P&O Ferries chose not to conduct a full staff consultation ahead of its plan to fire 800 UK-based crew members after calculating that the process would cost more than £300mn and potentially deal a fatal blow to the business.
The operator last year conducted a study into options to sustain the company, protect its other 2,200 staff and maintain its role in facilitating 15 per cent of UK trade, according to two people close to P&O.
They said P&O concluded that it would cost its Dubai owner at least £309mn to sustain the business through a likely consultation period of three months or longer, with no guarantee of recovery.
They claimed the process would have fatally undermined the business, with the potential flight of customers to competitors preventing any turnround.
P&O has been heavily criticised for sacking the crew members without notice last week, many of whom found out via video message.
On Wednesday UK prime minister Boris Johnson said “it looks” as though P&O broke the law over the firings, and warned the company could face millions of pounds in fines.
Businesses are required to give the UK secretary of state 45 days notice of redundancies of 100 or more employees. The ferry operator is confident that the process has been handled legally.
In a letter responding to concerns raised by Grant Shapps, the UK transport secretary and seen by the Financial Times, P&O’s chief executive, Peter Hebblethwaite, said the Dubai-owned ferry operator “simply wouldn’t have survived” without “fundamentally changed crewing arrangements”, including redundancies, to bring it in line with international peers.
P&O’s crewing costs in 2021 were around £35mn, 50 per cent higher than competitors, including Irish Ferries, Hebblethwaite wrote on Tuesday. Most ferries operating in Europe used the more cost-effective and flexible crewing model offered by agencies, he added.
P&O’s owner, DP World, one of the United Arab Emirates’ largest investors into the UK with around £3bn, has ploughed more than $700mn into the ferry business.
But the hit from Brexit and the pandemic meant P&O had become unviable, making losses of around £100mn a year.
“Without swift action, there would have been no future for P&O Ferries at all,” said Hebblethwaite.
P&O said that a full consultation process with staff and unions would have been “prolonged and highly disruptive” and concluded that “reaching agreement on the way forward would be impossible”.
P&O in the letter rejected claims that it had handled the dismissal process poorly, denying that security guards had been used to forcibly remove workers and that the redundancies had been carried out on a pre-recorded Zoom call.
The company said it informed staff in-person on vessels and via live online meetings for rostered personnel on shore. P&O acknowledged that around 140 people did not attend the online meeting, apologising for the “shock” of hearing about their dismissal elsewhere.
“We took a tough decision and got a bloody nose for it — but this isn’t a popularity contest,” one the people close to the business said. “On the balance of things, we have done the right thing — compensating staff in this way was preferable to losing the entire business.”