Uber has won a crucial victory in its biggest European market when a judge handed back its licence to operate in London.
Deputy Chief Magistrate Tan Ikram on Monday said Uber had done enough to satisfy the court that it was now “fit and proper” to hold a permit, despite its “historical failings.”
Those failings included safety concerns over account sharing, whereby drivers used the same account and car — meaning a person that picked up a passenger may not necessarily have matched the individual listed on the app.
The magistrate said he took into account Uber’s efforts to improve oversight and tighten up identity checks. He said he didn’t find any evidence of a "cover up" of the driver photo fraud problem.
"Uber doesn’t have a perfect record but it has an improving picture," Ikram said. "I am satisfied that they are doing what a reasonable business in their sector could be expected to do, perhaps even more."
But Uber won’t have long to celebrate. The company is facing battles on multiple fronts, including a lawsuit in its home state of California that could give drivers expanded employment rights — a move that could wreck its gig-economy business model.
A UK Supreme Court ruling in another suit over drivers’ worker rights will be given as soon as October, and will determine whether British drivers are considered to be employees of Uber or self-employed.
Outside of the courts, it is fighting to turn a profit. Uber posted a $1.8bn (£1.4bn) loss in the latest quarter as revenues dropped 29pc and ride bookings plummeted by 73pc because millions of people stayed home amid the pandemic.
That has raised doubts that it can meet its goal of becoming profitable by 2021. Its share price has collapsed by almost 50pc since March.
Monday’s victory will do little to alleviate the enormous pandemic-induced hit that has gutted the company.
“Right now this victory is pretty irrelevant because Uber is no longer a ride-hailing company but a food delivery company and the short-term performance will be all about that,” says Richard Windsor, founder of research group Radio Free Mobile.
“We will need a vaccine for ride hailing to come back to what it was. Hence until then it’s a food delivery company and will be judged on that basis.”
Uber’s reliance on its food delivery service, Uber Eats, became incredibly apparent in its most recent results, even chief executive Dara Khosroshahi said the company was fortunate to have a “natural hedge”.
In the three months to the end of June revenue from Uber deliveries was up 162pc to $885m. By comparison, income from its ride hailing business was down 66pc to $793bn. Despite the surge in demand for Uber Eats it’s still loss-making, posting a $232m during the three-month period.
David Madden, analyst at CMC Markets, is suitably pessimistic on Uber’s profitable ambitions given the year it’s had.
“The TfL decision will obviously help the company on its pathway to becoming profitable and it is welcomed amid the current climate,” Madden says.
“But ultimately, the pandemic is likely to hold the company back from turning a profit as Uber hasn’t been able to achieve its full potential — restrictions need to be lifted.”
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Competitors are also catching up. Companies like Free Now, which recently merged with black cab app Kapten, mobility firm Bolt, and Ola were undoubtedly salivating at the prospect of Uber being booted from one of its more important markets.
Monday’s ruling itself may hold some problem for the company down the line. The 18-month licence Uber received is considerably shorter than the maximum five-year permit it could have been granted.
TfL’s lawyer Marie Demetriou said it “considers it important to retain a close eye on Uber” given “the serious historical breaches.”
There is growing resistance among black cab drivers. “This 18-month license with a number of conditions allows us to closely monitor Uber’s adherence to the regulations and to swiftly take action if they fail to meet the required standards,” TfL said in a statement.
Its new licence is subject to 21 conditions, up from the 14 requirements attached to its previous permit.
Steve McNamara, general secretary of the Licensed Taxi Drivers’ Association, which represents some of the city’s black-cab drivers, called the ruling a “disaster for London.”
Uber “has demonstrated time and time again that it simply can’t be trusted to put the safety of Londoners, its drivers and other road users above profit,” he said in a statement. “Sadly, it seems that Uber is too big to regulate effectively, but too big to fail."
Unite, which represents nearly 1,000 taxi cab drivers in the capital, described the ruling as “a sad day for the traveling public in London and another blow to the taxi drivers in the capital.”
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“The risk is that other cities will ask Uber for the same commitment it has provided for London,” says Matthew McDermott, senior director for public policy at consultancy group Access Partnership.
“It is too soon to tell whether that would be the case, but that’s the real risk for profitability.”
McDermott also outlines how Uber’s food delivery business had “struggled for profitability” in the UK despite the fact that food delivery is less regulated than private hire vehicles.
“With strong competition for food delivery in the UK and a growing regulatory risk around the classification of delivery riders, the pathway for profitability remains unclear,” he says.
Uber will undoubtedly be scouring for ways to meet its 2021 profitability dream, but all in all it seems unlikely. When Khosrowshahi outlined his plans to enter the black last November, stock spiked by 11pc at the time. Nonetheless the company’s valuation is still some way of the $80bn it floated at.
Added to the lawsuits in the UK and abroad, growing unrest among cabbies and rising competition, Uber still has much to conquer.
Monday’s victory may have been a boost for Uber and its drivers, but the company faces a bumpy road ahead.
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