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Deliveroo will set up £50m pandemic recovery fund in charm offensive

<span>Photograph: Simon Dawson/Getty Images</span>
Photograph: Simon Dawson/Getty Images

Deliveroo is to set up a £50m pandemic recovery fund as part of a charm offensive linked to its $7bn stock market float.

The food delivery service is also expected to set aside shares for Deliveroo customers and could also be preparing to hand cash or share awards to thousands of riders.

The business is expected to unveil details of its listing plans on Monday, days after revealing that it had chosen London, where the company was founded, for its debut as a public company.

The timing of the decision appeared tailor-made for the chancellor, Rishi Sunak, who had announced plans to loosen City listing rules a day earlier and appeared to take partial credit for Deliveroo’s announcement.


Related: No strategy to Sunak marking his own homework on industry | Nils Pratley

Now the company is set to double down on its courtship of the political and financial establishment with a series of offers designed to show off its good intentions.

They include a £50m community fund, spread over five years, to aid struggling restaurants with post-lockdown reopening plans, pay for meals for vulnerable people and help some of its 50,000 UK riders buy electric scooters.

The float is also expected to be open to its customers, a rarity among major listings of recent years, while couriers could also be offered a financial reward as part of the deal.

The plan will deliver millions of pounds in advisory fees for bankers and lawyers, as well as crystallising a £500m fortune for the firm’s founder, Will Shu.

The Independent Workers’ Union of Great Britain (IWGB), which recently won a landmark legal battle against Uber over the employment status of drivers, said the wealth generated by Deliveroo’s float would come at the expense of couriers.

Its army of self-employed couriers, the union claims, are overworked and sometimes earn so little that they rely on top-ups from universal credit.

Alex Marshall, president of the IWGB, said Deliveroo’s community fund was a “publicity stunt” to distract from poor labour conditions. He said riders, some of whom are represented by IWGB, have been struggling through the pandemic while effectively earning less than minimum wage, working 70-hour weeks yet relying on universal credit top-ups.

“Deliveroo are as brutally efficient with costs as possible, just to maximise profits for the people at the top, who stand to make millions from this float,” said Marshall.

Deliveroo rejects the claims and says most riders earn more than the national minimum wage, which will be £6.56 an hour for those aged 18–20 from 1 April, rising to £8.91, the national living wage, for those aged over 23.

Deliveroo has said the law would have to change for it to give riders more benefits without them losing the self-employed status that gives them flexibility.

The business success and potential behind the float contrast sharply with a decision made last year by the competition watchdog that Deliveroo met the criteria for a “failing firm”, due to the impact of the pandemic.

The CMA decided it was in such grave danger of collapse that it cleared Amazon to take a 16% stake in the company as part of a £450m fundraising.

Since the pandemic hit, Deliveroo has expanded by forging delivery partnerships with supermarkets such as Waitrose and Aldi.

Deliveroo’s float plans were further eased when Sunak used the budget to announce plans to permit “dual class” share structures for premium FTSE listings, confirming proposals set out in a review by Lord Hill. This will allow Shu to retain enhanced voting rights that prevent him from being ousted. After three years, the company will revert to a more equal share structure.

In the US, Facebook founder Mark Zuckerberg and Google’s co-founders have deployed dual structures to keep a grip on their empires.

Deliveroo is said to be seeking a $7bn price tag despite having racked up £875m in losses over the past four years, £318m of them during 2019 alone, as it pursues growth at the expense of earnings.

US-born Shu had the idea for Deliveroo while working as an investment banker for Morgan Stanley and went about making it reality in 2013, with co-founder, friend and software engineer Greg Orlowski.

Shu was the company’s first rider and said in a 2017 interview that he still went on shift regularly to understand the experience of drivers and customers.

The company has hired Lord Simon Wolfson, the Conservative peer and chief executive of retailer Next, to sit on its board.