It was the biggest IPO in London for a decade. But when shares in British food delivery start-up Deliveroo fell 30% in just 20 minutes on Wednesday, down from an opening valuation of £7.3bn, it was an indictment not just of the company itself but of the management practices that the gig economy has pioneered.
Although it recovered later in the day, it was still “on track for the worst opening-day performance in at least a decade,” the Financial Times reported. Not great news for a company once described as a “true British tech success story” by Chancellor Rishi Sunak. In fact, the Amazon-backed unicorn’s stock fiasco jeopardises London’s post-Brexit ambitions to become a global capital for tech listings.
But the collapse did not come entirely out of the blue. In the weeks preceding the IPO, some of the UK’s largest asset managers, including Rathbones, Aberdeen Standard Investments, Legal and General, and Aviva, refused to take part amid concerns about its employment practices, investment risk and corporate governance.
Andrew Millington, head of UK equities at Aberdeen Standard Investments, had told Investor’s Chronicle that “we will not be taking part in the Deliveroo IPO as we are concerned about the sustainability of the business model, including but not limited to its employment practices, and also the broader governance of the business”.
These comments reflect growing alarm at the management practices of the gig economy platforms. Shortly before the multi-billion-pound stock market flotation, The Bureau of Investigative Journalism (TBIJ) published a damning report that analysed data from more than 300 of Deliveroo’s 50,000 riders across the country. It found that many of them are paid less than the minimum wage – sometimes as low as £2 per hour.
Deliveroo disputed the Bureau’s findings and said the sample under investigation was “not a meaningful or representative proportion” of its riders. But as Tech Monitor has previously reported, the gig economy platform model creates artificially low prices that are initially subsidised by venture capital investment but are eventually paid for by squeezing wages.
A call for regulation
The TBIJ investigation also exposed the algorithmic management practices that Deliveroo’s drivers are subjected to. The company employs an algorithm called Frank (named after Danny DeVito’s character in the TV series It’s Always Sunny in Philadelphia), which allocates orders to drivers based on data including their location and previous performance. Deliveroo workers told the TBIJ that they are clueless about how the algorithm works and how deliveries are assigned to them.
The International Labour Organisation (ILO) recently warned about the “very negative implications” of algorithmic management on workers’ rights and quality of life. The automated allocation of jobs based on prior performance leaves workers unable to turn down gigs, no matter how poorly paid or inconvenient, for fear they will be penalised as a result.
The ILO calls for a ‘human-in-command’ approach to algorithmic management to ensure that responsibility for decisions that affect workers’ lives are not taken out of the hands of people. And its Global Commission on the Future of Work recommends the development of an international governance system that would force platforms to sign-up to a blanket set of rights.
Deliveroo’s IPO fiasco confirms that regulation is needed urgently. And it shows that society does not consent to the anonymous, algorithmic reality – the “mutant algorithm”, as a certain prime minister said last summer – that platforms such as Deliveroo are building. Along with February’s landmark ruling by the UK’s Supreme Court, confirming that Uber drivers are employees, not contractors, it is a warning that digital innovation at the expense of human rights and dignity will not be tolerated.
Home page photo of a Deliveroo rider by Nrqemi/Shutterstock.