FERRY operator DFDS has defended its freight pricing after it came under attack from a leading local retailer.
Tony O’Neill, executive chairman of SandpiperCI, which runs all M&S shops in the Island, launched a scathing attack on the government, accusing it of driving up costs for Islanders by its choice of ferry operator.
Mr O’Neill said he had seen no evidence to back claims by ministers that DFDS’s flat-rate charges would increase prices by just 0.4% for consumers.
The retailer said his own company’s freight costs had risen by 5.8% since the new freight regime was introduced at the end of March.
Economic Development Minister Kirsten Morel has been approached for comment by the JEP, but DFDS did respond to Mr O’Neill’s strong criticism.
In a statement, it said: “We firmly reject claims that our freight pricing structure is driving significant cost increases for Jersey consumers.
“The transparent flat rate requested by government applies equally to all customers, large and small. This removes the complexity and inequality of preferential discounts that previously benefited a handful of larger importers, ensuring fairness, clarity and certainty across the board.”
It added: “Independent analysis for the Government of Jersey has shown that the effect of DFDS’s new structure on grocery prices is minimal when compared with the broader logistics, distribution, labour – including this year’s significant minimum wage increases – and energy costs that make up the majority of retail expenses. To present DFDS as the source of wider inflationary pressures is therefore misleading.
“DFDS’s commitment remains clear: to provide Jersey with a reliable, sustainable freight service that secures the Island’s supply chain for the months and years ahead.”
In his letter, which is published opposite, Mr O’Neill was also critical of extra port dues charged retrospectively by DFDS after an initial administrative oversight. It is understood that this charge – levied by all ports – was included in Condor’s freight bills but it is now a separate charge on DFDS invoices.
Mr O’Neill questioned whether the government knew that this charge had been ‘missed’ by DFDS when it submitted its tender and whether it had been included in the government’s calculations when it came up with the 0.4% increase.
He wrote: “It’s very clear that the original procurement process for a new operator was either incomplete or based on misleading assumptions.
“There is now a serious question of credibility in those who negotiated this contract and it’s clear that there is now a strong case for reopening the tender to ensure fairness, value, and complete transparency for Jersey.”
Asked by the JEP if he thought a new tender process, with a 20-year deal signed, was a realistic prospect, Mr O’Neill said: “The question is, were all the facts known and were they presented to both ferry operators so that they were on the level playing field, and both of them could quote accordingly?
“Were port dues already in the pricing and, therefore, are we dealing with apples and apples, or apples and pears? All we get is obfuscation from the government; it seems pretty clear to me that if you’ve got two operators running a boat service instead of one, then your costs are going to go up.”
Explaining his motivation for writing the letter, Mr O’Neill added: “There has been a lot of lot of noise, and all we’re getting at the moment, to my mind, is the government and Deputy Morel controlling the airways, giving their spin on it, and we have no one standing up and saying this is complete nonsense.
“For my part, I think there’s been a growing sense of frustration, which has been building over the last few months. We are in a farcical situation where the government brought a second ferry operator in. The logic says that when you have two instead of one, you’re going to get incremental costs, and we’re seeing incremental costs far higher than they have already advised us.
“These could get worse if port dues come through. Meanwhile, we’ve currently got inflation on food at 5%. The price of food is going crazy worldwide, but we’re making it worse in the Island.”
He added: “The minister continues to trot out this stuff about 0.4% on pricing, when I can tell you for a fact that our prices are going up significantly more than that, as a result of his actions to date, and that’s before we get port dues coming down the line.”
Mr O’Neill was also critical of a planned increase in the minimum wage next April to two-thirds of the median wage for 2024. This, he said, would be a £1.10 increase to £14.10.
He said that the change would add more that £500,000 a year to its Jersey wage bill, when considering the incremental costs that a rise in the minimum wage would spark.
Scrutiny to press for answers
CONCERNING DFDS’s contract and pricing, Deputy Montfort Tadier, who chairs the Economic and International Affairs Scrutiny Panel, said he would be pressing Deputy Morel for answers this week.
He said: “The panel is aware that a significant number of individuals and companies are raising concerns around the freight charges and pricing of DFDS, as well as some aspects of passenger services.
“Subsequently, the panel will be questioning the minister on Thursday in its Quarterly Hearing on DFDS, its service provision and its pricing structure.
“The panel remains attentive to developments around this matter and will pursue further inquiries with the minister where necessary. This will include some of the concerns raised by Mr O’Neill in his letter.”
Unbudgeted costs must be “carefully examined”, says Chamber
BUSINESS group, the Chamber of Commerce, said that it recognised the concerns expressed by retailers and consumers regarding recent freight and cost increases.
Chief Executive Officer Murray Norton said: “The government has always been clear that ensuring reliable, fair, and sustainable supply routes for the Island is of critical importance.
“The current contract was negotiated with the intention of balancing affordability, resilience, and long-term security of service with investments in new vessels.
“We still await ministerial decisions on the additional proposed freight charges and are in ongoing dialogue with government, operators and stakeholders, including retailers, to better understand the actual cost impacts across the supply chain.”
He added: “Where new or unexpected charges arise, such as these port dues, they will be unbudgeted costs, these need to be carefully examined to assess the implications for retailers and ultimately consumers.
“Jersey faces unique challenges as an island economy, with freight, energy, and labour costs all contributing to upward pressure on prices and we there must be an understanding from Government to minimising these pressures wherever possible, when balancing fair wages and protecting the resilience of our essential supply links.”
Mr Norton continued: “Chamber will continue to listen to the concerns of businesses and consumers and where the evidence shows that costs are having a disproportionate effect on the Island’s economy and its community, we will rightly question the decisions that lead to these impacts.”
