Trade

Clouds clear as DP World seals London Gateway deal

October 14, 2024, 8:29 PM

DP World has confirmed it will invest £1 billion in London Gateway as part of its 'long-term commitment to the UK'

DP World to invest $1bn
400 jobs to be created
Trade expected to increase

UAE port operator DP World has announced that it will go ahead with a £1 billion ($1.3 billion) investment in the UK after days of uncertainty, but the episode should be viewed as a “warning”, an expert has told AGBI.

The expansion of DP World’s London Gateway port is intended to make it Britain’s largest within five years and “significantly” increase the volume of trade at the seaport while creating 400 permanent jobs.

Sultan Ahmed bin Sulayem, group chairman and CEO at the multinational logistics company based in Dubai said: “DP World London Gateway will help make Britain’s trade flow in the future by connecting domestic exporters with global markets and delivering vital supply chain resilience for the whole economy.

“I am proud of this major investment which underlines DP World’s long term commitment to the UK.”

The deal nearly did not go ahead because the UK’s transport secretary Louise Haigh referred to P&O Ferries, which is owned by DP World, as a “rogue operator”.

Haigh’s comments were related to an incident in March 2022 in which P&O Ferries fired 800 workers without notice and hired foreign workers in their place on lower salaries. She encouraged customers to boycott the company in an interview.

Those comments were followed by days of controversy and uncertainty over the future of DP World’s investment in the UK, which was scheduled to be announced Monday during the government’s International Investment Summit 2024.

Reports just three days before the summit suggested that DP World had paused its planned investment, and that bin Sulayem had pulled out of attending the summit because of Haigh’s remarks.

The controversy had threatened to overshadow the government’s key messaging around the summit: that the UK is open to business and investment, and focused on growth over burdensome regulation.

“I don’t think the DP World issue has undermined the investment conference per se,” Stuart Cole, a former Bank of England economist, said. “But it certainly did cast an initial shadow. But that shadow appears to have now lifted given that DP World have said the £1 billion investment plan will still go ahead.”

Cole said that DP World’s approach to the controversy should be viewed as a “warning” to UK ministers. “I think the whole storm was more a move by DP World to warn the UK government that criticism of P&O by ministers … had to stop,” he said.

The saga is an indication of the difficult line the new UK government, which has only been in power for three months, is seeking to tread as it balances workers’ rights and a pro-growth platform, Cole said.

“Prime minister [Keir] Starmer will have his work cut out going forward trying to keep the left-wing, pro-rights side of his party happy while he simultaneously tries to court big business – something he needs to do given he came to power on a message of promoting growth.

“Unless he can do this, DP World’s warning last week may simply be a harbinger of what is to come.”

Other UK investments by the UAE and its affiliated businesses have also been in the spotlight in recent weeks.

Manchester City Football Club is owned by the UAE’s Abu Dhabi Group, a private equity company itself owned by the UAE’s vice president Sheikh Mansour bin Zayed Al Nahyan.

The club was accused by the Premier League in February last year of providing misleading information about its finances over a nine-year period. Manchester City has also been accused of failing to cooperate with the investigation into its finances. The club, which is worth an estimated $5.1 billion, has denied all charges against it.

Last week the UAE’s sovereign wealth fund Adia wrote off its investment in the UK’s largest water supplier, Thames Water, amid a financial crisis afflicting the utility company, citing the “challenging regulatory environment and operational performance”. Adia’s stake in Thames Water was initially worth £263 million ($343 million).

Speaking on Adia’s Thames Water write-down, Sandeep Ganediwalla, a partner at business advisors Redseer Consulting, said: “I doubt that one investment gone sour will have a long-term impact on the loss of trust for all UK investments by institutional investors. It could impact the sectorial theses and corresponding investments in them.”

Adia still owns a 16.7 percent stake worth more than £580 million ($756 million) in Anglian Water, another of the UK’s largest utility companies.

In August the investment company agreed a deal to buy UK-based stock trading company Hargreaves Lansdown for £5.4 billion ($7 billion) as part of a consortium.