One of the UK’s top fund managers is to boycott the stock market float of the meal delivery firm Deliveroo next month, amid growing disquiet in the City over the company’s treatment of delivery workers.
Aviva Investors said on Wednesday it had turned down the chance to invest in Deliveroo’s £9bn initial public offering. Aberdeen Standard, another of the UK’s biggest investors, has also expressed concerns about Deliveroo’s employment practices, the Guardian understands.
David Cumming, the chief investment officer for equities at Aviva Investors, which is part of the UK’s largest insurance company, said there was a combination of investment risk and social issues that affected its decision on whether to buy shares or not.
“If they are classed as riders they don’t necessarily get basic rights for minimum wage, sick leave or holidays, and [Deliveroo] states a reclassification of employees as an investment risk to the business,” Cumming told BBC Radio 4’s Today programme on Wednesday. “We won’t be investing in Deliveroo for a number of reasons but that is one of them.”
He added: “A lot of employers could make a massive difference to workers’ lives if they guaranteed working hours or a living wage, and how companies behave is becoming more important.”
The IPO has provoked a sense of unease among some in the City. A portfolio manager at another large investor said Deliveroo’s treatment of workers would raise concerns, while others in the investment industry have questioned Deliveroo’s decision to list with two share classes, a move that will give co-founder Will Shu tighter control over the business for three years.
Aberdeen Standard and Aviva Investors, which have £464bn and £365bn assets under management respectively, have recently taken more vocal approaches on ESG issues – investment industry shorthand for the environment, social and governance – and particularly on climate action.
Tom Powdrill, head of stewardship at Pirc, a consultancy for pension funds, said gig economy companies were likely to face increasing scrutiny from investors over social issues because of the ESG “tidal wave”. The pandemic had further highlighted the problems of worker welfare, he added.
“The nature of the employment relationship is absolutely essential now,” Powdrill said. “Everyone looking at a gig employer knows what the deal is. These companies have shifted risk and flexibility onto the employees. Nobody has any illusions on that.”
Gig economy companies, including Uber and Deliveroo, are thought to have faced at least 40 major legal challenges around the world, as delivery drivers and riders try to improve their employment rights. Their workers have brought numerous cases as they try to secure basic employment rights, such as being paid the minimum wage or receiving holiday pay.
Uber said earlier in March it would start to make these payments to its workers in the UK, after a supreme court ruling that confirmed worker status for its drivers.
Alex Marshall, a former gig economy courier who is president of the Independent Workers’ Union of Great Britain (IWGB), described Aviva’s action as “promising” and said Deliveroo workers were denied rights such as minimum wage protection.
“Until riders are classified as workers and given basic rights, Deliveroo will continue to face protests and challenges from these key workers,” Marshall said.
Documents released before the Deliveroo IPO revealed that the firm had set aside more than £112m to cover potential legal costs relating to the employment status of its delivery riders.
Deliveroo expects the company to achieve a valuation of up to £8.8bn when it floats on 7 April – £1bn more than initially forecast, and putting it on track to be the biggest debut on the London Stock Exchange since Glencore listed almost a decade ago.
A Deliveroo spokesperson said: “We are proud to provide work for 50,000 riders in the UK and that thousands more people apply to work with us every week. We are confident in our business model, which has been upheld by UK courts three times, including the high court twice.
“Deliveroo riders are self-employed because this gives them the freedom to choose when and where to work. Every rider is protected with free insurance and our way of working is designed around what riders tell us matters to them most – flexibility.”