Deliveroo on the defensive
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The final leg of Deliveroo’s much hyped initial public offering in London is getting bumpy.
The food delivery app, which is targeting a market capitalisation of up to £8.8bn, is under increasing pressure to justify its model of using self-employed riders, following Uber’s decision to reclassify its UK drivers — although not its food couriers — as workers with entitlement to the minimum wage and other benefits.
Analysis of rider earnings published today by The Bureau of Investigative Journalism found that on an hourly basis, a third of drivers in the UK were paid less than the minimum wage. (“Unverifiable, misleading claims”, said Deliveroo).
Uber’s hand, of course, was forced by a Supreme Court ruling that has been tipped as a game-changer for the gig economy. Deliveroo has already warned investors that if it were forced to change its business model there was a risk of incurring “significant additional expense” or even exiting some markets.
Some investors are turned off. “There is a big question about whether that business is a sustainable one and therefore whether they can be profitable enough while being able to grow. It is not just the employee rights concerns but the governance ones as well,” said Andrew Millington, head of UK equities at Aberdeen Standard Investments, part of the FTSE 100-listed asset manager.