Companies like Uber, Lyft and Doordash were founded on the premise that the gig economy would thrive maintaining a cheap and flexible workforce ripe to serve today’s consumer demands. But the model has flaws and there has been concern from the outset that workers were the biggest losers of this particular scheme. News that regulations might be about to tighten in the US has knocked stocks in ridesharing and delivery businesses both on Wall Street and this side of the Atlantic.
Danni Hewson, AJ Bell financial analyst, said: “Changing workers’ classification is likely to cost companies more, and right now they’ll find it hard to pass those additional costs onto their customers who are already thinking hard about their daily spend. There have been court cases aplenty in the UK and Europe and concern about the model coloured the stock market debut of Deliveroo, with many institutional investors refusing to jump on board because of the gig worker model.
“Generally, US markets seem drenched in gloom as they await earnings season with investors now seriously considering exactly how bad updates will look. Even banks are expected to report weaker profits despite rising rates. It’s all about the health of the whole economy and with the IMF downgrading global growth outlooks today, it comes as no surprise that investors are nervous.
“Nerves are clearly also rattled in the UK as the Bank of England stepped in once again with additional bond buying measures to shore up sentiment and protect pension funds. But how helpful are these seemingly knee-jerk interventions when the measures still come with a ticking clock? Clearly the bank faces a dilemma in wanting to tighten the taps without undermining its work to stamp down on inflation, but right now a steady hand is needed to ensure clarity and continuity.
“Whether the new Chancellor can provide that clarity when he delivers his medium-term fiscal plan seems like a big ask when he’s promising the statement will be both ‘relentlessly upbeat’ and fiscally ‘responsible’. With the IFS warning that Number 11’s resident will have to slash public spending to balance the books, it’s clear someone will have to lose out and they’re unlikely to find words like ‘upbeat’ wander naturally into their vocabulary.
“But there has been some cheer to be found today, pub operator Marston’s saw its shares enjoy a timely boost after it announced sales had topped pre-covid levels and that it was in prime position to take advantage of a restriction free Christmas as well as a boost from World Cup trading. Offering consumers a warm place to share an affordable drink with friends and family is quite the USP, and if the business can keep costs down it should keep its punters coming through the doors.”