Keir Starmer expressed his full confidence on Saturday in the transport secretary, Louise Haigh, after an explosive cabinet row cast fresh doubt over his Downing Street operation and threatened to overshadow a key international investment summit in London.

Government sources said the prime minister and Haigh had spoken and made up on Saturday after Starmer appeared to rebuke her on Friday for branding P&O Ferries a “rogue operator” in a statement and then calling for customers to boycott the company in a subsequent media interview.

The comments – and a description by the deputy prime minister, Angela Rayner, of P&O’s behaviour as “outrageous” when it sacked nearly 800 workers without notice in 2022 – led to reports that P&O’s parent company, DP World, had pulled out of Monday’s investment summit and shelved a £1bn infrastructure project at the London Gateway.

The workers sacked in March 2022 were told of their fate by the company in pre-recorded Zoom video. They were told: “I am sorry to inform you that your employment is terminated with immediate effect … your final day of employment is today.”

P&O Ferries boss Peter Hebblethwaite subsequently appeared before the Commons business select committee over the sacking scandal later that month. Darren Jones, then committee chair and now chief secretary to the Treasury, opened the session by asking: “Are you just a shameless criminal?”

Hebblethwaite told MPs the ferry business was not viable without the changes, adding: “I would make this decision again, I’m afraid.”

With DP World’s attendance at the investment summit in doubt, Starmer was asked on Friday if Haigh had been wrong to describe the company as a “cowboy operator” and to encourage a boycott. The prime minister appeared to cut her adrift, saying: “Well, look, that’s not the view of the government.”

Official sources said early on Saturday they were astonished that Haigh had been “hung out to dry” and “thrown under the bus” because she had only been echoing a government press release about new protections for seafarers, which had mentioned “rogue employers” and specifically said the measures were aimed at “preventing another P&O scandal”.

The release had been signed off by the No 10 communications team. “No 10 comms gave it the tick,” said a well-placed source.

Both Haigh and Rayner were said by insiders to be “hopping mad” that No 10 had not protected them, given that it had sanctioned the same kind of highly critical language towards P&O.

Downing Street sources later said that while the row had been smoothed over, it had been Haigh’s comments about a boycott that had gone too far and caused most annoyance to P&O’s owners.

On Saturday night, it appeared that DP World would, after all, attend the conference and that the investment of £1bn was no longer under threat. Senior sources confirmed that Haigh and Starmer had spoken on the phone and that he had expressed his confidence in her.

The Observer also understands that senior ministers, including Haigh, had not been informed in advance that DP World would be attending the investment summit, nor that they had been proposing a £1bn investment that would be announced at it.

They said the fact that they were not informed was “astonishing”, given that the government last week unveiled its key bill to improve workers’ rights and that this was highly relevant in that context.

“It shows the tension between the workers’ rights stuff and the investment stuff. This is going to keep happening unless we sort out the comms and the grid,” said an insider.

The row comes just days after Starmer’s chief of staff, the former senior civil servant Sue Gray, quit after weeks of bitter internal arguments and tensions inside No 10. She was replaced by another of the prime minister’s closest aides, Morgan McSweeney.

The investment summit has been talked up as a showpiece of the new government, aimed at attracting foreign money to the UK. Both Starmer and the chancellor, Rachel Reeves, will attend, as well as many of the world’s leading business figures.

The Labour MP Liam Byrne, chair of Westminster’s business and trade committee, said on BBC Radio 4’s Today programme on Saturday: “I think there’s a bit of a split here between the past and the future. Lou Haigh was absolutely right to say the behaviour of P&O, owned by DP World, in the past has been completely unacceptable.

“The calls for the boycott, let’s not forget, were originally made by Grant Shapps [the former Tory transport secretary] … but now we have got the employment rights bill coming through, I think we are all expecting businesses to play by the rules.”

The Dubai-based company owns the port of Southampton as well as London Gateway and was involved in the creation of some of the first of Rishi Sunak’s controversial freeports.

A chorus of disapproval: P&O explainer

“Are you a shameless criminal?”: how DP World’s subsidiary P&O Ferries was attacked by everyone from Boris Johnson to Keir Starmer

17 March 2022
P&O Ferries tells nearly 800 staff in a pre-recorded Zoom video: “I am sorry to inform you that your employment is terminated with immediate effect.” They included those on the Dover to Calais and Liverpool to Dublin routes.

23 March 2022
Prime minister Boris Johnson condemns the “callous behaviour” of P&O Ferries. He said it appeared the company had broken the law and could “face fines running into millions of pounds”. Employment lawyers tell the BBC it was unlikely employment law had been broken.

24 March 2022
Peter Hebblethwaite, boss of P&O Ferries, is quizzed by the Commons’ business select committee. Darren Jones, now chief secretary to the Treasury, asks: “Are you just a shameless criminal?” Hebblethwaite tells MPs: “I’d make this decision again.” Cheaper staff would make the business viable, he said, at £5.50 an hour, plus pension contribution, food and accommodation.

30 March 2022
Transport secretary Grant Shapps tells MPs the “shameful” sackings exploited a loophole, flagging vessels in Cyprus to avoid UK laws.

30 May 2022
Ministers are said to have cancelled a Home Office contract with P&O Ferries to provide transport for UK Border Force staff.

27 March 2023
The Trades Union Congress attacks an “appalling decision” to allow DP World to co-run the Thames Freeport in Essex, as part of the Tory government’s freeports plan. It is reported the project will see more than £4.6bn in investment, with the creation of 21,000 jobs.

9 October 2024
Transport secretary Louise Haigh promotes a new employment rights bill on TV, urging viewers to join her in boycotting P&O Ferries. Deputy PM Angela Rayner is quoted in a press release the next day saying the sackings were “an outrageous example of manipulation by an employer”.

11 October 2024
DP World pulls out of a £1bn investment at London Gateway, part of the Thames Freeport, due to be announced at the government’s investment summit tomorrow, according to reports.

12 October 2024
It is reported that DP World would attend the investment summit. The prime minister Keir Starmer says calls for a P&O Ferries boycott did not have government support.