A HISTORIC DAY on the stock market yesterday, as Deliveroo, perhaps the company most synonymous with the “gig economy”, saw its share price collapse on its first day of trading. It fell an extraordinary 26 percent by close of play. Some bankers are calling this “the worst IPO [initial public offering] in London’s history”.
Many are interpreting it as a blow to British economic credibility. Westminster leaders often talk up Deliveroo as a testament to our capitalist virility, with Rishi Sunak labelling the firm “a true British tech success story”. The FT suggests that the debacle will discourage other innovative firms from registering in London, with growing competition from exchanges such as Amsterdam.
Perhaps more importantly, this is a blow to a particular model of capitalism. Like many tech firms, Deliveroo combines rampant exploitation with heavy losses. Its riders lack many standard employment rights; conversely, they made operating losses of £225 million last year.
This duality is at the centre of investor fears. They reason that, if Deliveroo were ever forced to give its riders the regular rights expected by other workers, there would be no path at all to profitability. A suspicion lingers that the whole model is breaking a whole range of unwritten rules, and that the outcome must be regulation.
The affair highlights the debate over just what we mean by “innovation”. Our everyday experience is defined by new and unfamiliar products ranging from mobile phone games to smart bulbs to AI. It can therefore appear that the system is becoming more inventive and more progressive, to the point of alienating those “left behind” by technological development. At least, that’s how it appears on the surface.
In fact, our most recent phase of economic history has been defined by low investment and low innovation, both of which are locked in a vicious circle with low wages. After decades attacks on trade unions, wages have fallen so low that firms have little incentive to invest and innovate.
Deliveroo epitomises the contemporary firm that appears flashy and dynamic on the surface, but really trades on insecurity. Increasingly, even the most ruthless investors are realising the limits to this economic model. But capitalism as a system has found few other avenues for profitable investment, so expect more absurd, loss-making bubbles, especially in anything with the aura of technology.