LORD STERLING, chairman of P&O, will this week announce the biggest ever overhaul of the group’s loss-making cross-Channel ferry business.

Sterling is preparing to announce the staggered reduction of up to 1,000 jobs at Dover, Portsmouth and Calais — equivalent to 15% of the workforce employed in its ferry business.

The redundancies will be accompanied by a big reduction in the number of ferry crossings. The cuts are designed to reduce capacity and slash costs. In an effort to prepare the ground, P&O has held talks with union officials on both sides of the Channel. But it is expected they will strongly resist compulsory redundancies and could take strike action.

Bob Crow, general secretary of the RMT, said: “We are happy to look at efficiencies but will oppose any redundancies and draw a line in the sand at the suggestion of any compulsory job losses.”

Gwyn Prosser, the Labour MP for Dover, has also warned that any further job losses, in addition to the 600 that were announced last November, could be disastrous for the local region.

P&O, which runs a fleet of 31 ships, has seen its ferry business hit hard by the impact of the Channel tunnel. This now accounts for 42% of cross- Channel traffic compared with P&O which has 32%.

When the effect of Eurotunnel is combined with falling revenues after the withdrawal of duty-free shopping, tax hikes on French cigarettes and a ferocious cross-Channel price war, the impact has been devastating.

During the summer a price war pushed peak ferry fares down to their lowest levels for 30 years. Analysts at ABN Amro said: “Competition from other ferry operators and more significantly Eurotunnel will not abate in our view. Eurotunnel’s marginal costs are relatively low but its fixed costs are sky high so it will continue to drive for volume where it can.”

Sterling will argue that P&O Ferries has suffered from the subsidies enjoyed by its French rival SeaFrance, a wholly owned subsidiary of SNCF, the state-controlled railway group.

For the past three months Sterling and Robert Woods, his chief executive, have looked at ways to stem losses.

It has been a root and branch review from the tea ladies up to head office. The restructuring is expected to result in a £50m exceptional charge.

But not every cross-Channel operator is complaining. Norfolk Line, owned by Denmark’s AP Moller group, is preparing to introduce three new ships for its Dover to Dunkirk route. This represents the largest single investment on the short sea routes from Dover by any ferry company over the last decade.