P&O Ferries are owned by Dubai-based DP World, which is a large multinational logistics company that operates in over 40 countries and has an annual turnover of over £8 billion. They acquired P&O ferries in 2006 for £3.9 billion. After Brexit, P&O moved the registration of their vessels to be flagged out of Limassol, Cyprus.
As a multi-billion pound company, P&O were seen by the wider credit reference community as financially sound and creditworthy. However, Red Flag Alert had them as a financial risk for months before their failure and did not recommend credit should be extended.
Financial trouble and mass firings
On 17th March 2022, P&O suspended operations and dismissed 800 employees. Staff were informed by a short pre-recorded message advising their employment was ‘terminated with immediate effect due to redundancy’.
Allegedly, former employees were then given a short time to collect personal belongings and vacate their respective vessels. Some staff refused to do this and were eventually forcibly ejected by a third-party security firm, in some cases whilst handcuffed. P&O replaced these staff with agency workers that were to be paid a little over £2 an hour, a practice enabled by the vessels being flagged out of Cyprus and therefore able to utilise their labour laws. This was done by P&O in order to reduce staffing costs by up to 50%.
Underlying this controversy was the fact that P&O was on the brink of collapse; it had been operating at a loss of £100 million year on year. Whilst COVID had severely affected the carrier, they had already seen a significant downturn in business. The effects of Brexit had resulted in less haulage between the UK and Europe, and a steep increase in competition for what business remained. These stresses were paired with a business model of high overheads, including staffing costs, and were not sustainable.
Owner DP World had covered these losses but were no longer able to and the company could not afford to operate without agency staff and were docked for several days. The mass firings were met with near universal outrage, especially as they had received £15 million in COVID relief from the UK government.
Red Flag Alert first to spot P&O’s financial trouble
Red Flag Alert were the only credit reference agency to have rated P&O as a credit risk, due to our unique approach to business data and expert knowledge of risk. Traditional credit reference agencies do not primarily look for signs of failure or business distress, and factors such as the size of a company can mislead them into thinking they are a reliable debtor despite their diminishing returns.
At Red Flag Alert, we understand that any company can fail. Our focus is on signs of distress in a business, alongside signs of growth, when judging its creditworthiness. Our algorithm is based on over 15 years of insolvency data, and we use real-time data feeds to be the first to spot warning signs of business distress.
This approach saw our system identify P&O ferries as a credit risk a month before the firings, and we recommended no credit be offered. It is imperative that directors can make informed decisions based on real-time information, and that companies are carrying out sufficient due diligence to avoid exposure to risk. Red Flag Alert provides up-to-the-minute data run through an industry-leading algorithm to allow our clients to make confident business decisions.
P&O Ferries Company Timeline on Red Flag Alert Platform
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