Tech project cuts wake-up call for Irish economy

Mass global job cuts at Meta, Twitter, Stripe and other tech giants are bitter news for staff in Dublin, ahead of Christmas. But analysts said it was a “wake-up call” to the side effects of Ireland’s reliance on big tech.

Ireland’s decades-long gamble on global IT has paid off in investment, jobs and billions of euros in taxes paid by multinational companies that have their glittering European headquarters in the Irish capital’s Docklands and employ 12 percent of the capital’s workforce, according to stockbroker Davy. Group.

Big tech’s performance has helped boost Ireland’s growth, and its corporate tax revenue is impressive – despite Ireland’s low base rate for businesses 12.5 percent – has given the government a deep fiscal cushion to deal with the current cost of living pressures.

With Meta laying off 13 percent of its global workforce, Elon Musk cutting Twitter’s headcount by half and Stripe, the payments company founded by two Irish brothers, laying off 14 percent of its workers, the tech bubble of the past decade could burst as fast-growing companies now face rising costs credit.

A short-term hit would mean hundreds of jobs lost Ireland. But some here believe that less reliance on the industry is not a bad thing for the country that is sometimes called the “Silicon Valley” of Europe.

“Ireland really bet the garden on the future of technology. . . almost at the expense of everything else,” said Mark O’Connell, executive chair and founder of OCO Global, an advisory firm focused on trade and investment. job . . but for the other sectors that have been affected by this, I think it can be a good balance.

The slow pace of technology can also ease the upside pressure on fatfueled by the growth of large jobs in the sector, said the economist.

Ireland has added 24,000 new jobs in the information and communications sector since the first quarter of 2021, when the country recorded a record level of employment. The purchasing power of highly paid tech staff has squeezed rents in a market where housing supply is already under severe pressure.

“The reality is that this is a necessary correction to an overheated economy,” said Danny McCoy, chief executive of employers’ confederation IBEC.

He called Ireland’s housing crisis and overstretched public services “a real function of the imbalance in the economy”. If some things are “starting to cool now, it is actually a positive sign that we can return to normality”, he added.

Unlike when computer maker Dell moved its factories from Ireland to Poland in 2009, axing 1,900 jobscutting this time will not crater the economy.

But Jean Cushen, associate professor of human resources management at Maynooth University, said the layoffs were “a wake-up call”.

“If these companies cut back on investment and if we’re in a tech winter, there shouldn’t be any sources of growth and growth sectors,” Cushen said.

Column chart Number of ICT workers employed by multinational companies ('000s) shows Ireland's growing Big Tech workforce.

The impending cuts, expected to total no more than 1,000 jobs in Ireland, have also upset the government, which has warned for months that it will not be able to rely on tax payments from the tech giants because of it. see them may one day disappear.

Big tech and pharmaceutical multinationals make up more than half of corporate tax revenue, which was nearly €14 billion in the nine months to September, nearly €6 billion ahead of the same period last year. Ireland has agreed to join a new global minimum 15 percent corporate tax rate, although it is not clear when this will take effect.

Conall Mac Coille, chief economist at brokerage Davy, said Ireland was battling a housing supply crunch even before the technology downturn.

A bar chart of 2021 tax revenue (bn) shows A large proportion of Ireland's tax revenue comes from technology

“I don’t think the tech sector slowing down will cure Ireland of this capacity problem,” he said. “On balance, the news is more negative than positive . . . but it hasn’t been a disaster so far.

Technology workers, who account for 6.5 percent of all jobs in Ireland, account for 10 percent of income tax revenue, according to the finance ministry. But no firm has announced it is closing stores in Ireland and Mac Coille says most are still expecting revenue growth.

As talks about redundancies began at the companies in Dublin, Dell announced an investment of €2 million in an existing center for customers to test new technology in County Cork.

Mark Redmond, chief executive of the Irish American Chamber of Commerce, also noted that the news of job cuts coincided with the announcement of 520 new jobs in tech in Ireland.

Patrick Walsh, founder and chief executive of Dogpatch Labs, Dublin-based innovation hub and home of Ireland’s national accelerator NDRC start-up, said the current crunch offers another opportunity: to give homegrown tech the same laser focus as Ireland has previously been trained in. big tech.

“In the 1980s, in the midst of recession, high unemployment and emigration, we reduced corporate tax from 40 percent to 12.5 percent. This, combined with a low-cost base and a highly educated, English-speaking workforce, began to attract foreign direct investment,” he said.

“It’s not the wrong call. However, the reality is that Ireland now has an unbalanced economy with the risk of concentration and economic vulnerability as a result,” added Walsh, who is also a member of the National Competitiveness & Productivity Council. “We are creating the number one fiscal policy environment in the world if you’re Google, but we’re behind on key startup policies.”

Redmond said OECD research showed a “spillover” of talent from multinationals to Irish companies. Job cuts in big tech mean “a lot of great talent is now back on the market, which can really be good for business”, said one senior HR consultant in Dublin, although he added that his investor clients did not expect the situation to take “anything. soon”.

Ireland is going to take part in the technology work to reduce the pain ahead. “The bigger issue is if revenue starts to flatline, or decline,” said Paddy Cosgrave, founder of Web Summit, a technology conference. “It will affect jobs and tax revenue in Ireland.”

Leave a Reply

Your email address will not be published. Required fields are marked *