The decision this week by P&O ferries to make 800 workers redundant shines a light on Dubai-owned DP World as well as the stress facing transportation assets in the portfolios of state-owned investors. DP World bought P&O Ferries in 2019, for GBP322 million after selling it earlier in the decade.
The decision to sack British crew on the ferry operator is portrayed by the media as a clash between workers and the company’s owners. The nature of the mass dismissal has also drawn controversy, with the pre-recorded announcement and deployment of security personnel on ships condemned by the Rail Maritime and Transport (RMT) union’s general secretary, Mick Lynch, as “one of the most shameful acts in the history of British industrial relations”. The decision to replace the workers with a “third party crew provider” employing cheaper foreign workers has only added to the fury among those losing their jobs.
Nautilus International union general secretary Mark Dickinson said: “It is nothing short of scandalous, given that this Dubai-owned company received British taxpayer’s money during the pandemic.
While the decisions are made by P&O and not DP World, the Dubai sovereign wealth fund is finding itself drawn into the controversy, particularly given its pivotal role in the British government’s planned freeports as the owner of the London Gateway port, which is a central pillar of Thames Freeport. In September 2021,DP World announced it is investing GBP300 million (US$414.8 million) to build a fourth berth at the London Gateway hub to boost capacity for large vessels. DP World also owns Southampton port.
P&O, which operates the main routes between the UK and mainland Europe, claimed it needs to make labor cost savings as it “is not a viable business,” adding “We have made a £100m loss year-on-year, which has been covered by our parent DP World. This is not sustainable. Our survival is dependent on making swift and significant changes now.”
P&O Ferries was given GBP33 million in emergency funding by the government during the pandemic to maintain freight movements, but losses associated with the pandemic and Brexit are compounded by the impact of Russia’s invasion of Ukraine on fuel costs.
The problems facing P&O face other shipping and aviation sectors, which are emerging from the impact of the pandemic on global supply chains to another crisis related to soaring energy prices. This week, we drew attention to the impact of Malaysian Airlines’ woes on Khazanah’s finances.
In 2021, DP world reported a 26.3% rise in revenue to US$10.7 billion, supported by acquisitions and new concessions, including Angola, Unico, and Transworld. Like-for-like revenue increased by 11.7%, while containerised revenue grew 14.2% due to higher storage and reefer monitoring revenue. The group’s overall EBITDA came to US$3.8 billion with an adjusted EBITDA margin of 35.5%, while cash from operating activities increased 27.3% to a record US$3.6 billion.
DP World’s main focus going forward is not Europe but Africa, where it sees itself as playing a role in removing trade inefficiencies and improving capacity.
