The passenger ferry company P&O Ferries has attracted a lot of attention for its decision to deliver 800 staff redundancy notices in one video call.
This reflects insensitive labour relations, with consequential impacts for reputation damage far beyond the ferry company itself. Media attention is drawn to UK ports where the government, struggling to find positives in Brexit, would rather it did not linger.
In 2019, when P&O Ferries was acquired by its current owners for £322m, the auditor KPMG warned that due to “unprecedented levels of uncertainty they could not guarantee that the company will continue in operation”. The company was subsequently helped by Covid—no passengers meant reduced operating costs, and the UK government provided £33m in business support. To an extent, its demise was deferred for three years by the pandemic.
Last week, in a desperate attempt to forestall bankruptcy, the board of P&O Ferries decided to reduce operating costs by replacing 800 British crew members with agency staff.
On paper the savings were more about pension liabilities than salaries; this was surely a decision taken by employment lawyers and accountants, not personnel relations managers. The latter would have advised a more consultative approach to redundancies in keeping with good governance codes.
As a result, labour unions will block ports to draw attention to an unfair and insensitive mass dismissal.
Pressure and political risk
What is the fallout from the reputation damage? The board certainly looks poor and ill advised. The company has destroyed any vestigial trust held by passengers and employees so has in effect shot itself in the foot as a service business.
The parent company has been dragged into this. If it was still a public company no doubt shareholders would make their anger known; however, since DP World delisted in 2019, it is only accountable to managers of the Dubai Sovereign Wealth fund. It will now be under pressure from the UK government and may escalate into a political risk for Dubai.
The UK government is deeply embarrassed. Partly because it had no advance knowledge of the mass redundancy, and partly because it knows this will lead to confrontation with labour unions, who will question the legality of such abrupt terminations. Union action will add to congestion at ports just as Covid restrictions end and the public decide to travel abroad more. Disruption at UK ports leading up to Easter is as welcome as a French air-traffic controller strike in August.
A British company replacing British crew with agency contractors to save money just doesn’t look good given that this only draws attention to unethical employment practices like zero hours contracts at a time when the government is looking for positive stories about Brexit opportunities.
The biggest lesson of the P&O Ferries crisis has to do with board vision, and the failure of boards to consider unintended consequences when they make decisions based only on cost. It brings to mind Oscar Wilde’s definition of a cynic: a man who “knows the price of everything but the value of nothing”.
Garry Honey is the founder of reputation risk consultancy Chiron Risk.