Touring the United Arab Emirates last month to promote trade with the UK, Prince William was shown around DP World’s Jebel Ali port in Dubai — a facility opened by Queen Elizabeth in 1979.
Now the Dubai company’s UK relations have been plunged into crisis after its P&O ferries business berthed all its ships and summarily fired 800 British-based sailors.
While DP World says P&O’s restructuring was necessary to sustain the business, politicians are aghast at the way staff were let go on a Zoom call without consultation to be replaced by cheaper agency staff. Some fear the company has imported Dubai’s approach to labour relations — unions in the emirate are banned and workers’ rights constrained.
“This is a complete own goal — it can’t impact their reputation positively and will generate huge amount of political attention,” said one UK official. “The business logic may be correct, but this is going to have wider ramifications for DP World as an investor and employer.”
However, the government faces a dilemma in how to respond. The company, which last week reported record full-year ebitda of $3.8bn, has been a huge investor in UK industry, pumping £2bn into the country with another £1.5bn earmarked for the coming years.
The state-controlled group runs the UK’s second-biggest shipping terminal in Southampton and its third-biggest in London, handling more than half the intercontinental container traffic that enters the country, and has expressed interest in new UK freeport contracts.
Its Southampton terminal is vital to bringing Asian exports into the UK, while London Gateway is an important entry point for imports of food and raw materials from Africa and Latin America.
And with Boris Johnson visiting Abu Dhabi recently as he seeks to wean Britain off Russian hydrocarbons, few in the shipping industry are counting on a serious reprimand of the company for its poor treatment of British workers.
“Government wouldn’t have anything to gain by slapping down DP World, which is a massive infrastructure provider to the UK,” said John Manners-Bell, chief executive of logistics consultancy Transport Intelligence. “The government will be all bluster but there’s a limited amount they can do without full-scale intervention.”
Industry insiders say the company’s UK terminals are more efficient, reliable and have better customer service than Felixstowe, the country’s largest container port which is operated by Hong Kong’s Hutchison Ports.
“Through the container surges during the pandemic, they weathered that storm pretty well. They invested in extra facilities and storage,” said Richard Ballantyne, chief executive of the British Ports Association, a trade group. “They are a very well run company on that front.”
Dubai’s heritage as a commercial hub can be traced back to the turn of the 20th century when it lured Persian merchants to its creek-side souk by slashing taxes — in effect turning the emirate into the type of freeport now promoted by the UK government’s “levelling up” agenda.
Ever since, the combination of efficient port operations and associated tax-free logistics parks have underpinned Dubai’s growth. Modest oil revenues were reinvested into infrastructure, most effectively at Jebel Ali, which now accounts for about a quarter of the emirate’s gross domestic product.
Grant Liddell, business development director of UK-based Metro Logistics, said DP World was taking its Jebel Ali format worldwide. “They built Jebel Ali in Dubai, took the model including the cranes and are rolling it out globally,” he said.
In the 2000s, the company’s powerful leader Sultan Ahmed bin Sulayem branched out into debt-fuelled real estate and overseas investments through Dubai World.
But the government conglomerate was hobbled by the global financial crisis, becoming the biggest victim of the ensuing Dubai debt calamity. Plunged into recession, the city-state required $25bn in bailout loans backed by wealthier neighbour Abu Dhabi to ward off a damaging default.
While Bin Sulayem was moved on from Dubai World, he kept control of DP World, which he has aggressively expanded ever since.
The company has developed a strong presence across South America, Europe, Africa, the Middle East and Asia, and now runs 190 divisions across 69 countries. Last year alone it bought South Africa’s Imperial Logistics for $2bn and US warehousing company Syncreon for $1.2bn.
Xavier Woodward, founder of communications consultancy InfraComms and a former head of marketing at DP World London Gateway, recalls that when the group signed a £400mn contract to build the terminal in 2008 it was defying expectations that it would withdraw from British infrastructure investment.
“They are not afraid of taking tough, brave decisions,” he said. “If you talk about ambitious, there was a saying in the company that the sky was not the limit.”
Source: Financial Times