HCA is the world’s largest private healthcare company, as well as being both the UK’s and US’ biggest private hospital group. It runs London Bridge Hospital (LBH) as a for-profit business, as well as five other central London hospitals and partnerships around the UK.

Many of the cleaners at LBH are organised with the Independent Workers’ Union of Great Britain (IWGB). They are currently demanding fair pay, accusing their employers of failing to provide proper personal protective equipment (PPE) and bullying those who speak out.

Corporate Watch has investigated HCA and its business model, to provide information for action for the cleaners’ ongoing campaign.

In summary:

• HCA made billions from the pandemic in the US and the UK, yet it wouldn’t even supply workers with adequate PPE, let alone pay them properly.
• The pandemic created a perfect storm for the Tories to push more privatisation through the backdoor while ‘selling’ it as a strategy to help a broken NHS.
• Despite a huge government payout, HCA beds were greatly underutilised during the pandemic, resulting in the NHS terminating its contract only months later.
• Now, with NHS waiting lists at an all time high, it’s boosting profits further. The NHS has been forced to pay HCA millions for critical life-saving treatments for cancer patients. Meanwhile, record numbers of people who can afford to are paying the company privately for routine treatments.
• HCA has a long history of relationships with politicians who have pushed privatisation.
• Labour Party leader Keir Starmer has received donations from a HCA shareholder, who is a member of the House of Lords.
• Some NHS consultants are making money from shares in HCA, further undermining the integrity of the NHS.
• HCA has a documented history of fraud, negligence and malpractice: do we really want these people to run our healthcare?

This company profile shows that HCA’s agenda is to continue expanding and profiting from private healthcare, both in the US and the UK. HCA maximises its profits by hiring outsourced and underpaid workers, and cutting costs at the expense of workers’ and patients’ safety.

Henry Chango Lopez, IWGB General Secretary, told Corporate Watch:

“While HCA has made millions in profits during this pandemic and claims to value its employees, it treats its outsourced cleaners like second-class workers. Outsourced cleaners are overworked on poverty wages and are forced to work while sick because they cannot afford to take time off without proper sick pay. They also face unequal terms and conditions, worse treatment, being denied access to on-site medical care and other benefits enjoyed by directly-employed colleagues.

Their workers are not prepared to accept this discriminatory treatment any longer from such a prestigious corporation. They have launched their campaign at London Bridge Hospital with the support of their union – the IWGB, and will fight until they get the benefits, the dignity and respect they deserve.”

Unlike many healthcare companies, HCA managed to increase both profits and turnover throughout the pandemic. In fact, the company has seen its profits skyrocket as a result of Covid-19: company records show that in 2021, gross profits were up to nearly $50 billion. It reported turnover of $58.8 billion and a net profit of $7 billion.

A 2022 report from Service Employees International Union (SEIU), the largest US healthcare union, hit the nail on the head when it explained that as HCA profits soar, thousands of employees struggle on “poverty wages”.

Contents

– What is HCA?
– Who profits?
– Frist fortunes
– Pandemic profiteering, lack of PPE and union-busting
– New allegations of fraud
– Lobbyists and lurkers
– HCA in court
– Conclusion

What is HCA?

In the US, Hospital Corporation of America runs 182 hospitals in 20 states. It makes twice the profit of the US’ three other largest publicly-traded hospital companies combined. During the pandemic, its profits also soared above other private hospital groups.

HCA began operating in the UK in 1995 and now runs 30 UK facilities. The company is expanding its reach in the country, with a new joint venture partnership to build a $100 million hospital in Birmingham slated for completion in 2023.

HCA outsources the employment of the vast majority of its cleaners at LBH to Compass Group. Ultimately, because this deal saves it money.

The company has been plagued by scandals, including being implicated in “the longest and costliest investigation for health-care fraud in U.S. history”: it was forced to admit overcharging the US government for Medicare/Medicaid healthcare cases. In 2002, after pleading guilty, it paid over $2 billion in fines, the largest corporate fine in US history.

HCA has been expanding in the UK since 1995. Here is a list of its main UK facilities:

This global healthcare giant is now moving in on our NHS. It was one of several private healthcare companies paid millions by the British government to expand capacity during the pandemic. Yet most HCA beds remained empty. With further Covid waves looming, the NHS was compelled to end its agreement with HCA because, allegedly, HCA was demanding too high a fee while its beds weren’t being filled. Yet as waiting lists (for both planned and emergency operations) soared, this change meant the NHS paid further millions in vital treatments for critically ill patients. It also enabled HCA to lure thousands of people who could afford to pay into its hospitals for more routine surgery. Double whammy.

Meanwhile, the government is pushing through legislation that will make it easier for private healthcare companies to profit even more as the NHS continues to break.

Who profits from HCA?

In the UK, HCA operates through a complicated system of subsidiaries which eventually lead back to US-based HCA Healthcare Inc. The largest shareholder of the ultimate owner is a company called Hercules Holding II LLC.

In 2005, HCA was forced to pay $20 million to shareholders who sued the company following claims of insider trading and inflating share prices. The following year, HCA management and Hercules Holding II LLC, which was “a consortium of private investment funds including Bain Capital Partners LLC, Kohlberg Kravis Roberts & Co. and Merrill Lynch Global Private Equity”, bought HCA.

Since then, the investment companies (Bain, KKR and Merrill) have cashed out their shares, leaving the billionaire Frist family—who founded HCA—as the sole owners of Hercules Holdings. Other shareholders of note include BlackRock and Vanguard, two of the world’s biggest investment funds which exist only to earn more money for the super-wealthy.

HCA may not pay its workers well, but things are different if you’re a director or shareholder. In 2020, HCA’s current chief executive Samuel Hazen earned $30.4 million. Hazen’s net worth is at least $137 million, and over $100 million of this comes from HCA shares. Despite taking a salary dip in 2019, his total compensation package was 556 times more than the average earnings ($54,651) of HCA employees. Indeed, the US executive management team and most directors are also HCA shareholders. Many are also multi-millionaires with wealth boosted significantly by their HCA shares.

In contrast, Jamelle Brown—a technician for HCA in Kansas City—reportedly earned just $13.77 (£10.48) an hour, and 1,000 times less than Hazen’s salary. In 2020, he caught Covid at work. On his return, he was named ’employee of the month’ which came with a ‘reward’: a $6 coupon to spend at the hospital canteen. The SEIU report also notes that although 43% of HCA’s 2020 revenue came from Medicare and Medicaid:

“since 2010 HCA has diverted over $29 billion to the pockets of rich investors like Bain, KKR, Merrill Lynch and the Frist family.”

Another shareholding director is Nancy-Ann DeParle, who joined in 2014. She previously worked for both Bill Clinton and Barack Obama and was credited as one of the key players of the Affordable Care Act (ACA). Also known as ‘Obamacare’, the ACA gave millions of uninsured American people access to health cover. But although DeParle may sound on paper like an altruistic supporter of cheap healthcare, the truth is far shadier. Before heading to the White House, DeParle was director of several corporations that were investigated, and in some cases found liable, for corruption, bribery or negligence. She stepped down from these directorships upon appointment to the White House, having earned millions from companies that would benefit from Obamacare. DeParle’s career has continued to flip-flop between the White House and then back to making millions from private healthcare companies.

Given HCA’s landmark Medicare fraud case, DeParle’s role suggests a clear conflict of interest.

Other directors’ previous positions read like a roll-call of honour of capitalist ‘greats’:

• Meg Crofton: Disney World
• Bob Dennis: McKinsey & Co.
• Charles Holliday: DuPont, Shell, Bank of America
• Hugh Johnston: PepsiCo, Microsoft Corporation
• Michael Michelson: Kohlberg Kravis Roberts
• Wayne Riley: Vertix Pharmaceuticals, Compass Pathways
• Andrea Smith: Bank of America

In the UK, the majority of the management team appears to have strong medical, rather than business, backgrounds. Although Andrew Coombs, the UK’s HCA commercial director, previously worked for AXA. As the Palestinian campaign for Boycott, Divestment and Sanctions (BDS) notes:

“AXA’s investment in Israeli banks that finance Israel’s illegal settlements makes it complicit in grave violations of international law”.

Until 2018, AXA also invested in Elbit Systems, Israel’s largest privately-owned arms and ‘security’ company.

From 1995 – 2001 Selvavinayagam Vireswer, currently HCA’s vice president of development, worked for management consultancy giant McKinsey & Co.—notorious for “giving bad advice and working with corrupt entities”. In 2001, Vireswer worked for a year in government under Tony Blair at the Forward Strategy Unit. He was there as warnings grew about Blair’s private finance initiative (PFI), which pushed more public services into private ownership for profit and started the onslaught of outsourcing giants.

Concerns have been growing in the UK about potential conflicts of interest given that NHS consultants can refer patients to private hospitals that they also own shares in. In 2019, the Centre for Health and the Public Interest (CHPI) drew attention to the rising income of consultants with stakes in private hospitals. Among the companies concerned was HCA, which co-owns The Christie Hospital in Manchester, where oncologists had earned millions from investments in HCA. In January 2022, a new CHPI report found that London NHS trusts paid HCA £36.4 million for cancer treatments between December 2020 and November 2021 after ending its agreement with HCA. As the NHS became overwhelmed with Covid patients, there was an acute shortage of beds, particularly for cancer patients needing urgent care. But it’s worth noting that HCA also held “joint ventures with 120 medical consultants” working at these same NHS hospitals. Those consultants earned income from HCA share dividends, on top of fees for treating private patients, an NHS salary and any additional fees paid to them by HCA.

The investigation also revealed that:

• HCA has the UK’s biggest number of consultants with joint NHS/private stakes;
• HCA dominates access to 80-90% of private chemotherapy treatment in Central London;
• Between 2015 and 2020, consultants earned an estimated £31.3m from joint HCA/NHS ventures. Most of this (over £25 million) went to those with stakes in HCA.

Although the revolving door between the government and HCA is more discreet in the UK than the US, Corporate Watch has found that Labour peer Lord Clive Hollick is an HCA (and KKR) shareholder. In 2020, he donated £50,000 to Labour leader Keir Starmer, and has a long record of donations to the Labour Party and to right-wing Labour MPs. He’s seemingly unaware of HCA’s treatment of employees and claims to support gig economy workers.

Frist fortunes

HCA was founded in 1968 by Thomas Frist, Jr. and Sr., and Jack Massey (who also co-owned Kentucky Fried Chicken). The co-founders saw the potential to generate wealth from healthcare. According to the SEIU:

“Thomas Frist, MD, and his co-founders were inspired by ‘seeing what Holiday Inns 10 years before had done in changing basically the travel industry.’ HCA did change the hospital industry. Prior to HCA’s creation, the hospital industry had long been dominated by nonprofits.”

The Frists own the largest stake of HCA shares. According to Forbes, the family’s net worth at the time of writing is $21.3 billion. Between 2020 and 2021, the family’s wealth nearly doubled. Although founder Thomas Frist Jr. no longer holds an executive position at HCA, sons Thomas and William (Bill) Frist sit on its board of directors.

In 2005, when HCA was accused of insider trading, Bill Frist was a long-standing Republican Senate Leader who’d considered running for president. His political career seems ‘almost’ magically charmed.

Following the Medicare scandal, the Frists escaped any criminal charges. George Bush Jr. was in the White House at the time and reportedly:

“dictated the Justice Department deal with HCA that let the crooks escape jail just as Frist was being anointed the Senate’s majority leader. A pure coincidence in timing, of course.”

In 2005, analysis of Frist’s voting record revealed a “pattern of supporting bills that benefit HCA”. During his time as senator, Frist was also implicated in pushing through legislation to protect pharmaceutical giant Eli Lilly from lawsuits over links between its Thimerosal vaccine and autism “and other neurological maladies” in young children.

Bill Frist also has a history “of race-related controversy”. He was accused of making racist remarks on a campaign tour in Tennessee during his first run for public office in 1994. He’s also openly opposed gay marriage.

HCA lobbying funding has continued to grow since 1990, totalling over $3.2 million in 2021. Although HCA donated $169,798 to Joe Biden in the 2020 election, it also hedged its bets with a $74,870 donation to Donald Trump.

Pandemic profiteering, lack of PPE and union-busting

HCA’s profits have increased since the Covid-19 pandemic. One might think this is because HCA hospitals treated increasing amounts of people suffering from coronavirus. But the reality is somewhat more complicated. In fact, the company has received large Covid-19 bailouts in the US and UK, while at the same time cost-cutting on PPE for workers, and clamping down on worker organising.

In March 2020, NHS England “block booked almost the entirety of the private hospital sector’s services, facilities and nearly 20,000 clinical staff” to expand capacity during the pandemic. This was not just to treat Covid-19, but to enable urgent care—such as cancer treatment—to be provided while the NHS scrambled to address the pandemic.

HCA received the fifth-largest contract for beds and staff from NHS England (NHSE) and was paid over £150m to treat NHS patients between March 2020 and March 2021. It also received about £3m in furlough payments from the UK government during the first eight months of 2021.

The company was one of eight private healthcare providers paid a total of £1.69 billion by NHS England for bed capacity during the pandemic. But this billion-pound payout didn’t translate into significantly higher capacity for the NHS. In fact, overall “private hospitals delivered 0.08% of COVID care”. Out of an estimated 8,000 private beds, the highest number ever occupied by Covid patients on one day was only 78.

And by August 2020, the NHS reportedly ended its contract with HCA and two other providers owing to the lack of beds filled and the fees that the companies were demanding.

Following the end of the contract, there was said to be a “real and imminent threat to London’s ability to perform cancer surgery.”

HCA made profits of $3.75 billion in 2021. Yet cleaners at HCA’s London Bridge Hospital had to go through the pandemic without even basic protections. The cleaners launched their campaign complaining of woefully inadequate PPE, unsafe working conditions and the lack of proper sick pay. Ramona Marredo Mendez, a cleaner working for HCA subcontractor Compass, told Freedom News in February 2022:

“We risk our lives working here. The managers have sent us to clean areas full of infected people without PPE. When I caught covid at work, I was forced to isolate for two weeks without the sick pay that directly-employed workers get. The pay is already so low, I can’t afford to take two weeks off on £96.35 a week. When I asked Compass for support in accessing the statutory sick pay, they did nothing so I ended up at home for two weeks with no money.”

A glance at LBH’s reviews on the Indeed ratings site shows that these concerns are widespread. Reviewers mentioned difficulties in taking annual leave, long working hours, difficulties with “dealing with the supervisors”, bad management, rubbish pay, lack of progression, “class culture”, bullying and low pay. Workers used the reviewing platform branded hospital management “terrible” and “despicable”.

The story is similar in the US, where nurses and other workers spoke out about the lack of PPE in several HCA hospitals during the pandemic. Outcry over worker safety in HCA hospitals there increased in 2020 following the deaths of nurses Celia Yap-Banago and Rosa Luna, who worked at HCA hospitals in Kansas City and California, respectively. Both had contracted coronavirus, despite the alarm having been raised about the lack of PPE at work.

But HCA executives’ attention was not on Celia and Rosa, it was on crushing workers’ organising. Instead of responding to the wave of criticism and discontent by taking proper steps to ensure worker safety, HCA hired professional union busters—reportedly costing $400 an hour—to break proposed union actions by nurses in North Carolina. This followed “widespread complaints over cuts in staff, poor communication, and lack of access to basic supplies and PPE”.

HCA received billions in Coronavirus Aid, Relief, and Economic Security Act (CARES Act) payments as a result of the pandemic. As profits grew, it was then able to return $6 billion of this in a stunning PR stunt, while it cut costs in areas directly affecting workers.

LBH cleaners protesting at HCA’s offices. Image: IWGB

HCA and backdoor NHS privatisation

The pandemic, and the toll it has taken on the NHS, has created a perfect storm for the Tory party to extend healthcare privatisation through the back door, creating even greater profits for private healthcare giants. Not only had HCA already earned billions in revenue, it was perfectly poised to step in and profit further from a decimated NHS, exhausted staff and rising waiting lists for vital treatment.

Before the pandemic, HCA reportedly carried out “virtually no work” for the NHS. But it’s used the pandemic to increase all NHS activity, especially in London where it runs six private hospitals and a large portfolio of private healthcare partnerships and clinics. London NHS hospitals’ increased reliance on private healthcare providers such as HCA has raised alarms about “backdoor privatisation” of the NHS. Allyson Pollock, a clinical professor of public health at Newcastle University said:

“Covid has been very much used as a cover for shrinking NHS care and expanding private healthcare provision.”

After the NHS ended its emergency contract with several private healthcare firms in 2020, including HCA, struggling NHS hospitals in London were forced to buy “£36m of cancer care, cardiology and other services directly” from HCA. This spending was in addition to HCA’s chunk of the £2 billion that was initially paid by NHS trusts to private hospitals in 2020. It was also the first time the NHS paid large sums to outsource complex treatments rather than more routine operations.

With waiting lists at breaking point, this is an issue that’s growing. A 2021 survey by openDemocracy revealed that doctors and NHS staff have already advised “one in five” patients to go private to get the treatment they need. And HCA is set up to step in.

The pandemic created a perfect window for HCA which had been moving in on lucrative cancer treatments for a long time. Former HCA special advisor Karol Sikora helped set up London Cancer Group, described as “the largest UK cancer network outside the NHS”, in HCA’s London hospitals. A high profile anti-lockdown campaigner, Sikora also has a long history of pro-privatisation, anti-NHS campaigns. In 2017, Sikora called the NHS “the last bastion of communism” on Newsnight. He’s also linked to Reform, a think-tank funded “by leading outsourcing corporations”. Now director of Rutherford Health, Sikora recently proposed “the biggest public-private partnership in NHS history”and is advising Reform about ‘What’s Next for the NHS’.

A 2021 CHPI report called ‘For Whose Benefit’ analyses the government’s growing use of private hospitals in 2020, which it tried to pass off “as a strategy for alleviating the burden on the NHS”. It found that:

• Government funding guaranteed private hospitals an income which buffered them from financial losses during the pandemic.
• Although private hospitals were initially paid to take the strain off NHS hospitals, very few beds were used and government figures over the exact costs remain hidden.
• So-called elective surgery is non-urgent surgery. It’s here that NHS waiting lists are soaring. Yet, during the pandemic, private hospitals carried out 45% less NHS-funded elective care than in the previous year—the very thing they were supposedly paid to do.
• The deal ultimately benefited private hospitals more than the (already) broken NHS and paved the way for them to increase profits further.
• When the NHS ended its contract with HCA, this benefited the private hospital sector further. It was able to step straight in to perform planned surgeries for additional money—as more people paid for private treatment—because of the huge backlog of patients needing treatment during the pandemic.
• By January 2021, HCA “was performing twice as many self-pay hip surgeries, cataracts and abdominal operations as it had carried out in the previous year”. Only now, these are funded by patients who could afford to pay, leaving those who can’t on ever-rising waiting lists.

HCA has fingers in other profit pies in the UK, too, because it also owns HealthTrust Europe. Listed as an NHS partner, it has £1 billion in purchasing power to provide “procurement and related services”.

All this comes as the Conservative Party is pushing a new Health and Care Bill through the final stages of parliament. Critics say that the Bill is set to continue “the dismantling of the NHS… by adopting more features from the US health system”. HCA—and other US-owned healthcare giants—will profit even more from a struggling NHS. Although MPs and the government insist the bill isn’t about privatisation, the British Medical Association said it would likely “do more harm than good” and make “it easier for private companies to win NHS contracts without proper scrutiny”. The bill contains a sweeping array of amendments designed to benefit private healthcare providers and insurers.

openDemocracy explains that the Bill will also push more people toward private healthcare, while those who can’t afford it are left dealing with a broken NHS and spiralling waiting times.

One key part of the new legislation is to extend Integrated Care Systems (ICS). In theory, these give patients easier access to a range of services in their community: merging health, mental health, social care etc. Extending ICS regions across the UK sets up a system to pay per head providing healthcare from a set pot of funds. But this actually means the less they provide, the more surplus or profit they make. And as NHS for Sale notes, there’s no legislation to prevent private companies running, or bidding for, large chunks of ICS. Critics have warned that the true remit of ICS is to embed “private companies in running the NHS together with digital and data systems imported from the US healthcare market and insurance firms”. Over 200 companies are now accredited with NHS England to support ICS dealing with data and digital systems, many of which are US-owned giants.

Privacy concerns have been raised in the US after HCA signed a deal with Google to develop “healthcare algorithms” by selling access to patients’ medical records.

This all comes amid growing concerns over ways the government used Covid to increase digital surveillance. A 2021 report on surveillance in the UK explains that not only did the government share NHS Test and Trace App (downloaded by over 20 million people) data with police, it also “made deals with private companies” so they had access to it.

Although there’s no mention of HCA (yet), the accredited list includes companies linked to its shareholders and IT is clearly a growth industry for HCA. Given the healthcare giant’s UK dominance and recent deal with Google, it’s not a stretch to assume that it may soon line up to grab more profits.

With a current Tory majority of over 80, the Bill will almost certainly pass. There’s not much hope that the House of Lords will make meaningful amendments either as a significant number of peers (from all parties) have private healthcare interests and business links to private companies. As noted above, HCA shareholder Lord Hollick has already donated significant amounts to Starmer. There’s little chance that the Labour Party will offer serious opposition, as it’s not only backtracked on pledges to end NHS outsourcing to private companies, but Starmer has also defended employing a private healthcare lobbyist. Meanwhile, the UK’s largest union Unite has cut funding to Starmer’s Labour in disgust over lack of support for workers.

For a detailed timeline about the history of NHS privatisation, read this article from Your NHS Needs You.

Photo by Ehimetalor Akhere Unuabona on Unsplash

New allegations of fraud

There’s another big reason to worry about HCA’s intrusion into our tax-funded NHS. Despite settling the huge Medicare fraud case in 2000, an SEIU investigation analysing Medicare data and lawsuits involving HCA has revealed its booming profits and huge investor payouts may yet again “originate, in part, from apparent fraud” by “routinely” admitting patients for spells in hospital “regardless of medical need”.

Alongside this, the pattern of HCA’s callous quest for profit echoes the same complaints of IWGB workers at London Bridge Hospital. The investigation found that HCA’s hospital markups are at least twice the cost of actual care yet, at the same time, it:

“pays tens of thousands of its employees poverty wages, and staffing levels in its hospitals lag the national average by about 30%, despite the fact that higher staffing levels are associated with better patient care. Given this unbridled pursuit of profit over all else, it should be no surprise that HCA’s profits are astonishingly strong…”

The LBH worker’s challenge to HCA abuses is hugely important. If not stopped, the healthcare giant looks set not only to treat more employees badly, but potentially to siphon off more of the NHS’s limited funds wherever it can.

Lobbyists and lurkers

Private healthcare companies in both the UK and US are notorious for lobbying activity.

HCA was part of the Private Hospitals Alliance (formerly known as H5). This UK-based lobby group launched in 2010 at the same time as the government’s NHS White Paper, Equity and Excellence: Liberating the NHS. This time-frame also coincides with HCA International donating £17,000 to the Conservative Party.

As we have seen above, HCA shareholder Lord Hollick was busy bankrolling right-wing Labour figures prior to the last UK general election. Since then he has made a sizeable donation to Labour leader Starmer.

From 2015 to 2016, HCA used consultant lobbyists Burson Cohn & Wolfe. The company has a long history of working with repressive regimes, major polluters and pretty much every dodgy company going.

HCA’s public relations are currently handled by the PHA Group. The largest shareholder of PHA group is Monaco-based, multi-millionaire Simon Dolan who also owns Jota Aviation—involved in delivering PPE. Dolan is also behind anti-lockdown group Keep Britain Free, which took the government to court over lockdown measures.

In the US, there has been a huge increase in the amount HCA has spent on political lobbying in recent years, in particular since 2019. In 2021, unionised workers in the US called for HCA to suspend political donations after evidence emerged that HCA had donated to many of the Republican politicians implicated in the Capitol siege.

HCA in court

There have been a large number of UK employment tribunal hearings against the company, including cases for disability discrimination, sex discrimination, unfair dismissal and breach of contract.

In the US, HCA has a long track record of being embroiled in fraud cases. These include:

• 2000: HCA pled guilty in the Medicare/Medicaid fraud case, and eventually paid $2 billion in fines in 2002.
• 2005: Accusations of insider trading and fraud led to a large court case and a $20 million payout by HCA to shareholders.
• 2012: A scandal erupted concerning unnecessary cardiac procedures being carried out on patients at HCA hospitals. This is one of the many scandals which have been brought to light by whistleblowers. Whistleblower Justice Network wrote at the time: “with the ever-growing healthcare fraud crisis that seems to plague the nation, HCA and its subsidiaries commonly find themselves in hot water”.

The NHS For Sale? campaign also makes the point that these US fraud cases show that HCA isn’t fit to run hospitals in the UK. It writes:

“The major concerns with HCA International revolve around the behaviour of its parent company in the USA, which has been found guilty of large-scale fraud over the years, and has been the subject of an extensive investigation by the US Department of Justice into the company’s practices.”

The company consequently paid the US government over $2 billion in fines for defrauding its healthcare programmes.

Conclusion

From corporate fraud to worker exploitation, HCA is a capitalist giant with a shocking track record. Now, it’s hovering like a vulture to pick the flesh of our broken NHS and boost its profits further. And it’s been enabled every step of the way by successive governments that are hell-bent on privatisation.

The pandemic created a perfect storm for politicians to sell the lie that private healthcare companies—like HCA—are helping to relieve pressure on the NHS with empty promises that it will always be ‘free at the point of use’. The terrifying truth is, that in post-lockdown UK we’ve now got a two-tier health system. Those who can afford private insurance and treatments are the only people who can pay their way out of impossible waiting times. Meanwhile with limited funds, NHS professionals are forced to pay the likes of HCA to save critically ill patients. This adds more to HCA’s billions; a company most people may not have yet heard of. Solidarity with IWGB workers and their campaign is vital because it shines light on what increased healthcare privatisation actually looks like. That picture is shocking. We need to fight to change it.

For more information on the ongoing London Bridge Hospital cleaners’ campaign, see the IWGB.

The post HCA: Promoting US style for-profit healthcare in the UK appeared first on Corporate Watch.

According to the IWGB, the strike has now spread to Middlesbrough and is soon to start in Leicester and Dewsbury.

To support the strike, Corporate Watch has produced this profile of Stuart Delivery. In brief:

• Stuart Delivery is ultimately owned by the French state. It is a subsidiary of DPD delivery, which is itself a subsidiary of La Poste, the French state-owned postal service.
• La Poste says it guarantees labour rights and trade union representation for its employees – but leaves out Stuart couriers who are treated as precarious sub-contractors.
• Stuart is run by well-connected, ex-Lehman Brothers banker Damien Bon.
• Stuart is loss-making overall, but is making a profit from couriers’ deliveries. It is being bankrolled by DPD and has £7 million in cash in the bank.

Click here to find out more about the strike from the IWGB website.

The business model

Stuart’s pitch is instant delivery for everything. Instant (well, almost) delivery is standard in the food industry. If you live in a major city, you can order a takeaway from Deliveroo and hope to get it still relatively warm. So why not use the same kind of system to deliver other things “instantly” too – maybe a crate of beer from Brewdog, or some soap from Lush, or a dress from the Kooples, or your shopping from Carrefour (all of which are Stuart customers)? As Techcrunch puts it, Stuart’s offer is basically “Amazon Prime Now for local stores and merchants”, though all Stuart does is arrange the “last mile” – hooking up suppliers and customers in cities. It doesn’t have its own consumer-facing app, or arrange the shipping or warehousing itself.

Stuart also works for other delivery firms: in Sheffield, Stuart delivers for JustEat. This is why striking couriers have targeted McDonald’s: it contracts JustEat, which has in turn been contracting couriers through Stuart.

Who runs it?

Stuart was founded by Clement Benoit, Benjamin Chemla and Dominique Leca, but since 2017 its CEO has been Damien Bon. Bon used to work as a banker with US giant Lehman Brothers, infamous for going bankrupt in spectacular fashion during the 2008 financial crash. He then moved on to management consultants Boston Consulting Group before joining Stuart.

Damien’s corporate pedigree extends beyond his MBA from French business school INSEAD – the best in the world according to the Financial Times. The Bon family are well-connected. Xavier Bon has spent two decades running data monitoring firms and is a Foreign Trade Advisor for the Comité National des Conseillers du Commerce Extérieur de la France (CCEF), an association that represents and promotes French business interests abroad. He is a member of the CCEF’s Provence-Alpes-Côte d’Azur committee, where his role is to mentor budding start-up managers in their first forays into international markets. Advisors are nominated by the government and Xavier Bon has had his post repeatedly renewed over the past 16 years.

Damien Bon, CEO of Stuart

Who owns it?

So imagine: you’re a keen member of the gilded youth, out of top private school and the French “Grandes Écoles” elite universities, maybe finished off with an MBA, perhaps a year or two in investment banking. Now you’re ready to make your mark. Hedge fund, perhaps? Civil service fast track? But those are just so 20th century. You really want to be where the action is? Get a mate or two together and do your own tech startup. Know nothing about IT? No worries, you’ll hire a few back-office geeks for that. The thing is the buzz, the funky name. Think Uber, Deliveroo. Think TikTok, Tinder, Airbnb. It’s all about bringing people together – be it with a hamburger or a hot date – and you’re the guys in the middle with the magic algorithm. You’re wild, you’re hot, you’re “disrupting” old business models to actualise instant delivery of every possible human craving. (Actually, it’s the couriers who are out doing the deliveries, but let’s not get bogged down in mundane details).

Small obstacle: there are another thousand MBAs out there with the same idea. They’ve all got a logo, a downtown office and a team of IT geeks. How can you thrust yourself to the front of the pack? For the first five years at least, you’re going to be losing big amounts of money as you try to undercut the competition. And for every Facebook or Amazon, there are a thousand other failed tech companies that no one remembers the names off.

The only hope: attract big capital to back you through those first few years, and take the gamble that your company will sell. So get working those business school connections, get Dad to chat with a few mates in finance.

The classic way is to sell a stake in your start-up to “Private Equity” or “Venture Capital” funds. These are investment firms that specialise in buying chunks of businesses, then look to sell them on in a few years once they have established themselves. Take Deliveroo, for example. Set up in 2013 by William Shu, it’s lost hundreds of millions pushing rapid expansion into new cities and countries. It keeps going because a bunch of US and Hong Kong private equity investors, plus Amazon from 2020, keep sinking in cash. Then in 2021, on the back of the COVID-19 delivery boom, it launched an Initial Public Offering, (“IPO”) – selling shares on the stock market to get its investors back some of their money.

Stuart’s founders followed a similar path. But there’s one stand out point. Whereas most start-ups look for help from private investors, their big daddy backer was the French government.

La Poste, the French postal service that is 100% owned by the French state, put in €22 million of initial funding in 2015, even before Stuart had been officially launched. According to the website Techcrunch, La Poste stuck in the money “largely off the back of an idea and based on the track record of its three founders.” Two years later, La Poste went all in – it bought out Stuart 100%.

So we end up with a situation that some may find contradictory, but just might be the quintessence of 21st century hyper-capitalism. The French state, via its highly-unionised national post office, owns a tech company run by ex-bankers pushing the limits of gig economy precarious employment.

Since 2017, Stuart has been 100% owned by La Poste, which in turn is 100% owned by the French government. La Poste’s accounts describe Stuart as an “uncontrolled subsidiary”. That is, it is run as a separate company with its own independent management. But we shouldn’t let La Poste get away from taking responsibility for what Stuart does – La Poste is still the ultimate legal owner.

To break down the corporate web in a bit more detail: Groupe La Poste has a number of subsidiaries and divisions. These include La Poste itself; and also DPD, the international parcel delivery giant. It is this division that bought Stuart in 2017.

In legal terms, Stuart is in fact a number of companies. Three are registered in France: SRT France, SRT France Logistics, and above them the parent SRT Group. And then there are local companies in the UK (Stuart Delivery Ltd), Spain (Stuart Delivery SL), plus the newest one in Italy (SRT Italy SRL). All of these are 100% subsidiaries of DPD, which itself a subsidiary of La Poste.i

Undelivered McDonalds meals due to Stuart courier strike. Photo: IWGB

Labour rights for posties, but not couriers

As a national institution, and with a strong history of unionisation, La Poste proclaims its reputation on labour rights and trade union recognition. So what is it doing owning a gig employer like Stuart?

La Poste publishes an annual “Vigilance Plan” which sets out its commitments on “human rights and labour law”, as well as other social and environmental issues.ii This clearly commits that La Poste:

“has trade union representation for its employees and promotes sustained social dialogue in all its entities within the framework of employee representative bodies.”

“All its entities”, it seems, save one – Stuart. Somehow this one subsidiary appears to be exempted. La Poste bosses are clearly concerned to put a positive gloss on this exception because the Vigilance Plan contains a dedicated point on Stuart. This says:

“the Stuart subsidiary, which puts clients in contact with independent couriers, has been a pioneer in its field by developing a responsible social model”iii

Here La Poste is keen to clarify that Stuart couriers are not actually employees, so don’t need the same rights. But they do get a “responsible social model” which includes: “reinforced social protection (financed by Stuart from the first euro of revenue)” and “privileged access to professional or work-linked training”, as well as “easier access to funding for professional equipment and, finally a continuous listening, recognised by the delivery community.”

Sounds nice. In practice, couriers say they are denied basic employment rights by being wrongly classed as self-employed. This is despite both a UK Employment Tribunal and Employment Appeal Tribunal deciding that a Stuart courier should be classed as a worker.

Stuart couriers say they started the current strike after the company enforced a 24% pay cut in December 2021, which saw base pay rates slashed on most deliveries from £4.50 to £3.40.

Photo by Hello I’m Nik on Unsplash

How much money is Stuart making?

Accounts filed at Companies House show Stuart Delivery’s made £41 million in revenue from customers in the UK in 2020, just over double the £20.5 million it had made the year before. Once all its costs were taken into account, the company made a loss of £7.4 million. However, the accounts show its deliveries are profitable: it made a ‘gross’ profit of £12.9 million in 2020, at a ‘margin’ of 31.5%. If it paid its couriers more, then gross profit would decrease, but a 31.5% margin gives the company wiggle room to increase pay while still making money from its deliveries (its margin is significantly better than that of its rival Deliveroo when we profiled that company last year).

So why is Stuart losing £7.4 million overall? Because of the £20.3 million it is spending on ‘administrative expenses’. The accounts do not break these down but they are likely to include money it is spending in its drive to expand aggressively across the UK, plus head office, software and other costs. Staff costs – i.e. people they employ on contract, unlike their couriers – increased to £5.8 million in 2020, up from £1.7 million the year before. At the time of writing, Stuart was advertising for over 40 jobs in management, data analysis, HR and product design in the UK alone.

Stuart can afford to continue because of financial support provided by its owner DPD (and therefore La Poste and the French state), which directors say has left it with a “healthy cash balance”. Stuart Delivery Ltd had £7 million in cash in the bank at the end of 2020, the last date for which accounts are available. Money owed to its parent companies are mounting up (£46 million as of the end of 2020), but directors say support is guaranteed for at least until the end of 2022.

Some people are doing very well from the company even while it is loss-making. The accounts show an unnamed director – presumably Damien Bon – was paid £2.2 million in 2020. So couriers have every reason to demand better pay and conditions: those at the top are already making money from it.

“Stuart CEO Damien Bon, who used to work for Lehman Brothers, is using French taxpayers money to bankroll the exploitation of majority-BAME workers in the UK. Despite £2 million payouts to top execs, huge profit margins on deliveries, and £7 million sitting in the bank, couriers are being forced to work 12 hour days on poverty pay to make up for the 24% cuts handed out by Stuart. That’s why the couriers have been on strike for 50 days now and why the strike is still spreading, because this is a fight for survival. With the cost of living rising to crisis point, couriers cannot go on like this. We will continue to fight until these key workers are given the pay that they deserve.”

La Poste will hope to make good money from its investment too. The endgame is presumably either to cash in from future profits and dividends (made from couriers’ work), or a profitable sale. It is instructive that the company’s ‘key performance indicators’ chosen by management are revenue and gross profit: they are focused on expanding and eking out money from deliveries, not overall losses.

Will it work? Will Stuart ever make money for La Poste? All start-ups spin a good story about how they have a unique model to address a market need – and some do become profitable. But many crash, or fade into obscurity, without ever making a penny. In short – La Poste is taking a big gamble with public money.

Notes

The post Stuart Delivery: La Poste’s gig economy gamble appeared first on Corporate Watch.

Easy money if you’re at the top

The disclosures published last week show just how good life is for those at the top of Deliveroo. CEO William Shu’s controlling shareholding and generous salary have been well covered in the media. But he’s not the only director making big sums while riders complain of poverty pay. New chair Claudia Arney is paid an annual salary of £425,000, while fellow board members Rick Medlock and Lord Simon Wolfson make £125,000 and £90,000 respectively. They also have shares in the company.

Bear in mind that these are not full-time jobs. They are “non-executive” positions, meaning they are supervisory and do not include the day-to-day running of the company. Both Arney and Medlock will split their time with the various other boards they sit on. Meanwhile, Simon Wolfson is the boss of Next, the UK’s biggest clothing firm, so presumably won’t be spending much time down the Deliveroo office. Their hourly rates must be astronomical, and a fair bit higher than the £6.70 Wolfson reckons should be enough for workers to live on.

Riders’ pay still coming second to corporate growth

The registration document confirms Deliveroo is losing money because it is trying to expand so quickly. After revealing another multi-million pound loss in 2020 – £226.4 million – the company says the losses:

“resulted from our investments in, and expenditures relating to, the development of our platform and supporting technology, and the expansion of our business into new areas and further into our existing areas”.

There is more evidence that without this relentless desire to expand – a strategy designed to please investors and boost Shu’s ego – the business would be making enough money to pay its existing riders more and give them the rights they are demanding. Thanks to increased demand for food deliveries due to the COVID-19 restrictions, Deliveroo made even more profit from its riders in 2020 than it did the previous year. ‘Gross’ profit from deliveries increased to £356.3 million, with the ‘margin’ going up from 24% to 30% (there is a breakdown of what that means in last week’s profile). The registration document reveals that the company wrung more money out of riders than ever before, boasting there was a “year-on-year decline in the rider cost per order as we have continued to improve operational efficiency”.

And the company is cash rich. It generated cash from its operations for the first time ever in 2020, making £7.4 million. Another £178 million from shareholders in 2020 helped it increase total cash reserves to £379.1 million by the end of the year. Deliveroo hopes the IPO will add another £1 billion to its bank balance. Time for more of that to go to riders.

UK riders are particularly important

Deliveroo riders in the UK may also want to know they are working in Deliveroo’s biggest and most profitable national market. The document separates the business out into two “segments”: UK & Ireland and “International”, which includes the 10 remaining countries it works in. UK & Ireland contributes over half of total revenue and almost two thirds (£217 million in 2020) of total gross profit. Deliveroo needs to keep riders here happy.

Amazon’s servers are as important to Deliveroo as its cash

Amazon gave Deliveroo a huge chunk of change last year – £440 million – in return for a 16% stake. If Deliveroo raises as much money as it hopes from the stock market, Amazon’s financial backing will become less important. But the new disclosures show Deliveroo will remain dependent on its servers. Amazon Web Services (AWS) is the megacorporation’s cloud computing service, used by many of the world’s biggest organisations, including Apple, the BBC and much of the UK government. The AWS website boasts Deliveroo has gone “all in” on its servers and the stock market disclosure spells out how important its cloud infrastructure is. Deliveroo does not name Amazon, but says it “relies” on a cloud provider and that its Deliveroo app and other tech is “largely hosted” on it.

Who to woo

When Deliveroo shares hit the stock market, expected in the next few weeks, the vast majority of them will only be sold to “institutional” investors. As we set out last week, these are big investment firms, concerned only for whether the share price will rise or fall. Deliveroo aims to raise £1 billion from its IPO and the enthusiasm of these firms will determine how easily it can do that.

You can get an idea of which firms might be interested in a piece of Deliveroo from looking at who is investing in food delivery firms JustEat here or Uber here (scroll down the pages to the “Institutional shareholders” section). Will Shu, Claudia Arney and others at the top will currently be selling Deliveroo to them as best they can. Riders might want to share their side of the story.

Riders who want more information on Deliveroo as it prepares for its IPO can get in touch with us here.

The post Deliveroo’s IPO disclosures: what we’ve learnt appeared first on Corporate Watch.

Over the past four years Corporate Watch has supported Deliveroo couriers with research to help their campaigns for better pay and rights. In this profile we look at Deliveroo’s business model, how it makes money, who’s in charge, its important partners, who is set to benefit from its upcoming stock market splash, and who it needs to please for that to go well. Some stand-out points:

• CEO and co-founder William Shu could see his personal stake in Deliveroo rise to £500 million when the company puts its shares up for sale on the stock market this year. Other major Deliveroo shareholders, including corporate giant Amazon, also hope to make big sums.

• Meanwhile, Deliveroo couriers continue to struggle with poverty wages and insecure employment. They have taken strike action in at least 9 of the 11 countries Deliveroo works in over the last three years.

• Analysis of company accounts suggest Deliveroo was making good money from couriers’ work even before the pandemic and could have afforded to pay them better while still making money from its deliveries. The huge overall losses reported by Deliveroo appear to have been caused by its rapid expansion, a strategy designed to please investors, not riders.

• Ahead of the stock market launch Deliveroo has recruited new directors such as Lord Wolfson, multimillionaire boss of clothes chain Next. He has spoken out against the Living Wage and has said £6.70 an hour is enough for workers to live on.

• Deliveroo’s biggest partners include restaurant chains Wagamama, KFC and Nando’s, with grocery deliveries for Aldi, M&S, the Co-op and other supermarkets another growing business.

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Deliveroo couriers in the UK are currently organising and campaigning through the IWGB union’s ‘RooVolt’ campaign. Click here to find out more.

What’s the business?

Deliveroo was founded in 2013 by William Shu, the current CEO, and Greg Orlowski. Customers order food from over 140,000 restaurants and takeaways through its app; Deliveroo sends its 110,000 couriers to pick up then deliver that food, and takes a cut from the orders, plus a delivery fee from customers.

Company propaganda paints Deliveroo’s rapid growth as due to its innovative business model and tech – the efficiency of its ‘Frank’ algorithm for allocating drivers. In reality, its money-making formula is nothing new: it takes as big a cut as possible from the restaurants, while also squeezing workers’ pay to the bone.

On the restaurant side, commissions in the UK can be as much as 35% plus VAT. In May 2020, one pizza restaurant owner told CNBC that Deliveroo’s cut works out at 42% per order when VAT is factored in.

On the other side, the business model means making sure very little of that commission reaches the people who actually deliver the food. Deliveroo has claimed it pays its couriers over £10 per hour, on average, across the UK. Couriers dispute this. A report compiled by MP Frank Field in 2018 found some made as little as £2 per hour once their costs were taken into account. Other common complaints include being classed as self-employed contractors with fewer rights than other workers, lack of safety and protection, job insecurity, and lack of support during the COVID-19 pandemic.

Registered under the name Roofoods Ltd, Deliveroo is headquartered in a swanky London office and is active in nearly 800 towns and cities across 11 countries. As well as the UK these are: Australia, Belgium, France, Hong Kong, Italy, Ireland, Netherlands, Singapore, Spain, United Arab Emirates and Kuwait. A failed attempt to enter the German market ended in 2019, as the company failed to win sufficient market share against established competitors.

Deliveroo has not yet published information on where it makes most of its money but research firms reckon the UK is easily its biggest market, followed by France, Italy then Spain. Within the UK, the company appears to do the most business in London, followed by Manchester, Birmingham and Leeds. The company delivers from a range of different restaurants but the most important appear to be the big corporate chains – particularly KFC, Wagamama, Nando’s and Burger King (see more on these at the bottom of this profile).

Rise of the dark kitchens

A further twist in Deliveroo’s business model is its use of “dark kitchens”. Also called “ghost” or “cloud” kitchens, these are low-cost food preparation units in industrial estates. The food may be prepared using the recipes, branding and pre-packaged ingredients of a recognised high street chain – without going anywhere near an actual high street restaurant, so slashing the bill for rent as well as front of house costs. As Financial Times columnist Tim Hayward puts it, dark kitchens are “the logical extension of a system that sees food as a manufactured item and replaces hospitality with a supply chain”.

Deliveroo helped pioneer the model in the UK. In June 2017 it had five “Deliveroo editions” sites in London and one in Brighton, hiring out kitchens it had built and equipped to restaurant chain partners. Shu then described the model as the “the biggest development in the market since we first launched”. By the start of 2021 Deliveroo operated 32 of its own dark kitchen sites worldwide, each of which may hold a number of actual kitchens, and it has announced plans to double this number.

Deliveroo is now by no means the only player in the market. Investment capital has piled into the idea in the last couple of years, including funding start-ups such as Karma Kitchen whose whole business offering is to hire out dark kitchen space.

However, there could yet be problems ahead for dark kitchen operators. Many may operate in a grey area without adequate planning permission. Deliveroo has clashed with local authorities over planning and nuisance complaints, and this could become a bigger issue as the sector grows – and possibly provokes resistance.

Worker resistance

In most places where Deliveroo works, there is resistance from its riders. There have been strikes across the UK and court cases around the company’s employment practices. A ‘RooVolt’ campaign by the IWGB union is currently focusing on unfair termination or dismissal, alongside longer-standing grievances over pay and the employment status.

Outside the UK, after a first flurry of transnational industrial action in 2016-17 (click here and here to read more about it), the struggle has been fought on diverse fronts across the world. Since 2018 there have been strikes in Spain, Ireland, Italy,the Netherlands, Hong Kong, France, Belgium and also Germany before Deliveroo pulled out.

Legal challenges to the couriers’ working conditions have been brought against Deliveroo in Spain, Italy, and Australia. In Italy its booking system was deemed “discriminatory”, while the Spanish Supreme Court ruled that couriers are employees, not self-employed contractors. This is similar to a recent Supreme Court decision in the UK concerning Uber, which may also affect Deliveroo in the future.

In addition, there have been some some moves by riders to set up their own courier platforms as a co-operative. This attempt to set up a rider-owned alternative started in France – in the UK, there is currently a branch in York.

Where’s the money?

The COVID-19 pandemic has been a boon for Deliveroo’s finances (see next section). Before the pandemic, Deliveroo was growing rapidly – yet also losing money in eye-watering amounts. Between 2016 and 2019 Deliveroo’s revenues grew sixfold, reaching £772 million at the end of 2019, the last year results are available for. However it posted overall losses of over £100 million in each of those four years: it lost £317 million in 2019.

Deliveroo revenues and losses 2016-2019

Source: Company accounts

This does not mean the company can’t afford to pay its workers better. Look deeper into the accounts and it turns out Deliveroo was making decent profits from its couriers’ work but its desire for international domination incurred huge costs that led to huge losses. This is important as it shows that even after the pandemic restrictions have passed, the business should be generating enough money from couriers’ work to increase their pay.

In 2019, Deliveroo spent £583 million delivering food. According to the accounts, “the largest element” of that spend is “the cost of delivery from restaurants to customers”. In other words, couriers’ pay. Deliveroo’s revenue from those deliveries was £772 million, meaning it made £189 million from deliveries in 2019 (its “gross” profit, in the jargon). After barely breaking even from deliveries in 2016, the profitability of its deliveries has been strong every year since 2017. Given the boom to Deliveroo from the pandemic and the increased cuts it can take from restaurants, this will likely have increased again in 2020.

Source: Company accounts

So if Deliveroo has been making decent money from its deliveries, why has it been making such huge losses overall? The accounts say its poor overall results came “principally as a result of the Group’s focus on investment, given it is still in a rapid growth and expansion phase”. The extra costs caused by this expansion are grouped together in “administrative” expenses. They peaked at a massive £502 million in 2019 but have been high throughout Deliveroo’s existence.

Source: Company accounts

These numbers will include some costs essential for the running of the business. The wages of software engineers running and maintaining the app, for example, or other workers employed in head office or other administration and a variety of other admin costs. But it is the costs of Deliveroo’s investment in its rapid expansion plan that appears to be causing the real damage to the company’s overall results. In just a few years since starting in 2013, Deliveroo has muscled its way into at least 13 countries and has set up a range of new business lines. That does not come cheap. Neither does failure: the 2019 admin expenses included a £43.4m “impairment” charge after it shut its operations in Germany and Taiwan.

The cash it used for this expansion has come from confident investors who have ploughed money into the company to push up its market value. But it has also come from the profit Deliveroo made from deliveries, generated by squeezing its couriers’ pay to a minimum.

Thank you Amazon and COVID-19

At the start of 2020, things were not looking great for Deliveroo. It seemed like Shu might have pushed his rapid growth strategy too far: delivery profits had grown, but expansion costs and so overall losses had grown even more. To keep going, Deliveroo needed more capital. It turned to the global platform capitalism behemoth Amazon, which in 2020 bought a £450 million chunk of Deliveroo, becoming the company’s biggest shareholder with a 16% stake.

The controversial deal was initially mooted in May 2019, but then blocked for a year by the Competition and Mergers Authority (CMA). They feared that even as a minority shareholder Amazon could wield “material influence” on Deliveroo and seriously impact competition in the delivery industry due to its massive market power. But in 2020 the CMA eventually backed down and agreed the deal – after Deliveroo convinced the authorities that it would indeed go bust without Amazon’s help.

Then came COVID-19. In the words of Will Shu, the pandemic has “accelerated strong underlying trends, and there is an enormous opportunity ahead”, After a rocky couple of months, restaurants opened up again and more people ordered meals to eat at home.

Buoyed by its new success, Deliveroo has played hardball with restauranteurs who have dared play away with any of its rivals. One London restaurant told the Financial Times that Deliveroo threatened to increase its commission after the restaurant also sold through UberEats. Deliveroo also struck deals with supermarkets to deliver groceries ordered through the app. The company now delivers for Aldi, Morrisons, Sainsbury’s and Waitrose.

Thanks to this, Shu announced in December his company was signing-up more customers, seeing existing customers place more orders, and seeing the average value of orders grow. All this helped it make its first ever operating profit in the first six months of 2020.

In short, COVID appears to have boosted revenue so much that the huge ‘admin costs’ are finally outweighed by increased sales. Again: this undermines any justification Deliveroo may give for not paying its couriers better. It has the money and can afford to do it.

The IPO

Thanks to its COVID boost, Deliveroo is now planning to ‘list’ its shares on the London Stock Exchange. The ‘Initial Public Offering’ (IPO) was officially announced on Monday.

Until now Deliveroo’s shares have been traded privately: the company has solicited money from specific investors, then given them shares in return. By ‘going public’, Deliveroo will issue new shares through the stock exchange, which greatly increases the number of investors it can reach. This should bring a huge amount of cash into the business – as Deliveroo will receive the money paid for the new shares.

It also means a potential bonanza for William Shu, Amazon and its other current shareholders, with increasing demand pushing the value of their stakes higher. We don’t know how much investors will decide Deliveroo is worth for the IPO but the company is reportedly targeting a valuation of £7 billion. This would make Shu’s stake worth around £500 million.

While individual investors will be able buy Deliveroo shares after the IPO, the biggest prize for corporations are the ‘institutional’ investors: huge investment firms that manage trillions in savings and pensions, many of which can only be invested in shares listed on a stock market. A look at who now owns rival Just Eat shows some of the firms that may be interested: Blackrock, Vanguard, Standard Life and other mainstays of global capitalism.

The more they like Deliveroo, the higher Deliveroo and its banks can set the share price (and the higher it is, the more money it can generate). Potential institutional investors will not be concerned about the ethics of Deliveroo’s business model – but they may be put off if they think workers’ challenges will be successful.

Deliveroo has already signed-up JP Morgan, Goldman Sachs and other investment banks to take care of proceedings and will currently be marketing itself directly to institutional investors to drum up demand. A next step will be to issue a ‘prospectus’ that will present the business to potential investors and should contain a lot of new information about the workings of the company. It should also identify any “material risks” that could cause problems for its business model.

This has to be signed-off by the state regulator, the Financial Conduct Authority. Will it insist Deliveroo list legal cases around workers’ rights or resistance as material risks? Let’s see, but given the government is currently trying to lure future tech companies’ IPOs to London, don’t expect too much.

Size wars

What is Deliveroo’s plan to impress potential investors this year? The company can’t bank on COVID lockdowns being around for ever – so can it use the current momentum to find more sustainable long-term profit?

Deliveroo’s biggest market is the UK. But it is not alone and is a long way from dominance. Its two main rivals are Just Eat and Uber Eats. Uber has a wide network and partnerships with major restaurant chains, while Just Eat’s app is still the most popular app for orders. Just Eat has also recently developed its own courier fleet (restaurants on its app previously had to arrange delivery themselves). Neither are short of cash to grow their businesses further. Ominously for Deliveroo, Just Eat’s CEO Jitse Groen issued a declaration of war earlier this year, announcing his company will “go all out” against Deliveroo and Uber Eats, with dominating London a particular focus.

There are also other up-and-coming players challenging Deliveroo: for example, dark kitchen specialist Karma Kitchens, which has a partnership with Uber Eats, raised £252 million in 2020 to massively expand its network.

In response to this competition, Deliveroo’s strategy appears to be simple – keep bulking up. So far in 2021 it has announced the following plans to expand its operations:

• Grow across the UK, with more restaurants and chains on its app. In January 2021 Deliveroo said it plans to cover 100 new towns and cities.

• More dark kitchens – plans to “more than double” the number of its ‘Editions’ sites worldwide in 2021 (there are currently 32, containing over 200 kitchens).

• More “on demand grocery” partnerships with supermarkets – the “fastest growing part of the business”.

It goes without saying that another key part of the strategy will be to continue to challenge any attempts by its workers to increase their pay.

Who runs Deliveroo?

Deliveroo is led by William Shu, who is also its co-founder (the other, Greg Orlowski, has since left the company). Shu used to work for investment bank Morgan Stanley. The Deliveroo origin story tells of Shu dreaming up the company while working late nights in the London office, where his number-crunching was interrupted by having to leave his desk to pick up food.

Also on the board is Deliveroo’s head bean-counter, Adam Miller, who was appointed as Chief Financial Officer last year. He used to be an executive at the travel business, Expedia.

The rest of the board are either representatives of existing shareholders or big corporate ‘stars’ hired to impress potential investors for Deliveroo’s big stock market opening.

Deliveroo signed Claudia Arney, Richard ‘Rick’ Medlock and Simon Wolfson last year and the company hopes they will all polish its image with investors – and thereby increase the cash it hopes to raise.

Medlock has a background in finance and is former Chief Financial Officer at Worldpay, a payment processing firm. Medlock was CFO at telecomms firm Inmarsat for nine years, where he oversaw its initial public offering.

Arney has a more impressive corporate CV: she has worked for Pearson, the Financial Times, Goldman Sachs, HM Treasury and has experience as a director at Ocado, Halfords, property firm Derwent London, Aviva, Which? and TFL. She was previously interim chair of the Premier League.

She will need to balance her commitments at Deliveroo with her directorship at Kingfisher plc, a large DIY retail group whose name is less familiar than its brands: B&Q, Castorama, Brico Dépôt and Screwfix. She is also currently a director of Bedales school, a boarding school in Hampshire. Bedales boasts an impressive list of alumni including Cara Delevingne, Daniel Day-Lewis and Lily Allen as well as knights, nobles and royals.

But perhaps the biggest signing is Simon Wolfson. Currently the CEO of Next, Wolfson is the FTSE 100’s longest-serving chief executive (when appointed in 2001, he was also its youngest). A Tory peer, ‘Lord Wolfson of Aspley Guise’ is the ‘scion of a well-known retail family’ and is reportedly worth an estimated £112m.

Wolfson is no stranger to Deliveroo’s key business strategy of squeezing worker pay. In 2015 he made headlines by criticising campaigns calling for firms to pay a Living Wage of £7.85 an hour. He said £6.70 an hour was “enough to live on” for a lot of people.

Wolfson has given serious financial backing to the Conservative Party and to Brexit. He has personally donated £630,850 to the party and to David Cameron, plus another £100,000 to the Vote Leave campaign. He has also been Chairman of Open Europe, a Eurosceptic research and propaganda outfit that merged with Policy Exchange, a powerful Tory think tank of which he is now a trustee.

Wolfson has further Tory connections through his family. He is married to Eleanor Shawcross, a Non-Executive Director at the Department for Work and Pensions, and former economic advisor to George Osborne. His father, David Wolfson, is a businessman and former chief of staff to Margaret Thatcher who was also raised to the peerage as Baron Wolfson of Sunningdale – though later kicked out of the House of Lords for non-attendance.

Some Next shareholders are reportedly none too happy with Wolfson’s new appointment at Deliveroo. They are worried the role will distract him from his duties at the fashion retailer at what seems a crucial time for the company. Some insiders reckon he wants the Deliveroo post as a way to get closer to Amazon, his ultimate target destination.

Aside from Next, Wolfson currently has shareholdings in the following companies: Superdry clothing, biotechnology firm ADC Therapeutics, Pembroke Venture Capital Trust, and nuclear fusion research company Tokamak Energy.

Also on the board is Darrell Cavens, an entrepreneur and founder of Zulily, an ‘e-commerce company’, who joined Deliveroo in 2017. The rest of the directors all represent current shareholders:

• Antoine Froger, representing Bridgepoint. He also currently sits on the board of Burger King’s France franchise, another of Bridgepoint’s investments.

• Martin Mignot, representing Index Ventures, one of Deliveroo’s earliest backers. A keen cyclist, he recently collaborated with London Cycling Campaign on a webinar about how to make London a ‘friendlier and safer for pedestrians and cyclists’. He has 45,000 followers on Twitter where he uses hashtags such as #humansnotcars.

• US-based Jayant Mittal, representing Amazon, where he is a Corporate Development Director.

• Benjamin ‘Benny’ Peretz, representing Greenoaks Capital.

• Seth Pierrepoint, representing Accel. Pierrepoint is described as having played a key role in Accel’s early investment in Deliveroo.

• Adam Valkin, representing venture capitalist firm General Catalyst. He posts about his business on Twitter.

Who owns Deliveroo?

Co-founder William Shu still owns a fair chunk of Deliveroo’s shares – 6.8% as of January 2021. His former partner Greg Orlowski also keeps a stake, possibly now around 2%. However, most Deliveroo shares are owned by investment firms – both big global investors and more specialist private equity funds – as well as the megacorporation Amazon.

As discussed above, Deliveroo never made a profit until COVID. It is only still in business thanks to being given piles of cash by these investors. They are betting that the value of their investment will increase and make them handsome profits if the coming IPO is well received by the stock market.

The current shareholders are:

Amazon

The delivery and cloud computing leviathan is now one of Deliveroo’s largest shareholders, and has a seat on the board. In 2020 it bought a £450 million chunk of Deliveroo in a controversial deal which at the time gave it a 16% stake – after a year of wrangling with the Competition and Mergers Authority (CMA). Amazon was fined £55,000 for failing to provide timely information during the competition inquiry – an amount that will mean little set against its multi-billion dollar profits.

Amazon’s intentions with Deliveroo are an interesting question, given its massive wealth and drive to dominate most of the markets it enters. One analyst speculates that the endgame may be eventually combining Deliveroo’s food-ordering app into an Amazon “super app”. Or perhaps Amazon could use the business knowledge it gains from Deliveroo to launch its own dark kitchen operations in other countries.

Fidelity

Just last month (Janary 2020) Deliveroo topped-up its capital by selling another $180 million in shares. The sale was led by two investment managers – Fidelity and Durable. It is not yet clear how many of the shares they kept for themselves, and how many they sold on to other existing investors. Fidelity is one of the world’s biggest investment fund managers, based in the US with a London office in Cannon Street. In June 2020 it managed assets of over $3.3 trillion.

Durable

Durable is a venture capital fund based in Maryland in the US. It was set up recently in 2019 by Henry Ellenbogen, a former “star fund manager” at big investor T. Rowe Price – which also owns shares in Deliveroo.

Index Ventures

US venture capital firm, putting its money into Deliveroo through two Jersey registered investment funds (essentially pots of money). Invests in 160 companies in 24 countries, including: Dropbox, Etsy, Sonos, SoundCloud, Squarespace, Lookout, Hortonworks, Pure Storage, Funding Circle, as well as Deliveroo rival Just Eat. Its London office is in Mayfair, naturally. Represented by Martin Mignot on the Deliveroo board.

DST Global

Hong Kong-based firm founded by Yuri Milner, Russia’s “most influential tech investor” according to Forbes. It is one of the world’s most successful internet company backers after making huge sums from stakes in Alibaba and Facebook. It invests in Deliveroo through three different funds. It has a London address in Mayfair.

Greenoaks Capital

San Francisco-based venture capitalists specializing in tech investments. They invest in Deliveroo through three different funds, all of which appear to be registered in the Cayman Islands. They are represented by Benjamin Peretz on the Deliveroo board.

Accel Partners

Another investment firm specializing in tech companies. They were one of the first investors in Facebook and also own stakes in Dropbox, GoFundMe, Groupon, GoCardless, Squarespace, Walmart.com, Wonga and a host of other companies. They have a UK office in Mayfair, London.

General Catalyst

US-based venture capital fund manager that invests particularly in “growing” tech companies. Has also backed Airbnb, Snapchat, among others. Represented on the board by Alexander Valkin.

Deliveroo’s key restaurant and grocery partners

Nando’s

Nando’s deliver exclusively with Deliveroo and have recently expanded the amount of restaurants on the Deliveroo app.

Nando’s is owned by Dick Enthoven, a South African billionaire who owns the company through a string of offshore companies. His son, Robby Entoven, heads the UK operation of Nandos.

Burger King

Burgers were the most popular Deliveroo order during the UK’s COVID lockdown, and Burger King has been ramping up its delivery business.

Burger King worldwide is owned by Restaurant Brands International, a massive Canadian-American company. The Franchise to operate Burger King restaurants in the UK is owned by UK-based private equity investment firm Bridgepoint Capital, which is also a Deliveroo shareholder.

KFC

KFC and Deliveroo’s relationship extends to holding joint publicity stunts together. KFC is another COVID winner, expanding business during the pandemic: they have recruited almost 10,000 new staff by the end of 2020.

KFC is part of major US company Yum! Brands Inc, which also owns Taco Bell and Pizza Hut. Pizza Hut also used Deliveroo, though is testing its own delivery options. Yum! Brands Inc Previously invested $200m in GrubHub. In the UK KFC’s restaurants are run by 37 franchise partners, who range from small family owned businesses to bigger franchise companies that run multiple outlets.

Wagamama

Wagamama was already expanding via “Dark Kitchens” before the pandemic in early 2020. It cited strong courier operations as part of its “covid resilience” strategy for the future in its annual report.

Wagamama is part of The Restaurant Group Plc, whose other restaurants include: Chiquito, Frankie & Benny’s, TRG Concessions, Brunning & Price, Coast to Coast, The Filling Station, Fire Jacks, Garfunkel’s, and Joe’s Kitchen. Not all of the group’s brands have done so well: during the Covid-19 outbreak and subsequent quarantine, The Restaurant Group closed 250 restaurants, with a loss of nearly 4,500 jobs.

Five Guys

The “Golden Burger” marketing stunt with Deliveroo that amounted to £25,000 worth of cash prizes shows the effort that has gone into marketing Five Guys on Deliveroo. There’s also evidence of the chain growing in the UK despite the pandemic. As a highly successful burger chain, and burgers being named the most popular take away during the pandemic, it’s safe to assume that Five Guys is an important partner to Deliveroo.

Five Guys internationally is owned by the US-based Murrell family. The UK operation is owned jointly by the Murrells and Freston Ventures, an investment company run by Carphone Warehouse founder Sir Charles Dunstone.

The Co-Op

The Co-Op has paid for TV ads to promote its partnership with Deliveroo. It has become the most “widely available supermarket on Deliveroo” with 400 stores now available.

The Co-Op is technically still owned by its five million members: anyone can become a member by subscribing for a £1 share. Co-Op members vote on motions at the AGM and also elect the members council which consists of 100 members from across the UK.

The post Deliveroo: we profile the dodgy delivery firm set to cash in on the stock market appeared first on Corporate Watch.

This article looks at a few ways the economic system we call capitalism has been fundamental in spreading the virus – and in fostering a wider crisis of panic, repression, and looming poverty. And this is by no means a complete list. The general point is that capitalism, based on prioritising profits over people’s lives, is incapable of serving our health and well-being. To care for each other now and in the future, can we use our anger to fight for change?

Feature image above: occupation of Deutsche Bank owned building to create a mutual aid hub in Chicago, US

Medics protest against lack of resources in Athens, Greece

1. Industrial agriculture incubates new viruses

COVID-19 didn’t appear out of the blue. It is just the latest pandemic linked to industrial agriculture, and in particular the mass-scale production and sale of meat.

In this case, the disease has been traced to the Wuhan seafood market and to China’s “wild animal” trade, also implicated in the 2003 SARS pandemic. However, as biologist Rob Wallace, author of Big Farms Big Flu, makes clear: “this is no Chinese exceptionalism […] The U.S. and Europe have served as ground zeros for new influenzas as well, recently H5N2 and H5Nx, and their multinationals and neocolonial proxies drove the emergence of Ebola in West Africa and Zika in Brazil.”

The common factor is profit-driven intensive meat farming. “Zoonotic”, or cross-species infections from animals to humans, count for the majority of new human pathogens. Wallace identifies at least two common origin patterns. One is a leap from intensively farmed animals such as cows, pigs, chickens – as in the recent avian and swine flu pandemics. As he puts it:

“You couldn’t design a better system to breed deadly diseases. […] Growing genetic monocultures of domestic animals removes whatever immune firebreaks may be available to slow down transmission. Larger population sizes and densities facilitate greater rates of transmission. Such crowded conditions depress immune response. High throughput, a part of any industrial production, provides a continually renewed supply of susceptibles, the fuel for the evolution of virulence.”

Covid-19, like SARS or Ebola, appears to belong to the other pattern – in which the virus leaps from non-domesticated species. But again, capitalism plays a key role. The Chinese economy’s rapid growth drive and marketisation in the 1990s included corporate consolidation of agriculture, alongside major deforestation and destruction of biodiverse habitats. As smaller farmers were squeezed out of traditional livestock farming, one state-promoted strategy was to move into intensive breeding and farming of captive “wild” species. This led to further incursions into remaining forest areas and to new zoonotic infections, which can then spread rapidly through high-volume markets like Wuhan.

NB: see also this more detailed account by Wallace and other authors in Monthly Review; and this in-depth essay by Chuang journal examining how these factors played out in Wuhan and China.

2. Big Pharma diverts medical research

We still know relatively little about COVID-19 and its impacts. Although obviously dangerous, research is inconclusive as to precisely how virulent it will turn out to be, or how it can best be combated. But some issues are clear enough. One is the absence of drug treatments: no vaccine, and a lack of proven antiviral treatments.

Respiratory infections are well known to cause harm. So why is medical research so far behind on this area?

Much medical research is led by profit-chasing corporations – along with the universities and foundations they sponsor. One issue with the capitalist research model is that, because drugs are high value property, research data is guarded as “commercially confidential” rather than being shared for all to develop.

Another big problem is that drugs targeting respiratory viruses just aren’t that profitable. Adrian Hill, the professor who led UK research on the Ebola virus, has condemned the pharma industry’s “market failure” to tackle that pandemic in Africa. He explained in an interview with the Independent in 2014:

“Today, commercial vaccine supply is monopolised by four or five mega- companies – GSK, Sanofi, Merck, Pfizer – some of the biggest companies in the world. The problem with that is, even if you’ve got a way of making a vaccine, unless there’s a big market, it’s not worth the while of a mega-company …. There was no business case to make an Ebola vaccine for the people who needed it most.”

In a recent interview, Mike Davis – author of The Monster at Our Door: the Global Threat of Avian Flu – calls the problem: “Big Pharma’s abdication of the research and development of new antibiotics and antivirals.” He says:

“Of the eighteen largest pharmaceutical companies, fifteen have totally abandoned the field. Heart medicines, addictive tranquilizers, and treatments for male impotence are profit leaders, not the defenses against hospital infections, emergent diseases, and traditional tropical killers. A universal vaccine for influenza — that is to say, a vaccine that targets the immutable parts of the virus’s surface proteins — has been a possibility for decades but never profitable enough to be a priority.”

So in the US, as reported by Bloomberg, venture capitalists have poured $42 billion into drug development in the last three years. Nearly half of that has flooded into potentially lucrative treatments for cancer and rare diseases. Only 5% went into drugs that prevent infections.

Medics protest against lack of resources in Quetta, Pakistan

3. Markets decimate public healthcare

It started with a virus, but it’s the failure of our healthcare systems that have made this a serious health crisis. As well as lack of drugs, we can add the shortage of key equipment from testing kits to ventilators, down to masks and other basic protective clothing. And the shortage of hospital places, of doctors and nurses to treat people with severe symptoms. Whatever the real scale of the pandemic turns out to be, one thing is certain: because of these shortages, people will die.

Again, none of this comes as a surprise. In the UK, there have been repeated warnings, including the 2016 “Exercise Cygnus”, that the NHS couldn’t cope with a new pandemic. In fact, the NHS is in continual “winter crisis”: overwhelmed ICU wards and images of patients dying in the corridors are not extraordinary but regular events. With hospitals already at full stretch, it only takes a slightly more aggressive virus to turn this “normal” crisis level into something even worse.

This is not just a UK issue. In Italy, for example, the healthcare union USI identifies recent cuts of “43,000 workers (which means the loss of 70,000 beds, including 3,000 in intensive care).” They write that continuous funding cuts have:

“led to a widespread collapse of the healthcare system. As a result, access to treatment has been reduced for an increasing number of people. Today it is the coronavirus, tomorrow it could be another virus or even any trivial disease: to maintain only Essential Levels of Care (ELC) is to sign a death sentence.”

In the UK, the number of hospital beds has halved in 30 years. There are less than 3 hospital beds per thousand people and only 7 Intensive Care places for every 100,000 people.ⁱ Hospital places are just the most obvious indicator – all the same points could be made about testing facilities and other resources.

These health shortages are entirely avoidable: the UK and Italy are richer than ever before. The basic problem is that capitalism does not prioritise collective healthcare: the services we do have are concessions that people have won and defended through decades of struggle against “market forces”. In recent years, these victories have been eroded by privatisation and “austerity”.

In England for example, successive governments have failed to give the NHS the money it needs to care for a growing and ageing population. The other issue is where the money goes – much of it returns to corporate pockets. Here are just three examples of NHS profiteering:

• PFI debt. Debt on “private finance” schemes costs “up to £1 in every £6” of the budget for some NHS trusts, according to the IPPR thinktank. These were schemes pushed by the last Labour government in which hospitals were refurbished by borrowing from the private sector at extortionate long-term interest rates.
• Drug companies. According to The King‘s Fund, “estimated total NHS spending on medicines in England has grown from £13 billion in 2010/11 to £17.4 billion in 2016/17.” This is over 10% of the total NHS budget.
• Private health businesses and outsourcers. Much NHS work, for example cleaning or transport services, is now outsourced to profit-chasing companies. The latest development has involved handing contracts for actual medical services to private sector companies. These were worth £3.6 billion in 2019, with the biggest winners being Care UK and Richard Branson’s Virgin Care.

4. Work makes us sick

A well-prepared health system might respond to the virus with wide scale testing, plus hospital care for those hit by severe symptoms. Instead we get a brutal last-ditch measure: mass lockdown. Medics hope this can slow the pandemic so that fragile health services aren’t overwhelmed. Many governments are happy to seize the opportunity and race through new police state powers.

But here too, the capitalist drive for profit takes precedence. Even as police and public outrage target “irresponsible” individuals taking some air, workers are still being crowded into factories, building sites, and tube trains.

The European corona epicentre so far has been Lombardy, Northern Italy. This is Italy’s “industrial heartland”: the home of steel mills, car plants, textiles factories, and in total over one fifth of all Italy’s GDP. Lombardy was placed under the first quarantine measures on 1 March, and went into deep lockdown on 7 March, with people confined to their homes other than for “essential” activities. These measures then went nationwide on 9 March.

But there were no rules against the most obvious transmission sites of all: workplaces. Car factories and fashion sweatshops kept on going through the lockdown. This only changed on 21 March when the government finally ordered closure of “non-essential” workplaces.

While shouty Italian mayors berated joggers, workers were taking action against being forced to turn up in corona conditions. Wildcat strikes began on 12 March, and spread across Italy the next day. Workers are up against the employers’ confederation Confindustria, which has lobbied hard to keep the factories open. Despite the 21 March decree stopping “non-essential” work, calls for a general strike continue – even from the country’s three biggest unions. They argue that the “essential” rules are full of loopholes: making machinery for the tobacco industry is included, for example.

In the UK, much the same drama played out with a two week delay. The government ordered people to “stay at home” on 23 March – with the big exception being if you have to go to work. On 24 March, as building workers walked out of a 1,700 person site in Middlesborough, the housing minister tweeted: “If you are working on site, you can continue to do so. […] Outside of work, remember to #StayHomeSaveLives.”

As anyone who’s ever worked in construction knows, and has been widely pointed out on social media, the idea of observing “social distancing rules” on building sites is a bad joke.

Like Italy’s manufacturing bosses, the British building industry has political influence. At the top are a handful of big contractors – many close to the Conservative Party, and with a shady record of ignoring safety issues and blacklisting organising workers. In the manufacturing sector, too, we get stories about companies like William Cook Rail or Wren Kitchens, major Conservative Party donors refusing to shut down.

So, which are more dangerous, parks or workplaces? We haven’t seen any research assessing that. What we do know is that, in capitalism, “essential” is a close cousin of “profitable”.

5. Click-hungry media feed panic

Corona is a healthcare crisis, but it has also become something more: a crisis of fear. The 24/7 feed of anxiety through our TV, computer and phone screens has created a social panic of unprecedented scale and speed. This has spiralling impacts on billions of people’s mental, social and material well-being, and is used by governments to justify brutal power grabs.

Here are a few basic observations about media coverage of coronavirus:

• The pandemic has swiftly achieved almost total media dominance, eclipsing every other issue. Even back in January, as a study in Time magazine showed, corona had received extraordinary coverage in English speaking media – for example, more than 20 times as many headlines as the Ebola outbreak in its first month.
• It is largely framed in terms of fear and death. Back in February, media scholar Karin Wahl-Jorgensen analysed the use of fear language in major newspaper reporting. Social media platforms ramp up this sensationalism. A post presenting cautious analysis is unlikely to go far – as opposed to a viral tweet thread like “HOLY MOTHER OF GOD […] the most virulent virus epidemic the world has ever seen.”
• Coverage is pinned to simplified and obsessively reported numbers: the daily tally of “confirmed cases” and deaths. Questions about the accuracy and comparability of these headline figures may be discussed in a side note – but not allowed to get in the way of the constant countdown.
• It fixates on authority. While medical and scientific expertise are clearly extremely valuable they are subject to the distortions of the media and are open to being exploited by political leaders, who are either heroes to rally round, or castigated for failing to play their roles. Here the corona panic has elements of the classic sociological model of a “moral panic”, in which the media’s call on authorities to save us from a threat to society presents a serious threat of authoritarian abuse.

While capitalism isn’t the only force shaping these patterns, profit is again a crucial factor. Psychologists point out how “our minds like to jump to threatening headlines with big, alarming numbers”. But if that’s true, it isn’t simply a settled fact of human evolution – it is actively used and reinforced by the dominant media business model.

Most major media platforms have a financial model based on advertising. Advertising revenue depends on audience, meaning attracting the maximum possible views and “hits”. While this has been the case since the birth of the popular press in the 19^th century, online technologies have accelerated the feedback loop between content and “clicks”.

The well-known market leader is Facebook’s algorithmic News Feed Editor, which automatically selects and targets news. More “traditional” media outlets, including state-backed broadcasters, now also have to compete with the social media giants and adopt their methods – or lose even more of their market share and relevance.

The upshot of this profit imperative is a constant and rapid bombardment of the most click-worthy images, figures, tragic anecdotes, and “hot takes”. We are left swimming in numbers, information, and anxiety, with no space for reflection and critical thinking. And if we’re unable to sort through the noise and form our own informed and considered views, all we can do is trust and obey the authorities.

6. Gross inequality threatens lockdown poverty

Now the corona crisis is mutating into an economic crisis, as lockdown measures shut “non-essential” production, travel and consumption. In itself, switching off much of the capitalist economy is no bad thing: we really don’t need all the disposable plastic crap it churns out; wildlife, forests, and oceans could do with a breather. The problem is not “the economy”, but that billions of people rely on wages to eat and live.

Capitalism has created the most unequal society in human history: billionaires with unimaginable wealth, billions on the breadline. The lockdown affects us very differently depending on where we are in this pyramid.

To the rich, “stay at home” is no great hardship. For online professionals, or better off workers with permanent contracts, recipe swaps and yoga classes can take the edge off the frustration. To low-income, precarious and informal economy workers, it means the threat of unemployment and impoverishment. And as the crisis spreads to countries without welfare and healthcare safety nets, many millions will be hit.

In India, as Arundhati Roy writes, Modi has “borrowed the playbook from France and Italy” to impose a rapid lockdown on 1.38 billion people. In this context:

“The lockdown worked like a chemical experiment that suddenly illuminated hidden things. As shops, restaurants, factories and the construction industry shut down, as the wealthy and the middle classes enclosed themselves in gated colonies, our towns and megacities began to extrude their working-class citizens — their migrant workers — like so much unwanted accrual. […] The lockdown to enforce physical distancing had resulted in the opposite — physical compression on an unthinkable scale. […] The main roads might be empty, but the poor are sealed into cramped quarters in slums and shanties.”

In the rich world the curfew is, so far, largely maintained by agreement and social pressure. In India, where quarantine may mean starvation, it requires widespread “beating and humiliation” by police. In Kenya, one case of police enforcing lockdown by the lethal shooting of a thirteen year old boy has already been widely reported.

But here in Europe, too, when it comes to the margins of society – migrants, prisoners, the homeless – “stay at home” takes on very different meanings. We have already seen evictions and mass arrests in Athens, round-ups of refugees in Calais, at least eight dead in prison riots in Italy, as barbed wire fences go up around migrant accommodation in Croatia, and the army imposes quarantine on Roma settlements in Slovakia.

“Solidarity is the virus that capitalism fears.” To knit (back) our networks. Organise you neighbourhood, common pot, mutual aid.

Conclusion

This crisis is developing on multiple levels. The pandemic itself is just one. Then there are wider psychological and social impacts of continuing fear and isolation. There are political impacts as governments take advantage to rush through new powers. And there are the looming material impacts as millions are threatened with poverty and violent repression.

On all these levels, capitalism is a big part of the problem. The virus kills, and responses to it by states and corporations could kill many more. Many of these deaths are avoidable. We live in an age of enormous wealth, where vast amounts of human labour and natural resources are directed to produce trillions of dollars worth of anything from smart phones to fighter jets. These resources could be used to safeguard the health and wellbeing of all.

To quote Arundhati Roy again:

“Historically, pandemics have forced humans to break with the past and imagine their world anew. This one is no different. It is a portal, a gateway between one world and the next. We can choose to walk through it, dragging the carcasses of our prejudice and hatred, our avarice, our data banks and dead ideas, our dead rivers and smoky skies behind us. Or we can walk through lightly, with little luggage, ready to imagine another world. And ready to fight for it.”

The post #CoronaCapitalism: six ways capitalism spreads the crisis appeared first on Corporate Watch.

• eCourier has paid out £5.5 million to its owner Royal Mail in the last two years.
• Royal Mail has not invested any money into the business since it bought eCourier in 2016.
• eCourier’s boss was paid £134,000 last year.
• Major Royal Mail shareholders include the Greater Manchester Pension Fund, which expects “secure, direct employment” for company staff.

Basic rights, big payouts

At the end of last month, couriers organising through the IWGB union voted for strike action after “gig economy” company eCourier “refused to grant them basic employment rights and a living wage”.

The company currently classes the majority of its workforce as independent contractors and the couriers are demanding the London Living Wage and ‘worker’ contracts, which give more rights and benefits. In response, eCourier says it is already offering worker contracts to couriers who qualify for that status (for more details you can read the IWGB’s press release here and the statement eCourier gave Corporate Watch at the bottom of this article).

eCourier offers same day delivery services, mainly in London and the south-east. Clients include HCA Healthcare, Goldman Sachs and NHS hospitals. IWGB couriers have previously won better pay and conditions in delivery companies including Citysprint and The Doctors Laboratory, which Corporate Watch also investigated.

eCourier publicity, ecourier.co.uk

eCourier was a family-owned business until 2016, when it was snapped up by Royal Mail for £17 million. Three years after its 2013 privatisation, Royal Mail was keen to gain a bigger chunk of the growing courier delivery market.

But accounts filed at Companies House show that, since it bought eCourier, Royal Mail has been taking money out of the business rather than investing to help it grow.

In the two years since the takeover, eCourier has paid out £5.5 million to Royal Mail in dividends. In the previous three years, eCourier paid out just £130,000.* The increase comes even though eCourier’s revenue and profits have hardly changed.

While it has extracted huge amounts that could otherwise have been paid to couriers, Royal Mail has not put any money into eCourier. The £17 million it paid for the company in 2016 appears to have gone to previous owner Ian Oliver. Accounts published since the takeover show eCourier has received no investment from Royal Mail.

At least some people at eCourier are making a decent living. The (unnamed) highest paid director made £134,000 in 2018, and similar amounts the two previous years.

‘Marred by misfortune’

Further up the corporate chain, bigger money is being made. Royal Mail is a huge company: it brings in revenue of over £10 billion a year, with operating profit from that close to £500 million. Giving the couriers the employment and pay they are demanding would barely make a dent.

Certainly, those at the top of Royal Mail do ok. CEO Rico Back was given a £5.8 million ‘golden hello’ before taking the top job last year, then £647,000 for his first year of work. Not bad, given “his short tenure has been marred by misfortune”, according to the Financial Times, with a falling share price and the threat of a major strike by postal workers.

Royal Mail CEO Rico Back, royalmail.com

The people that ultimately own Royal Mail – and therefore eCourier – have also enjoyed good times. Royal Mail paid its shareholders £242 million in dividends last year, and similar amounts in previous years. Back has announced payouts will be reduced in future, as Royal Mail invests to keep up with the competition, but they are still scheduled to remain above £100 million.

Who are the shareholders receiving these payouts? The biggest is Schroders Plc, a giant investment firm that owns a chunk of most major companies in the UK. Records show it owns 12% of Royal Mail shares. Next are fellow investment giants Standard Life Aberdeen and Blackrock, then Norges Bank Investment Management, which invests the proceeds of Norway’s oil and gas sales (6%, 5% and 3% of shares in Royal Mail respectively).

Another major shareholder of note is the Greater Manchester Pension Fund, which invests the pensions of local government workers in the area. The fund’s stake in Royal Mail is worth £67 million. In its latest annual report, it says businesses it invests in should: “offer secure, direct employment where possible, and should not interfere with the right of their workforce to seek representation through a trade union.”

We put all the points about eCourier’s finances above to Royal Mail who did not dispute their accuracy. An eCourier spokesperson told us:

“We are committed to operate best practice in terms of modern working practices and the need to ensure the most effective and appropriate delivery models. Many of our couriers prefer to work as independent contractors because of the additional flexibility it brings. We have offered worker status to self-employed colleagues where it reflects their actual working arrangements with us, and where they decide to make the change.”

* Note: Former owner Ian Oliver may also have profited from payments made by eCourier to other companies he owned.

The post eCourier paying millions out to owner Royal Mail while denying workers ‘basic employment rights’ appeared first on Corporate Watch.

Waterstones staff are demanding to be paid the living wage. Management say the company can’t afford it but an investigation by Corporate Watch has found:

• Waterstones’ new owner – US hedge fund Elliot Advisors – has set up an offshore financing scheme that could see it make £17 million a year from the bookseller.

• The highest paid director’s £1.6 million pay packet is over 100 times more than staff on the minimum wage receive.

• Elliott Advisors is a notorious ‘vulture fund’, chasing the debts of crisis-hit countries like Argentina. It is run by Paul Singer, a US billionaire and major conservative donor who has funded Donald Trump, George W Bush and the Koch brothers.

In short, Waterstones sums up capitalism in Britain today: billionaire owners and millionaire executives living off a workforce on poverty wages.

We put all the points below to Waterstones. It did not dispute the figures but a spokesperson said: “we pay our booksellers as much as it is prudent to do, with a particular commitment to a progressive pay scale” (you can read the full statement below).

How much would it cost?

In response to a petition from staff, backed by prominent authors, Waterstones Managing Director James Daunt said the company was “simply not profitable enough to wave the magic wand and shower gold all around”. He explained:

“If you raise the bottom level really significantly, then everybody all the way up the company has to go up, and then we go bust, which isn’t very helpful”.

To assess this claim, let’s start by estimating roughly how much paying the living wage would cost Waterstones.

The latest Waterstones accounts show the company paid its 3,000 employees a total of £56 million in 2018. Let’s accept Daunt’s point that pay scales should rise proportionally all the way up the company and say they’d go up by 10% across the board (the difference between minimum wage of £8.21 an hour and the living wage of £9).

That means the company would pay staff around £6 million a year more. Let’s be generous to the company and bump that up to £7 million, given its London staff would get the London Living Wage of £10.55.

Waterstones made £16 million profit after tax in 2018, down from £18 million in 2017. Take that £7 million off, and those profit figures remain healthy at £9 million and £11 million respectively.

It’s true the company faced bankruptcy a few years ago and Amazon isn’t going away anytime soon. So Waterstones’ management want to keep a healthy profit margin while times are good. But look closer at those profits and they would be even higher were it not for annual payouts being made to the group’s owners.

Showering the gold

Last year, Waterstones was bought by US-based hedge fund Elliott Advisors from the previous owner, Russian billionaire Alexander Mamut (who has retained a minority stake in the company).

No accounts have since been published but company records show the kind of sums that Elliott plans to extract from the company.

A note at the end of the latest available Waterstones accounts filed with Companies House says the hedge fund is investing in Waterstones by lending it £60 million. It is presumably also putting money into the company’s shares (or ‘equity’ in the jargon) but details of this are yet to be published.

Elliott is lending that money to Waterstones at an interest rate of around 7%. A simple calculation estimates Waterstones will have to pay out around £4 million a year in interest as a result.

Look at previous years and Mamut had also put money into Waterstones through loans at roughly the same interest rate. In 2018, Waterstones paid £4 million out as interest on loans to companies also controlled by Mamut, with £5 million in 2017 and £6 million in each of the two years before that.

Without such big payouts to its owners, Waterstones’ profits would have looked even healthier: £20 million last year and £23 million in 2017. This would have given the company a lot more financial wiggle room to increase staff pay.

Alright at the top

Where else could savings be made to enable to afford the living wage staff demand?

Waterstones’ accounts show two directors between them made £2 million in 2018. The highest paid director – presumably Daunt – alone made £1.6 million from the company last year, up £170,000 from the previous year. This is over 100 times more than a full-time Waterstones worker on the minimum wage will bring home. One director – again, presumably Daunt – was also paid a bonus of £1.2 million (read more on this from author Chris McCrudden here).

Given Daunt has said those demanding living wage are “preach[ing] to the converted”, would he or his colleague at the top be able to survive on a meagre £600,000 a year from now on?

If so, let’s do a quick back of the envelope calculation: throw in a million a year from the boss’ salary, accept slightly lower profits, stop paying out £4 million a year to owners and £7 million a year doesn’t seem so unaffordable.

James Daunt, waterstones.com

A quick caveat before we move on: at least some of the interest paid to the Mamut companies appears to have been used to pay off loans those companies were themselves taking from banks or other third parties. So not all of that will have been profits enjoyed by Mamut.

It’s hard to know the full details of where the money went under Mamut because he ultimately owned Waterstones through a company registered in the British Virgin Islands, as the last page of accounts downloadable here explain. The BVI is a so-called ‘secrecy jurisdiction’ as well as a tax haven, which does not require accounts to be disclosed. If you work for Waterstones and want us to look into this in more detail, get in touch.

But Waterstones’ new owners are aiming to pocket all of the £4million set to be paid out to them – and, as we will see below, much more.

The magic wand of finance

Why is Elliott investing its money as loans? Why saddle your own company with annual interest payments?

Until the next set of accounts come out we won’t know for sure what’s going on. But the latest we have say Elliott Advisors have set up two shell companies to manage their investment in Waterstones – the catchily-titled Book Retail Bidco Ltd and Book Retail Investco Ltd, which is based in Jersey.

We’ve found Book Retail Bidco is also racking up debt – but this time through the International Stock Exchange in the Channel Islands.

A listing there shows Book Retail Bidco Ltd has issued £129 million in bonds with a whopping 13% interest rate. This looks a lot like the quoted Eurobond dodge we’ve covered before: these bonds will be bought by other companies owned by Elliott. The money Book Retail Bidco received from this will be invested in Waterstones. We’ve already seen it has lent it £60 million so the other £70 million may have been invested in shares.

Book Retail Bidco will either pay out interest on the bonds to the other Elliott companies in cash every year or, more likely, ‘accrue’ it, to be paid out at a later date.

Either way, every year this interest gets taken off the UK profits of both Book Retail Bidco Ltd itself and the corporate grouping it is part of, which includes Waterstones. As a result the total tax bill of the Waterstones business is slashed, while its owners, thanks to a legal loophole called the quoted eurobond exemption, enjoy tax free payouts.

And what payouts: 13% of £129 million amounts to around £17 million a year. The Financial Times reckoned Elliott plans to bulk Waterstones up for a few years (for example through the recent acquisition of Foyles) and then sell it to the highest bidder. If so, expect the interest to accrue each year, to be paid out as part of the price Elliott – if successful – sells the company for.

A price which, let us not forget, will be thanks to the hard work of the staff currently being paid less than the living wage.

All the way up

Who’s ultimately benefiting from all this? Step forward Elliott founder and billionaire “vulture capitalist” Paul Singer, described by the Independent as “a pioneer in the business of buying up sovereign bonds on the cheap, and then going after countries for unpaid debts.” Targets have included Argentina, Peru and Congo-Brazzaville, who a company of Singer’s successfully took to court for $39 million.

Paul Singer, elliottmgmt.com

A long-term Republican, Singer has donated millions to, among others, George W Bush, Rudy Giuliani, and the Koch Brothers – whose foundations and think tanks push right-wing causes such as low taxation for the wealthy.

Another of Singer’s causes is, you guessed it, Donald Trump. Initially an anti-Trump guy, Singer quickly changed his tune after the presidential election, giving $1 million to Trump’s inaugural committee.

We put all the points regarding finances and future payouts to Waterstones and Elliott Advisors for comment. A spokesperson from Waterstones said:

“We have answered the petition directly, noting that we pay our booksellers as much as it is prudent to do, with a particular commitment to a progressive pay scale. The retail high street is under extreme pressure, with many highly respected companies closing, and many more in dire straits. Having come close to bankruptcy ourselves, we understand acutely the need for proper prudence. We are fortunate now to be able to invest sensibly in new shops, in refurbishments, in logistics and, above all, in our booksellers. In doing this, we are building a solid business for the future, perhaps not with as fast progress on pay as you wish but – in today’s world – the tortoise is likely to beat the hare.”

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Cleaners, security guards, catering staff and other workers at the University of London are campaigning to be directly employed by the university, rather than through outsourcing companies. University management says it cannot afford the extra costs that would involve. But a Corporate Watch investigation has found:

• the university has substantial cash reserves, with £45 million in the bank.
• financial problems used by management to argue against in-housing have been a direct result of their own expansion strategy.
• many of the staff at the consultancy chosen to review the costs of in-housing used to work for outsourcing companies.
• the university has refused our Freedom of Information request for a copy of that review. Similar reviews by other universities found in-housing would not be significantly more expensive.

We put our findings to the university. They did not dispute the figures but said the issues involved were “very complex” (full statement below).

University of London 2019 graduation, www.london.ac.uk

‘The dignity we deserve’

Around 250 staff working at the University of London are currently employed by four outsourcing companies rather than directly by the university itself.

The majority of outsourced staff are represented by the Independent Workers of Great Britain (IWGB) union. They say the jobs must be brought in house for two main reasons: workers are employed under worse conditions than in-house staff, with “worse pensions, holiday pay and sick pay entitlements”; and face “bullying, discrimination and illegal deduction of wages”.

The centrepiece of the campaign has been the boycott of the landmark Senate House library building. According to cleaner Margarita Cunalata: “We will continue fighting until we are made direct employees and treated with the dignity we deserve.”

Senate House, www.london.ac.uk

In response, the university management have agreed to bring around 35 audio-visual, front of house, post room staff and porters in house (just over 10% of the total outsourced workforce). They have also pledged to stop anyone being employed on zero hours contracts, another initial campaign demand. But there has been no commitment to directly employ the rest of the workers, merely a promise to review all outsourcing contracts by spring 2021.

The companies profiting from university outsourcing

Four different outsourcing companies are involved:

– Catering staff are employed by Aramark, a huge multinational food service company based in the US.

– Cleaners, security, audio-visual, porters, reception and post room staff by Cordant Group, a UK outsourcing firm.

– Gardeners by Nurture Landscapes, a “horticulture, landscape and grounds maintenance business”.

– Maintenance staff by Bouygues, a multinational construction, development and telecoms company based in Paris.

The university argues that outsourced staff benefit from “job flexibility” and from higher take home pay as they have to make comparatively lower pension contributions.

They also say employing staff directly will be too expensive. In a statement to university staff, vice-chancellor Peter Kopelman said analysis commissioned by the university showed bringing staff in house would cost substantially more “at a time when we are currently projecting an operating budget deficit for this academic year”.

This is what we’re looking at here. The key question is not whether outsourcing costs the university less – it may well do. It is whether the university can afford to do the right thing and give the workers the same terms and conditions as other university staff.

Two questions

A disclaimer before we continue: it is impossible to definitively answer the question above with the information currently available. The university refuses to disclose the detail of its calculations around the cost of in-housing. And its annual financial statements in the main only give top-level numbers. But they do give a good picture of the overall financial health of the institution.

So, two questions: how is the university doing financially? And how do the university’s claims over the cost of bringing staff in house stack up?

For the first, let’s start by breaking down the costs of in-housing into two parts:

• one-off set-up costs involved in setting up new management and administrative structures for the newly in-housed staff, such as – supervision, payroll, recruitment, procurement and facilities.
• any extra regular costs of running the services in-house. For example, due to the workers getting a better deal, or due to the need for more supervisors, managers, HR staff, plus direct procurement of materials and so on.

These of course have to be set against the profit margins the companies are making on the contracts. More on that below.

There is plenty of cash in the bank

A look at the university’s latest financial statements suggests it could certainly afford the set-up costs. The accounts for the year ending 31 July 2018 showed the university had £45 million cash in the bank.

It’s true this is less than previous years and that the university’s debts are now bigger than the cash it has to hand.ⁱ But this is because management has been splurging cash on an ambitious expansion strategy.

In the last two years for example, £20 million was spent on “capital expenditure”, including refurbishments of Senate House and Charles Clore House, a new distance learning programme, IT systems and “improving and upgrading teaching and research infrastructure”.

Charles Clore House, www.london.ac.uk

University management say this investment will help to make more cash for the university, which will make it more financially sustainable. But clearly the money is there to cover the set up costs of employing staff in house. And if the management’s strategy does make the university more financially sustainable, they can more easily satisfy the cleaners, caterers and security guards’ demands for better treatment.

The accounts also show that, as well as cash in the bank, the university has £11 million in its “Unified Trust Fund”, plus over £90 million thanks to endowments. It also owns prime London property worth around half a billion pounds. Add up everything the university owns, then take off what the university owes to its “creditors” – most notably a £50 million loan from RBS – and the university’s net worth is £646 million.

The university’s deficits have been caused by management’s decisions

What about the budget deficit described by vice-chancellor Peter Kopelman above? The university may own central London property and have multi-million pound endowments, but it is unlikely to sell its main buildings and the endowments are almost all restricted to academic work. Meanwhile, it is losing money on its day to day operations – and so reluctant to add to its costs by bringing staff in house.

But the university has only started to make deficits after it embarked on the management’s much-vaunted five year expansion plan, starting in 2014:

Annual reports since 2015 explicitly state that weaker financial performance was due to the increased costs involved in the 2014-19 University Strategy. The 2016 report states, for example:

“The decision to make a deficit at the ‘operating level’ in 2015-16 is a direct consequence of the University Strategy”

One of the main goals of the five year plan was financial. It aimed for an operating surplus of as much as £9 million by 2019 but as we saw above, Peter Kopelman predicts another deficit for the coming year.

It’s notable that before this new direction, the university had been posting healthy surpluses – between £1 million and £8 million in the four years between 2014 and 2011, the last set of financial statements available on the university’s website. That averages out at just under £5 million a year.

So if the strategy does turn out to be successful, then the university will have the financial leeway to employ staff directly (as the surplus will be big enough to absorb the extra costs).

If it’s not successful then, from a financial point of view, the management’s much-vaunted investment plan has been a dud and has left the university in far worse financial health. In which case the university could have afforded to bring staff in house had it been managed better.

Peter Kopelman, www.london.ac.uk

Will bringing staff in house cost an extra £3 million a year?

In his public statement, vice chancellor Peter Kopelman said analysis commissioned by the university “had estimated the additional annual cost of bringing in house all currently contracted out services on a like for like basis to be around £3 million”.

This is in sharp contrast to the findings of similar reviews at other universities. A 2016 review by the Association for Public Service Excellence, commissioned by the School of Oriental and African Studies – itself a University of London member institution and located a stone’s throw away – found bringing cleaners in-house there should be “cost neutral” after initial set-up costs (the university agreed to bring its cleaners in-house last year).

Queen Mary – also a University of London member – brought cleaners in house ten years ago. A review soon after found that while “the real and estimated costs for the service had risen slightly above those involved in the past, these increases were marginal and the Chief Administrative Officer declared himself to be ‘perfectly happy’ with the cost rises so far.”

The review also found the cleaners themselves were “overwhelmingly positive about their new jobs”, due to “the increased pay and benefits, as well as working for the College with better management and opportunities for career development”.

In general, while in-housing sees staff get better conditions and increases university management and administration costs, it cuts out the profit margins being made by the outsourcing companies (there are also extra costs involved in contracting these companies and overseeing their work).

We do not know how much is being made on individual outsourcing contracts with the university as companies do not disclose that level of detail. But the accounts of the relevant subsidiaries registered at Companies House show they are making healthy profits from their services overall. The following table shows the revenues, ‘gross profit’ (which shows the profit they made directly from their various contracts), and the profit ‘margin’ for each company:*

* Security, AV, porters, postroom and reception staff employed by Cordant Security Ltd, cleaners employed by Cordant Cleaning, both part of the Cordant Group. Note also the results quoted above are just those from the subsidiaries employing the University of London workers. Aramark, Cordant and Bouygues are all huge corporations with far greater overall revenue and profits when all their operations around the world are included.

Admittedly there are a greater number of staff, and a greater number of job types, to be brought in house at the University of London. There were just around 100 cleaners at Queen Mary for example.

But could those differences explain the supposed cost of £3 million extra per year? The problem is, it is impossible to know how that sum has been calculated, because the university refuses to share the review. The university rejected our freedom of information request for a copy, saying disclosure would be “prejudicial to the conduct of public affairs”.

Who’s behind the figures?

The review was produced by an organisation called the Russell Partnership, which describes itself as the “UK’s leading Strategic Food and Technology Consultancy with over 600 global clients”. These include a range of universities and companies, plus events such as the Olympics and the Rugby World Cup.

Many of the Partnership’s staff come from the outsourcing industry. Founder and Chairman David Russell was “Group Managing Director of Europe’s largest private catering company”. Of the ten “consultants” listed on their website, two used to work for outsourced catering giant Sodexo, one for the rival Compass Group, one for Italian multinational catering company Autogrill Spa, with another for an unnamed “Outdoor Event Catering company”.

One former employee, Jan Matthews, worked for Aramark, the same US multinational that holds the catering contract at the University of London.

Of course, we do not how relevant these links are. Were the consultants with catering industry experience involved in the University of London review? If so, did that experience encourage them to look more favourably at the relative benefits of outsourcing?

The only way to know is for the University to publish the report.

We asked the University of London why it chose a consultancy with links to the outsourced catering industry to perform its review of outsourced services (including catering). It did not answer.

Chief Operating Officer Chris Cobb, www.london.ac.uk

Management are paid well enough to bring staff in house

As well as cost, outsourcing saves the management time and hassle. IWGB President Henry Chango Lopez, who used to be a porter at the University of London, said when the campaign launched: “Every time we go to the university to complain about poor pay or conditions, they hide behind the outsourcing companies and say it isn’t their responsibility.”

But the accounts show management are paid well enough to stomach any extra work involved. According to the latest financial statements, 11 members of staff enjoyed basic pay of over £100,000 in 2018. The seven lucky members of the “Vice Chancellor’s Executive Group” between them made £1.1 million.

Then-vice-chancellor Adrian Smith’s salary was £168,000 and he wasn’t even the best paid manager. The – unnamed – highest paid member of staff made between £220,000 and £225,000. This is presumably Chief Operating Officer – and prime outsourcing advocate – Chris Cobb.

That puts him on over 11 times as much as the university’s cleaners.

In response to the points above, a university spokesperson said:

“Since the 2014-19 strategy was written there have been a number of changes in the environment in which the University operates. There are a rising level of adverse factors that are likely to impact the University and its federal members. The University of London is not alone in facing these pressures – most higher education institutions are operating in a challenging financial environment.

“The University Strategy 2014-19 is one of investment vital for the long-term sustainability and success in the challenging years ahead.

“Your questions suggest an overly simplistic approach to a very complex set of issues. We have already started the process of bringing staff in house and are on track to bring front of house, portering and post room services back in-house by the end of May 2019.

“We will apply the same process in turn to the other externally contracted services and expect this to be completed by 2020.ⁱⁱⁱ

“The plans are responsible and appropriately phased to assure no disadvantage to staff, no deterioration in service standards and additional costs to be spread over more than one financial year.”

(We checked and the “process” to be completed by 2020 is the review of outsourcing services already announced.)

CORRECTION 6/9/19: The article originally stated the university spent £20 million to buy land in Stratford for new halls of residence. This has been removed. Vice chancellor Peter Kopelman has since said the University Partnerships Programme – the for-profit company the university is developing the halls with – provided the cash to buy the land.

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Meanwhile, an investigation by Corporate Watch has found those at the top of the company are making huge sums. Company accounts and other records show:

• The Doctors Laboratory (TDL) paid £60 million out to its owners in the last five years.

• TDL’s highest paid director made £1.6 million last year, with his pay doubling since 2013. The top three directors together made £3 million.

• Sonic Healthcare – the Australian multinational TDL is part of – last year paid out £180 million to its shareholders, who are largely banks, investment funds and the super-rich.

We put our findings to TDL. A spokesperson did not dispute any of the figures but said they believed they had addressed couriers’ concerns “fairly and reasonably” (full statement below).

The dispute so far

Motorcycle, van and bicycle couriers carrying blood and other vital supplies from TDL laboratories to hospitals across England have been organising through the IWGB union for the last two years. Over 100 couriers work for TDL, and the IWGB say they represent the “vast majority”. In the last two years the union legally challenged TDL’s classification of its couriers as self-employed contractors, and secured collective bargaining rights – a first for the ‘gig economy’.

But pay has not increased and the union is now demanding the company “reverse pay cuts implemented in 2015 and 2017, cover the couriers’ costs and implement pay increases to make up for the number of years in which these workers have had their rights denied”. The work is often dangerous, with urgent samples often having to be carried through heavy traffic. Many couriers say they have been injured at work.

TDL made a pay offer to the couriers in August that it said increased pay rates to £20 per hour after expenses and mileage were included. The union rejected the deal, saying the majority of couriers would not receive close to that rate.

Couriers protest at The Doctors Laboratory HQ

In the last month, couriers have started campaigning for a better deal. Demonstrations outside TDL’s London headquarters will be followed by lobbying clients, including NHS trusts and private hospitals. The union has said they are considering strike action.

Big profits, big payouts

Can TDL afford to increase its pay rates? Corporate Watch asked TDL how much they currently spend on the couriers’ department but they did not reply. The company told the union the deal rejected in August would have added an extra £400,000 to running costs.

So even if the company doubled its offer, the total cost increase would be less than £1 million.

The company’s accounts suggest the company could easily absorb such increased costs. TDL was bought by Australian multinational Sonic Healthcare in 2002. At the time, Sonic CEO Colin Goldschmidt looked forward to a UK pathology market that would “consolidate and corporatize in the next 10 years” as more services were outsourced. He told investors “there will be a lot of cream that follows as [the] NHS privatises”.

Colin Goldschmidt, Sonic Healthcare CEO

He’s been proven right. TDL has signed contracts with multiple NHS trusts, as well as private hospitals such as Harley Street. Business has more than doubled over the last ten years. The company’s latest accounts put revenue from providing and delivering blood tests and other pathology services at £84 million in 2017, up from £33 million in 2008.

Costs have increased too of course. But not by as much, leaving TDL with consistently healthy profits, amounting to £91.2 million over the last ten years. Annual profit after tax has increased from £6 million in 2008 to £14 million last year, according to accounts filed at Companies House. The company could therefore afford to pay significantly more than the couriers are demanding while still remaining profitable. But keeping costs down allows it to pay more money out to its owner, Sonic Healthcare.

In the last ten years, TDL has paid over £70 million in dividends (cash payouts) to Sonic – more than three quarters of the profits it has made. The bulk of that has come in the last four years. TDL has paid dividends of £60 million between 2014 and 2017, with £20 million paid out just last year.

No wonder Goldschmidt could tell investors there had been “huge growth” in Sonic’s UK business a couple of years ago.

Following the money

If TDL paid less out in dividends to Sonic, it could pay more to couriers. So what is Sonic, and who ultimately benefits from the money it makes from TDL?

Sonic Healthcare is one of the biggest 50 companies on the Australian stock market thanks to operations in the USA, Germany, Switzerland, the United Kingdom, Belgium, Ireland and New Zealand, as well as its home country.

The dividends TDL pays out go to Sonic (via a UK holding company called Sonic Healthcare Holding Ltd), which then uses them to pay dividends to its shareholders. Helped by the £20 million it received from TDL, Sonic paid out 312 million Australian dollars in 2017, the equivalent of around £180 million.

Sonic’s recently-released 2018 accounts show things are getting even better, with Chairman Mark Compton telling the Annual General Meeting it had been a “fantastic year for Sonic Healthcare and our shareholders”. The company has declared record profits of AUS$476 million (around £270 million) and dividends of AUS$329 million (around £185 million).

So who do the profits made by TDL ultimately end up with? As with many multinational corporations, Sonic’s biggest shareholders are the huge banks and investment funds whose money management keeps global capitalism going. The largest is a subsidiary of HSBC bank with 39% of Sonic shares, HSBC Custody Nominees (Australia) Ltd. As a ‘nominee’ company, this pools and channels the investments of a variety of bodies.

Regulations do not require these investors’ identities to be disclosed but they are usually pension funds, insurance companies or funds benefiting ‘high net worth’ individuals. They will receive the bulk of the dividends they receive, plus profits from selling Sonic shares for more than they originally paid, and HSBC will take a cut.

Similar operations run by JP Morgan and Citigroup – also among the biggest banks in the world – are listed as Sonic’s second and third biggest shareholders, with 14% and 5% of shares respectively.

Jardvan Pty Ltd, Sonic’s fourth biggest shareholder, is easier to link to a specific individual. This is the family company of Michael Boyd, who bought into Sonic in the early 1990s when it was still a struggling business. Its turnaround has helped him amass a fortune of over AUS$500 million (that’s just shy of £300 million).

Michael Boyd

Boyd ranks as the 169^th richest person in Australia, according to the Australian Financial Review, and is a previous resident of a six bedroom, seven bathroom mansion in Perth’s ‘millionaire’s row’.

Good pay at the top of TDL

How much do the people who run TDL make? According to accounts filed at Companies House, the highest paid director of TDL and some smaller subsidiary companies made £1.6 million in 2017, including salary, bonuses and pension contributions. The accounts do not disclose who this refers to, but it is almost certainly TDL chief executive David Byrne (not the singer). We put this to TDL and they did not dispute it.*

In the last five years he has made £6.4 million, with his pay packet doubling in that time.

David Byrne, The Doctors Laboratory CEO

The next best paid director, most likely TDL Chairman Raymond Prudo-Chlebosz,** made £1 million in 2017 and £1.1 million the year before.

Add on the £438,000 made by the next best paid director – presumably TDL Finance Director Thomas Amies – and the top three TDL bosses together made over £3 million from their work for the company in 2017.

Meanwhile those at the top of Sonic are doing even better. CEO Colin Goldschmidt was paid £3 million in cash in 2017, plus more Sonic shares to add to the million plus he already owns.

Money coming the other way?

How much money has Sonic invested in TDL? Perhaps the payouts described above would be easier for the company’s couriers to stomach if Sonic had been risking serious amounts of money in the company.

The accounts show that in the last ten years Sonic has invested £78 million into TDL, all in 2016.*** However, together with a £187 million bank loan, that appears to have been mainly used to start or acquire new businesses.

Over the last three years TDL has invested £21 million in the Health Services Laboratories partnership with two NHS trusts (University College London and The Royal Free), and acquired the Medisoutien group of Swiss pathology companies for £222 million.

These purchases will increase the sale price of TDL if Sonic decides to sell the business in the future. In the meantime, they will add to Sonic’s share price, adding to shareholders’ gains from the company.

Valuing workers

Earlier this year Sonic’s CEO Colin Goldschmidt, writing in the company’s Corporate Social Responsibility report, said he was “proud that we are viewed as an ethical company that values and cares for its workers”. Surely time, then, to pay the couriers what they are asking for?

We put the figures above to TDL. They did not dispute them but a spokesperson said:

“TDL has been in active negotiations with IWGB regarding pay rates for a number of months. We engaged in these negotiations in good faith and we believe that all specific concerns were addressed fairly and reasonably in our final offer.”

We also asked TDL how much the courier department costs to run but they did not answer.

* Sonic Healthcare Holding Company Ltd only has four directors. Two of those – Colin Goldschmidt and Christopher Wilks – are on the board of Sonic Healthcare so are most likely paid by the Australian company. The only director other than Byrne is TDL Finance Director Thomas Amies. And it’s very unlikely he makes more than his boss.

** The Sonic Healthcare Holding Company Ltd accounts detail the pay of two directors, one of who is described as not being a director of that company but of subsidiaries. As Prudo-Chlebosz is not a director of Sonic Healthcare Holding Company but is TDL Chairman, and a director of a number of subsidiaries, the figures most likely refer to him, as well as David Byrne. Again, we put this to TDL and they did not dispute it.

*** TDL also took loans from other Sonic subsidiaries in previous years but these have now all been repaid.

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