Deliveroo unveils plans to pull out of Spain in wake of ‘rider law’

Deliveroo has announced plans to pull out of Spain only months after the government promised a law to give gig economy workers greater employment rights.

Deliveroo, which is headquartered and listed in London, said remaining in Spain would require too much investment compared with its other markets, given the scale of its operations in the country.

The takeaway app company blamed its relatively small market share, saying that “achieving and sustaining a top-tier market position in Spain would require a disproportionate level of investment with highly uncertain long-term potential returns that could impact the economic viability of the market for the company”.

A spokesman for Deliveroo said Spain’s employment rights law was not the determining factor, but added that it had resulted in an earlier withdrawal from the country.

The Spanish government announced plans in March to legislate to give workers at food delivery companies and other online platforms more employment rights after a landmark legal ruling, as the first EU country to do so.

Known as the “rider law”, the changes will mean a worker is presumed to be an employee rather than self-employed contractor. The changes will also force food digital platforms to inform delivery riders about how computer algorithms and artificial intelligence affect their working conditions.

Deliveroo said its withdrawal from Spain was subject to a month-long consultation with affected employees, beginning in September, with its services in the country halting in October.

The firm indicated the move would not have a significant financial impact,with less than 2% of its gross sales in Spain. Deliveroo operates in 12 markets, including Australia, Belgium, France, Hong Kong, and Italy, but the UK and Ireland account for half of its revenues.

Although the company did not explicitly mention the Madrid government’s changes as it announced the move on Friday, the Spanish reforms have been seen as a direct challenge to the business models of companies such as Deliveroo, which rely on farming out delivery jobs to workers who are classified as independent contractors.

Deliveroo says this gives workers desired flexibility, but some workers have campaigned for rights such as sick pay and holiday.

Deliveroo workers in the UK are still treated as contractors. In June, the company successfully argued in the court of appeal that workers were self-employed, to the dismay of unions seeking to improve conditions in the gig economy. However, the UK’s supreme court had previously found that Uber workers should be treated as employees.

The status of workers was deemed a particular issue by big City investment funds, with some major investors saying it was a key reason for not buying shares in a disappointing initial public offering of Deliveroo stock in March. One investor told the Guardian labour issues were a “ticking bomb” for the company.

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The plan to pull out of Spain comes as Deliveroo has faced stiff competition from rivals, including Uber Eats, which is owned by the US taxi app company Uber, Anglo-Dutch Just Eat Takeaway, and homegrown Spanish competitor Glovo.

Glovo has said it plans to hire 2,000 delivery riders permanently, but will still try to retain some independent workers. Uber Eats is outsourcing its rider services to other companies.

“The decision to propose ending our operations in Spain is not one we have taken lightly,” said Hadi Moussa, Deliveroo’s chief business officer for international. He thanked its riders, and said employees would be supported throughout the consultation period.