The tech jobs environment is looking more and more shaky. It started as a stock market rout which savaged big tech valuations. The trickle down effect hit startups and high-growth firms.
Suddenly, and for the first time, tech executives in unprofitable private companies are having to explain to investors why their shares are actually worth less than they paid for them.
Big global multinationals like Facebook parent Meta are not immune. Mark Zuckerberg’s firm is planning to close one of its offices in New York after scaling down its expansion plans. It plans to exercise its option to terminate its lease at 225 Park Avenue in Manhattan.
Closer to home the list of tech companies affected by a slowdown is growing. PayPal said in May it was planning to cut 300 jobs in Dublin and Dundalk. Yapstone warned of the potential loss of jobs among its 65 workers in Drogheda.
Clearco said it was closing its Irish operations with the loss of 50 jobs. Among smaller Irish tech firms, there is a tightening on recruitment too. Irish unicorn Flipdish said in January it would hire 700 people this year. It now looks set to let some staff go.
The mechanics of a tech slowdown are very worrying because the sector has so many high-skilled, high-paying jobs.
Paschal Donohoe pointed out on Budget Day last week that one third of all the State’s tax revenues come from the corporate tax of 10 multinationals and the income tax of 500,000 workers. Many of them work in the tech industry.
The Apples, Googles, Facebooks and others are now heavily invested in Ireland
The old fears of the 1980s or 1990s were that large multinational employers might simply pull out and go somewhere else.
The Apples, Googles, Facebooks and others are now heavily invested in Ireland. They are having to grapple with a changing environment and that may well go from a hiring freeze to actual job losses. It doesn’t mean we are facing a jobs Armageddon.
It is much more likely that they will continue to play a huge economic role in Ireland. Plus, individual firms have their own issues. Meta is facing greater competition and regulation while also making a major multi-billion dollar play on virtual reality. All of this has taken a chunk off its huge valuation.
The real danger is for emerging Irish tech companies. Some of those in development stage without a revenue stream yet could simply get culled if their backers decide they cannot keep funding them until this downturn is over.
Others with strong revenue streams and a proven business model (but just a valuation that is not as high as it was) will feel some pain but at least can come through it.
Unfortunately, that situation is going to have to get worse before it gets better.
The question of why the state cannot seem to build more social and affordable homes came directly into focus with the announcement that the parent company of many Ikea stores is going to build 250 of them.
Global private sector conglomerate to invest €100m building social homes – what’s the catch? Well, the investment does seem to be a new model and a whole new approach.
Ingka Investments is part of Ingka Group, the largest Ikea store franchisee. It normally invests in everything from commercial property in London to 600,000 acres of forest land in the US, Estonia, Lithunia and Romania.
Its website shows a number of recent major investments in offshore energy assets. Under the plan here, Ingka Investments will contribute to the construction of 250 homes across different Dublin sites.
It is a brilliant idea and a far cry from the vulture fund approach of paying minimal taxes in Ireland to fund build-to-rent homes which remain owned by the funds
These will be leased to the local authority as social homes. However, each payment will be treated as a mortgage instead of rent so after a number of years, ownership of the homes will revert to the local authority.
It is a brilliant idea and a far cry from the vulture fund approach of paying minimal taxes in Ireland to fund build-to-rent homes which remain owned by the funds.
Like any large international business I am sure that Ingka Investments is adept at reducing the tax it has to pay around the world but it doesn’t seem to be “tax driven” in Ireland. At least as far as one part of its operations goes.
One of its companies here, Ingka Investments Financial Assets Ireland Ltd, which provides liquidity and short-term financial investment to the group, paid €36m in corporation tax last year on a profit of €291m. It was bang on 12.5pc.
You have to wonder about the State’s inability to construct social homes itself. Houses are being built by local authorities but just not nearly enough.
The Government went from an approach decades ago of having local authorities build social homes, to having the private sector provide them at a profit. This concept collapsed along with the property market in 2008. The Government’s Housing For All policy sees the focus return to state owned and provided social homes.
But there is still a huge dependency on private sector provision of housing for social ends. Instead of the State being a major landlord, it has become the major tenant. This is a more costly way of doing things in the long run.
This Ikea model is quite different. The ultimate outcome is good – more badly-needed social housing, which will ultimately revert back to the State’s ownership.
But what exactly is Ingka bringing to the table that the State cannot? It isn’t a house builder. It has financial resources, as does the State. In fact, this project will see the investor purchase sites. The State already has large tracts of land even in Dublin, which could be used.
Ingka is bringing a level of desire as well as a level of private sector efficiency and energy. Its initiative is to be welcomed, but it only goes to show how years of government policy and local authorities have truly let people down.