P&O Ferries redundancies part of wider problems

The fury over the redundancy of 800 staff by the subsidiary of DP World, P&O Ferries, is unsurprising, but the issues that underlie it are current in many parts of the world. The attraction, or rather, compulsion to employ cheaper labour in shipboard roles is simply too strong for managements to dismiss it. In fact, exactly the same issue arose in 2005, when one of P&O Ferries’ competitors, Irish Ferries, made 543 of its shipboard staff redundant in a remarkably similar manner. It employed staff from outside the Irish Republic as P&O is employing workers from outside the UK. This must have reduced Irish Ferries’ direct labour costs, putting pressure on its competitors which include P&O Ferries. However, it should necessarily be assumed that wage costs are the main source of P&O Ferries’ problems.

P&O Ferries, which is in a different part of the DP World to the other P&O businesses, operates a network of ferry services across the British Isles and the North Sea. The operation has been troubled for some time, with losses over the past several years culminating in an expected loss of £100m in 2021, according to a statement by P&O Ferries. The impact of COVID-19 must have made things worse, however, the trajectory of the business has been downwards, which is a contrast to major rivals such as DFDS which continue to see profits rise. P&O Ferries also has substantial pension liabilities.

P&O Ferries’ parent, DP World, is hardly financially stressed. Two weeks ago, the company announced results that saw revenue rise by 26% to US$10bn and EBITDA up by 15% to US$3.8bn, a margin of 35.5%. However, having a persistently loss-making subsidiary is hard to tolerate over the long-term. The problem is P&O Ferries is a useful part of DPWorld’s non-container logistics presence in Europe and shutting it down would be a significant reverse for DP World’s strategy of diversification. Some form of sale or acquisition may be a longer-term solution.

Source: Transport Intelligence, 22nd March 2022

Author: Thomas Cullen