Deliveroo is set to shut down its operations in Spain, months after the government announced changes to the legal status of gig economy workers.
The British company, which listed in London earlier this year, said it would consult on pulling out of the market due to the high levels of investment needed and uncertainty over future returns.
“The company has determined 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,” it said in a statement.
It comes after the Spanish government ruled that workers for food delivery platforms and other companies should be classed as employees.
A court ruling last month found that Deliveroo employees in the UK should be classed as self-employed. However, Uber drivers have successfully won the right to be treated as employees.
Deliveroo operates in 12 markets worldwide, with the vast majority of its gross transaction value (GTA) coming from countries where it holds a number one or two position in the market.
Spain, where it faces competition from companies including Uber Eats, Just Eat and Glovo, represented less than two per cent of its overall GTA in the first half of this year.
Deliveroo said its proposal to exit the country reflected its plans to focus investment and resources on its other markets, with further growth of consumers, drivers and restaurant partners as well as launching in more towns and cities.
It comes after Deliveroo pulled out of Germany in 2019 amid tough competition from Dutch-owned Lieferando.
The delivery group said its decision to withdraw from Spain remained subject to a full consultation with impacted employees and riders, which will begin in September and last around a month.
If the decision is confirmed, Deliveroo said it would ensure appropriate compensation and goodwill packages were paid to staff.
The company added that the plans would not impact its previously-announced full-year guidance on GTV growth and gross profit margin.
“The decision to propose ending our operations in Spain is not one we have taken lightly,” said Hadi Moussa, chief business officer for international at Deliveroo.
:We want to thank all of the restaurants who work with Deliveroo in Spain, as well as our fantastic customers. Particular thanks goes to the thousands of brilliant, hard-working riders who chose to work with Deliveroo, as well as our talented and committed employees. They will be supported throughout the consultation period.”