“We believe that businesses can only be successful if they prioritise their biggest competitive advantage – their people.” So said DP World in its annual report for 2021, demonstrating once again that companies will spout any old rubbish in pursuit of a socially responsible halo.
The Dubai-owned company, via its P&O Ferries subsidiary, showed on Thursday what its “duty of care” to members of its “corporate family” really means. It sacked 800 UK employees with immediate effect via pre-recorded video message. Employment lawyers wondered whether the action was legal but, even if it is, it’s a shocking way to behave.
P&O Ferries is losing money – £105m in 2020, according to the accounts for the relevant local holding company – but DP World itself is one of the world’s biggest logistics firms and recorded top-line earnings of $3.8bn (£2.9bn) last year. It ought to be able to handle a £100m crisis in a minor subsidiary in a calm manner and without resorting to such extreme tactics. It may be correct that P&O doesn’t have much of a future without a major restructuring but, come on, you’re more likely to achieve your aim if you signal your plans in advance and negotiate.
Almost as grubby was the blindsiding of the UK government. P&O merely issued vague warnings via Twitter of “a major announcement” in the offing, despite knowing that its action would mean days of disruption at ports for haulage companies and travellers, including on the critical Dover-Calais route. According to the same annual report, DP World is also in the business of building “long-lasting relationships with governments”. Except when it isn’t.
The company’s other UK investments include London Gateway, one of those freeports that are supposed to power economic regeneration via public-private partnerships. Ministers may wish to tell DP World that its services will not be required when the next freeport is up for grabs.
Sub-1% borrowing costs might look like tokenism
Get ready for an inflation rate of 10% later this year, a sight not seen in the UK since the early 1990s. That outlook is now endorsed as roughly credible by the Bank of England, the same people who thought as recently as last month that the peak would arrive soon and be 7.25%.
Russia’s invasion of Ukraine, a fresh round of soaring energy prices, and more supply chain disruption have up-ended month-old assumptions that already looked wobbly. Thus we are in a land where inflation could end up being “several percentage points higher” than the Bank expected only last month.
In the circumstances, the mini surprise is that nobody on the Bank’s nine-strong panel wanted heavier action than a quarter-point rise in interest rates to 0.75%. Indeed, the deputy governor, Jon Cunliffe, preferred to stick at 0.5%. This was a very cautious version of an interest rate increase.
Complacency on stilts? That accusation will arrive from one quarter for the understandable reason that sub-1% borrowing costs, at first glance, looks like tokenism if you seriously expect inflation to be at double-digit levels within the year. The danger lies in allowing inflation expectations to run wild, igniting a wages and price spiral.
Yet the critical line in the Bank’s minutes was probably this: “Further out, inflation was expected to fall back materially, and possibly to a greater extent than had been expected in the February report.” Well, quite. The peak grabs headlines but what happens thereafter matters as much. Energy bills are virtually guaranteed to rise again in October (by about another £1,000, if nothing changes) but they cannot keep increasing forever. In the meantime, the severe squeeze of living standards will eventually generate deflationary forces. The risk of a wage spiral looks modest when growth is already expected to slow to 1.25% in 2023.
But the implied message in the Bank’s relative restraint on rates is that growth forecasts could go even lower when next revised in May. The US Federal Reserve is being more hawkish on rates, but the Russia-related energy shock to its economy looks less severe than the one facing Europe.
Let us hope Rishi Sunak is taking notice. It is the chancellor’s job to soften the hit to households’ budgets, and there is every reason to think the economic pain from energy prices will be acute. The Bank’s quarter-point tweak on the rate lever, as opposed to a half-point yank, is justified. Next year’s growth challenge looks more daunting than this year’s inflation drama.
