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Utopia outsources physical distribution logistics to DP World – but are jobs secure?

By | Published on Thursday 10 August 2023

Utopia Music

Utopia Music pushed out more details about its previously announced Bicester warehouse deal earlier this week, which provided more information about its move to outsource the warehousing and logistics side of its subsidiary Utopia Distribution Services to Dubai-owned logistics company DP World.

According to Utopia, its new Bicester operation will handle “70% of the UK’s physical music, for clients including Universal Music Group, Sony Music Entertainment and [PIAS], as well as 35% of the UK’s physical video market – amounting to over 50% of the UK music and home entertainment markets combined”.

The announcement has given Utopia an opportunity to push out some big numbers and positive stats, presumably in an attempt to counter recent coverage that has centred on the rapid downsizing of its core business, the liquidation of it’s UK R&D division, the bankruptcy of it Finnish R&D division, and the recent divestment of various businesses it had previously acquired.

Current headcount for Utopia globally is just 430, of which around 275 people work in its physical distribution businesses, leaving just 150 employees at the rest of the company – a far cry from its peak of more than 1100 staff as recently as November 2022.

The new warehouse facility – which was first announced back in May – replaces the warehouse previously operated by Cinram, the music and video distributor that Utopia acquired last year via a “prepack” administration. The former Cinram business then became Utopia Distribution Services Limited.

As part of the deal to acquire Cinram’s business out of liquidation, 132 permanent employees and 100+ “temporary” Cinram staff transferred to UDS. Now, as part of the new deal with DP World, 78 of those permanent employees are being transferred to the Dubai-owned business, as well as “over 100 temporary staff”.

On one level the new partnership with DP World – which will handle the logistics, warehousing and fulfilment side of UDS’s operations moving forward – seems like a positive move.

It secures a key hub relied upon by a significant portion of the UK record industry, and one which handles an apparent majority of the logistics and fulfilment for the music sector’s still important physical product sales.

However, the involvement of DP World does raise its own questions – not least because the logistics company has refused to clarify whether the 78 permanent employees who will be transferred from UDS to DP World will have secure jobs after the transfer.

CMU explicitly asked DP World to confirm that the jobs of employees now transferring from UDS to the company were secure in the long term. This was in light of last year’s scandal at DP World subsidiary P&O Ferries, where the entire UK workforce was summarily dismissed on a video call. The only response from DP World, through their spokesperson, was “no comment”.

A UDS spokesperson asked the same specific questions explained that the move from the old Cinram base to the new DP World facility “has seen all jobs protected. 132 permanent and 100+ temporary Cinram staff initially transferred into UDS; 78 of the permanent staff will now move over to DP World via TUPE, with the rest remaining at UDS”.

DP World is largely unknown outside the warehousing and logistics industry, but the company is a globally significant operator of ports, economic zones and logistics services. It was formed after the merger of the Dubai Port Authority and Dubai Ports International, and is ultimately owned by the state of Dubai – and its royal family.

As noted, in March 2022, the company found itself mired in controversy after its P&O Ferries business abruptly fired its entire UK workforce of nearly 800 people on a video call, with staff then being escorted off its ships by security guards.

In an interview with the Financial Times two months after the firing, DP World CEO Sultan Ahmend Bin Sulayem praised P&O boss Peter Hebblethwaite for doing an “amazing job” and “expressed irritation” at the UK government’s strong criticism of the way he had treated his employees, claiming that the choice was to dismiss workers or “bring down the company”.

Back at Utopia the UDS spokesperson was keen to emphasise that those employees are “protected by TUPE, a long contract term between UDS and DP World, and a requirement for their expertise”.

TUPE refers to the Transfer Of Undertakings (Protection Of Employment) Regulations, rules that seek to protect employees when they shift from one employer to another via a commercial transaction, so that the new employer accepts the obligations of the former employer.

The UDS spokesperson went on to say: “Over 100 temporary staff will also transfer to DP World. Both groups of staff have received an above inflation pay rise and had legacy pension debts from the last 24 months of Cinram paid”. CMU has since been able to confirm the accuracy of this statement.

However, TUPE – while offering some protection for employees – doesn’t actually prevent workers from being dismissed, it simply protects the existing terms and conditions of the employment contracts of those employees.

If an employee is dismissed solely because of the transfer from one employer to another they can bring, and would likely win, an employment tribunal claim. But, if an employee is dismissed and the new employer can show a valid “economic, technical or organisational reason” for doing so, then things are not so clear cut.

Critically, one primary “ETO exception”, according to employment law specialists Davidson Morris, relates to the “nature of the equipment or production processes that the new employer operates including, for example, increased computerisation or mechanisation of activities reducing the number of employees required to carry out a particular function”.

When announcing the deal back in May, Utopia’s press release highlighted that the DP World operated warehouse “will showcase technologically advanced solutions such as high-density storage and robotic transfer of product, to enable smooth and efficient distribution of over 30 million units a year across the UK and export markets”.

Which means – while on one level this week’s announcement seems to suggest that the physical distribution side of Utopia is on a more solid footing in the short term than Utopia Music’s wider data business might seem to be – questions were raised around the job security of those moving over to DP World as part of this deal.

UPDATE 10 Aug 2023, 7.30pm: Following initial publication of this article, CMU received much more robust assurances from a UDS spokesperson about the long term job security of staff transferring to DP World, as well as detailed information about the efforts taken by UDS to safeguard the rights of employees that joined the company from Cinram Novum.

As part of that conversation it was highlighted that Utopia Distribution Services Limited is led by a team of experienced UK-based professionals with long and trusted records in the music business.