🍔EU regulation fears sinks Deliveroo shares

FOOD DELIVERY
EU regulation fears sink Deliveroo shares

What’s going on?
The rumours that the EU could introduce stricter labour laws on gig economy workers sunk shares in Deliveroo by 7% yesterday.

Why is this important?

It’s expected that as early as tomorrow the EU will announce new rules that will see gig economy workers treated as employees rather than contractors. According to Bloomberg, as many as 4.1m people working through food delivery and ride-hailing apps could be reclassified as employees.

The rumours crushed shares in Europe’s biggest food delivery apps.

London-based Deliveroo dropped 7% to a record low and European rivals Just Eat and Delivery Hero also fell about 5% in Amsterdam and Frankfurt. 

The change in labour laws would see delivery riders entitled to benefits such as minimum wage, sick pay and paid holiday. These increased costs would either be borne by the business and therefore dent profitability or be passed onto consumers.

The classification of delivery drivers has been a touchy issue since the emergence of delivery and taxi apps almost a decade ago.

Critics argue that working as a contractor i.e. being self-employed limits the rights of riders whilst benefiting the company with flexible, cheap labour. 

Takeaway
The news is another headache for Deliveroo in what has been a rocky first year as a public company. Shares dropped 25% on its debut in March and since then has been hampered by questions on how the business will grow in light of the easing of Covid restrictions on out-of-home dining. 

RETAIL
Tesco workers plan festive strike

Tesco shelves could be barer this month as 1,200 of its warehouse workers and lorry drivers threaten to walkout over a pay dispute.

The Unite union that represents the workers says that the proposed 4% wage increase was less than inflation so translated to a real terms pay cut. But Tesco says it’s the highest raise in 25 years.

If both sides can’t come to an agreement then workers will strike throughout December starting next week. This would undoubtedly impact store deliveries across the UK in the busy Christmas period. In any year this would be a nuisance but especially in 2021 when retailers are wrestling with clogged up global supply chains.

Supermarkets have already flagged that festive product choices will be narrower to focus on being able to have the essentials for the season available.

Retail pay disputes at this time of year are not uncommon as worker bargaining power increases in the run up to Christmas.

Last week Morrisons avoided a walk out in its distribution centre after it improved its pay offer. Although Tesco says it has a backup plan if the strike goes ahead it would be a risky strategy to rollout a contingency during a critical trading period.