The High Court in London, has in effect, ruled that Uber's entire business model broke the rules. The firm brought the latest judgment on itself
Uber brought this latest judgment on itself. During the Supreme Court hearing the presiding judge had suggested that the firm might be contravening regulations governing private-hire vehicles in London. Uber asked the High Court to declare that this was not the case. Instead it agreed and said that the rules required Uber, not drivers, to enter into contractual agreements with passengers.
The change probably means Uber is liable for anything that goes wrong, such as no-shows, and that it is eligible for value-added tax on fares. This may be collected retroactively. Some estimates put the potential bill as high as £2bn . Rides look likely to become 20% dearer. Uber’s position in London was already shaky. In its early days it subsidised fares with venture-capital cash in order to dominate the new market. The same tactic bore fruit in America, where Uber and Lyft form a duopoly, but in London Uber is just one of many ride-hailing services, including Free Now, Bolt and Ola, and must also compete against black cabs and an extensive public-transport network. It does not always measure up.
This created a negative feedback loop. Fewer available rides meant passengers were less likely to use Uber, which made it even less attractive to drivers. Then came the pandemic, which both reduced demand for rides and provided new ways to make money behind the wheel, delivering meals and packages to locked-down homes. As Britain reopened, the result was a shortage of drivers. In November Uber raised fares by 10% to try to lure them back.
The firm is likely to keep muddling through in London; stepping away from one of its largest markets would send an extremely negative signal to investors. But for London’s 2m Uber riders, the future will be pricier and slower. The days of cheap rides and two-minute pickup times are gone, along with the venture capital that paid for them. For London’s 45,000 Uber drivers, the future is harder to predict.
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