public
  • First parachute jump
  • Sing in public
  • Tell a colleague about poor hygiene
  • Tell a neighbour to cut down a hedge
  • Give blood
  • Swim the channel
  • Eat ‘bush tucker’ for a week
  • Sack a popular employee
  • Tell a boss to work harder
  • Tell a client they are out of line
  • Send back wine in a restaurant
  • Shave own head for charity
  • Go to an event where you know no one
  • Tell own team they are not performing

Back to top