P&O debacle is product of race-to-bottom capitalism which we all secretly sponsor

Say you take it as read that P&O's sacking of 800 workers without notice and via a prerecorded message on Microsoft Teams, lasting just four minutes, was an act of corporate thuggery.

The company had security guards with handcuffs and balaclavas waiting to board ships and remove workers, by force if necessary, as it made the announcement.

Say you also take it as read that the ferry company has been roundly vilified – even by pro-business groups – and was almost certainly in breach of UK labour law in dismissing the workers without notice.

P&O chief executive Peter Hebblethwaite admitted as much to a House of Commons select committee on Thursday.

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Relevance

You might then conclude that this was just an isolated case of corporate slash-and-burn and therefore of limited relevance to the wider economy.

There is, however, a deeper narrative running through the P&O debacle, one that relates to globalisation, wage inequality and even climate change, and one that we as consumers play an active role.

P&O’s fire and rehire tactic – it replaced the 800 sacked workers with cheaper agency staff – might have been brutal and swift but the company was following a well-worn industry path.

Irish Ferries became embroiled in a bitter battle with unions back in 2005 after it laid off 543 crew members and replaced them with eastern European workers at less than half the Irish minimum wage.

At the time chief executive Eamonn Rothwell said that the company must slash its Irish workforce to meet competition from rival ferries and low-fare airlines.

The minutes of a confidential meeting show that P&O warned the UK government last November that a new "low-cost competitor" on its Dover-Calais route was posing a serious challenge to the business. Ironically the low-cost competitor was identified as Irish Ferries, which began operating a new Dover-Calais service last year.

P&O, which operates two routes from Ireland – Dublin to Liverpool and Larne to Cairnryan in Scotland – said it made £100 million (€120 million) loss in 2021, which had to be been covered by its parent, Dubai-based logistics giant DP World.

Costs

No doubt Covid and higher fuel costs played a role in the company's financial difficulties. Brexit has also contributed. In its latest published results, the company singled out the Northern Ireland protocol, saying it had created difficulties on the Larne to Cairnryan crossing.

But industry insiders say the underlying reason relates to globalisation and a demand for cheaper and cheaper shipping driven by companies like Amazon and by extension us as consumers. To survive, shipping companies have had to slash costs.

The new P&O crews will be paid an average of £5.50 an hour, which is legal despite being well below the UK minimum wage. This is because P&O ships operate in international waters.

One insider said you would be hard-pressed to encounter a ship entering or exiting Dublin port with an Irish or EU crew on board.This is because the wages are too low.

What nobody seems to be addressing and what’s got lost in the justifiable outrage at P&O’s reprehensible behaviour is what is driving the company’s actions?

Operating margins have been squeezed by market forces and ultimately our demand for low-cost shipping. And countries like Ireland and the UK don’t have the power to impose higher labour standards or wages on these companies for two reasons.

First, they don't have jurisdiction. Ships in these companies are typically flagged (registered) in far off destinations – Nassau, Panama, the Marshall Islands – for historical reasons but also to escape labour laws pertaining to their routes. They also operate in international waters.

Second, countries like Ireland and the UK are almost entirely reliant on international shipping. Nearly everything we consume here comes in via shipping. The UK imports about 80 per cent of its food. Ireland, despite its big agri-food industry, is not dissimilar.

The grim reality is that if critics of P&O get their way and sanctions are imposed, the company will most likely go to the wall and the ships will go elsewhere, leaving other operators with below minimum wage workers to service the routes.

Assets

Ships are mobile assets and in a globalised trading environment they will move to wherever they can make the most money. Irish Ferries is already exploiting P&O’s difficulties on the Dover-Calais route by using cheap labour.

There’s a parallel with food and air transport. Consumers profess to being more conscientious about the environment and about paying workers reasonable wages while, at the same time, demanding cheaper and cheaper food and lower and lower airfares often at the expense of the environment and wages. Railing against agricultural emissions and declining rates of biodiversity while buying below-cost food items from your local discounter is hypocritical.

Last week the Cabinet approved a Bill establishing a new Office for Fairness and Transparency in the Agri-Food Supply Chain, which should in theory insist on a costs-plus food chain and ultimately higher prices. With food inflation accelerating, the timing may be problematic.

Much of the race-to-the-bottom globalisation we’ve seen over the past 20 years has effectively exported higher prices by sourcing cheaper and cheaper inputs from abroad, workers in the case of P&O and shipping.