When the BBC’s breaking news banner lit up on 17 March 2022 stating all P&O ferries had been told to return to port; employees, trade unions and politicians were blindsided by the subsequent announcement. Pedigree and a lineage dating back to 1837 is no guarantee of continued survival or making headlines for the right reasons. Recent history normally provides a basis for understanding the present. In this case, the context of recent history makes March’s announcement appear almost neurodivergent.
The Context of Recent History
In 2006 DP World bought P&O shortly before being taken over by Dubai World. In 2019 DP World took the reins of P&O once more, continuing the business as a going concern. In 2020 P&O undertook rightsizing of the workforce. At the same time, downsizing looks to reduce staff numbers to maximise profits, and rightsizing looks at whether the business is over or under-resourced to meet current and anticipated levels of trade. P&O consulted trade unions to achieve circa. 1,100 redundancies the following year. Rightsizing also involved selling ships and discontinuing loss-making routes. The national lockdowns of 2020 saw turnover reduce, the market contract, and rightsizing easier to justify. P&O proved it could follow the mandatory consultation period with employees and unions before proceeding with redundancies.
Coming out of the pandemic P&O took steps to manage cash flow including loan repayment holidays alongside cash injections from banks and shareholders. In 2022 industry demand is still some way off pre-pandemic levels. Like all cross-border businesses, P&O is impacted by inflation and Brexit. Fuel surcharges paid by customers help offset increased hydrocarbon prices. The latest accounts on file are YE 31 December 2020, which show a turnover of £865 million, a loss of £103 million, trade creditors of £116 million, total liabilities of £569 million, a reduction of cash in the bank, and borrowings up substantially. The continued absence of County Court Judgements suggests creditor expectations are being met. The as-yet-unpublished YE 2021 accounts may present a different picture, but the firm’s employees and Parliament’s select committee have no other data on which to judge recent actions. Those actions are, of course, the unexpected firing of 786 staff on a cold March day via a heavily scripted Zoom meeting, only for those permanent employees to be replaced by waiting agency crews.
P&O CEO Peter Hebblethwaite and DP World COO Jesper Kristensen appeared in front of a joint transport and business Select Committee in the immediate fallout of the sackings. The televised Q&A was already set to be prime time viewing for those with a personal interest in P&O. Mr Hebblethwaite’s candid words captured the attention of even the most disinterested. Previous CEOs from a multitude of organisations have gone before parliamentary committees only to deploy the tactics of evasive manoeuvres, outright lying, or deny-deny-deny! Mr Hebblethwaite attempted to tell the truth as P&O sees it, taking ownership for the decisions off an easily scapegoatable DP World, whilst admitting the 786 sackings were not in line with trade union obligations. In a political environment, giving clear and honest answers is like giving a 5-year-old a Space X Crew Dragon spacecraft – it fulfils a child’s dream, but what on earth do they do with it now?
In short, Mr Hebblethwaite advised P&O to push through redundancies to halve the wage bill and change the crew model without consulting trade unions, who admittedly would have challenged it all the way. This was in the name of making P&O a viable business. The loophole P&O saw to immediately crew the vacancies with agency staff on a lower maritime minimum wage looks set to be challenged by the Transport Secretary. Legislative changes could be implemented to ensure the UK’s national minimum wage applies in British waters, overriding what the International Chamber of Shipping set. UK ports are already being encouraged to refuse to dock for vessels paying less than the national minimum wage. Advocate’s own calculations suggest if the national minimum wage were applied to agency staff, the cost would still be significantly less than payroll for 786 already jettisoned employees. Less than a month after the story broke, the Insolvency Service announced it had launched criminal and civil investigations into the matter.
Behind Closed Doors
NDAs and confidentiality agreements prevent P&O’s advisors and auditors from commenting on what other options were available to the board. We merely have P&O’s word that changing the business operating model could only be achieved by firing permanent employees and replacing them with cheaper agency workers at half the cost. P&O’s last set of accounts does not suggest the mandatory employee consultation process could have been afforded from its own coffers. The unverified cost of following the correct process is in the £300 million ballpark. Employee severance packages are said to be in the region of £36.5 million. At face value, P&O, as part of a global multi-billion-pound group, has links to cash-rich holding and parent companies that could have funded long term, union-focused restructuring. However, boardrooms answer to shareholders and profits. They do not run Community or Kingdom companies. The boardroom choice may have been that between an immediate change incurring so-called ‘collateral damage’, versus putting the subsidiary on long term dialysis with group funds. It does the 786 former staff a disservice to call them collateral damage. They are/were dedicated and skilled employees reliant on P&O for their livelihoods to support families, mortgages, rent and life’s commitments. Severance packages can’t compensate for the personal upheaval, uncertainty and distress of one’s employment being terminated only to be replaced with a lower-paid agency worker waiting dockside. Would it be too dramatic to suggest crew comradery creates a family that once disbanded en-masse makes orphans out of sacked employees?
P&O has suppliers nationally and internationally. They will no doubt be watching ledgers for any indication of default. Much like how a coal or car plant supports the wider economy, there are suppliers dependent on P&O’s survival for their own. We’re not talking about the banks and financial institutions – it’s the cleaning company keeping ships Covid secure, the ship chandlers representing locally sourced spares and supplies, the family-run printing firm, the fourth-generation fresh produce wholesaler – the list of suppliers goes on. If P&O were to cease trading altogether, there would be a multitude of creditors (and therefore jobs) at risk throughout the entire supply chain. Beyond the 786 sacked, there are another circa 2,200 employees (plus those employed through dependent suppliers) who would also lose employment. Mr Hebblethwaite stressed the action taken was to make the business viable. Viable means trading with customers and suppliers and paying wages. Even though suppliers have not been left high and dry, alarm bells are difficult to ignore. History has shown such industry scares prompt suppliers to seek a debt recovery firm to mitigate risk across their entire ledger. The number of enquiries along those lines, as witnessed by Advocate suggests history is being repeated.
Whether you are an arm-chair observer, social media sympathiser, employee or elected official we can all agree there must be another way. There is always another way, a better way, one that doesn’t question legislative compliance. For commentators, the words ‘should, would and could have’ are the basis for an infinite debate on how else P&O might have gone about this (incidentally, Beverly Knight’s Shoulda Woulda Coulda may have been a more tactful way of sacking 26% of the workforce?). At the time of writing, there is nothing to prove creditors of P&O are being prioritised over employees. Creditors will indirectly benefit from measures to ‘make the business viable’ assuming the new operating model works and P&O avoids outright insolvency. Is there another way to save jobs, stem losses, keep creditors paid and deter them from taking up metaphorical arms with debt collection agencies in their munitions store? The information from P&O alone says No. Based on fag packet calculations and third-party experts filling in unverifiable data with estimates, the answer is Yes! When debtors refuse to pay, the other way is Advocate. But when a business sacks staff without consultation, there can’t-not be another way. Consultancy and Trade Unions are supposed to find another way, although the granted middle ground is not always achieved. Taking them out of the equation gives rise to the inevitable social, economic and political carnage caused by denying 786 employees any chance of being part of another way.