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Is the gig up for the European platform economy? Lawmakers in Brussels are discussing new labour rules that would give drivers and riders greater protection. Uber has claimed that, if it were forced to treat its drivers as employees, it would have to cut jobs, raise prices and retrench. The UK’s Deliveroo has already exited Spain, where the government has ruled to strengthen rider rights.
For platform companies, the risk is clear. Fixed working hours are incompatible with their flexible business models. Platforms forced to guarantee working hours would need to hire a fixed number of riders, organise deliveries and distribute labour.
The impact of such a rule change is hard to assess, but Citigroup reckons it might add 30 per cent to labour costs. That is a lot, given slim platform margins.
Take Deliveroo. It made £855mn of revenues outside the UK and Ireland in 2022, out of a total of £2bn. Gross profit outside the UK was £237mn, implying £618mn for the cost of goods sold. If one assumed the vast majority of that cost was riders and increased that by 30 per cent, it would roughly halve international gross profit.
Not all of Deliveroo’s international business comes from the EU. As an indication, it accounts for less than 30 per cent of its gross transaction value, estimates Citigroup. Lower marketing spend would offset added overhead. These quick estimates then hint at the impact.
Do not expect such a draconian outcome. While the European parliament sees all of the EU’s 28mn gig workers as employees, the European Commission believes only 5.5mn are misclassified as self-employed.
Any rule change will need to be translated into local employment legislation in the EU’s member states — a process with some leeway. Italy has already given gig workers a measure of protection from strict algorithms, but without destroying the platform model. When rigid distinctions between workers and contractors are fuzzy, that type of flexible approach offers an option.
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