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As Silicon Valley swings the axe, Ireland counts the cost of its tech addiction

ireland mark zuckerberg elon musk
ireland mark zuckerberg elon musk

When Google’s executives landed at Dublin Airport two decades ago on a scouting trip for a potential European head office, they were ferried by Irish government officials to the city’s down-at-heel docklands.

At the time, Google was a minnow with only around 500 staff. It was looking to expand internationally and initially favoured opening up in Switzerland.

But persistent lobbying by the Irish Industrial Development Agency (IDA), including the offer of lucrative tax breaks, convinced executives like future Facebook operations chief Sheryl Sandberg to think seriously about basing itself in the Irish capital.

In 2002, Google’s team settled on a 60,000ft building on Barrow Street in the docklands area, which today gleams with office blocks.

“It’s a choice still seen by those in the IDA as a seismic shift for investment in Dublin,” according to the book Silicon Docks: The Rise of Dublin as a Global Tech Hub.

In the years that followed, tech giants including Facebook, now known as Meta, LinkedIn and Twitter all followed Google and set up shop in the redevelopment area. Modern glass buildings rose up behind the old white Grand Canal Dock sign. High paying tech jobs came with them. The Dublin outposts of Google and Meta are some of their biggest outside of Silicon Valley.

Google Inc European Headquarters...The Google Inc. European headquarters are seen in Barrow Street, Dublin - Paul McErlane/Bloomberg News
Google Inc European Headquarters...The Google Inc. European headquarters are seen in Barrow Street, Dublin - Paul McErlane/Bloomberg News

Later, they were joined by fast-growing start-ups such as payments company Stripe, founded by local boys the Collison brothers who were born in the village of Dromineer in County Tipperary. Today, about 6pc of jobs in Ireland are in the tech sector.

Now, that progress is under threat. Big Tech companies are downsizing and slashing tens of thousands of jobs.

Ireland, which welcomed Silicon Valley jobs with open arms, now faces the brunt of their frugality with possible devastating consequences for its economy. With more than 100,000 people employed by multinational technology companies, there are fears the “Celtic Tiger” has become over-reliant on a handful of Silicon Valley titans.

Technology companies have already begun winding down their hiring plans in Dublin, says Glenn Murphy, managing partner at tech sector executive search specialist Riviera Partners.

“Last year we placed a European site leader role for Dublin. It went through a massive process with the IDA, and now the company has cancelled the site,” he says. “The business is valued at about $2bn. They were planning to hire 150 people. The office has been disbanded.”

Attracting these Big Tech giants at the turn of the century helped extend Ireland's economic growth streak, which during the 1990s and 2000s earned the country the nickname of the “Celtic Tiger” after it outpaced its European rivals. A pivot to tech also turned Ireland from an economy reliant on agriculture into a modern digital nation.

Big Tech companies were drawn in by generous tax policies. A flat corporation tax rate of 12.5pc encouraged US giants to funnel their international sales through the Republic, generating huge tax receipts.

Ireland has aggressively defended this set up, winning a recent appeal against European authorities that were trying to force Apple to pay the Irish state €13bn in back taxes on the basis it was illegal state aid.

Big Tech’s commitment to Ireland has helped the state reap massive taxes on profits. This year, they are expected to bring in €20bn. But government officials have warned these boom years are coming to an end. Multinational tech companies are now focused on slashing costs.

Meta recently announced it would make 11,000 staff redundant, about 13pc of its workforce, as Mark Zuckerberg seeks to rein in costs following its Metaverse investments. Stripe is cutting 14pc of jobs, or about 1,100 people, as financial technology valuations come under pressure. Meanwhile, TikTok and LinkedIn have scaled back expansion plans in Dublin's docklands.

The layoffs have been most dramatic at Elon Musk’s Twitter. The Tesla billionaire locked staff out of its Irish headquarters and summarily deactivated employee's email and Slack accounts with little or no notice. In Dublin, 140 staff, around a third of its headcount, were let go.

Paschal Donohoe, minister for finance, said the current tax revenues created an “artificially positive picture” of the public purse.

“As I have warned on many occasions, while these receipts are welcome, it is imperative that the Government does not build up permanent fiscal commitments on the basis of revenues that may prove transitory,” he said earlier this month.

Business groups argue that downsizing is a temporary blip and technology companies will continue to boost Ireland’s economy in the longer term.

Una Fitzpatrick, of Technology Ireland, says: “The tech sector has grown at a phenomenal rate of 30pc the past two years. However, we are now seeing this rate of growth slow… The technology sector is still growing in Ireland albeit at a slower rate.”

Start-ups in the country are braced for a period of belt tightening.

“We are already seeing a huge impact on both valuations and deal numbers,” says Barry Lunn, chief executive of Limerick-based Provizio, which is developing sensing technology for cars to prevent road deaths.

“Good companies will always attract talent, funding and sales. We might be about to find out the good from the rest.”

Patrick Gunnigle, emeritus professor at the University of Limerick, adds that while there will be short-term pain, Ireland’s strategy for attracting foreign investment could help with a “resolute” recovery.

The tech sector cuts, he says, “will undoubtedly and negatively impact economic performance”. However, he adds, “generally speaking, Ireland has a long and very impressive record in attracting foreign direct investment, especially in IT, and this is likely to pertain in the medium term at the very least”.

Last week Leo Varadkar, Ireland’s former Taoiseach and now minister for enterprise, insisted there remained a “strong pipeline of investments from overseas”, adding “we expect many positive announcements in the coming months”.

Fine Gael leader and Tanaiste Leo Varadkar makes his keynote address at the Technological University of the Shannon in Athlone - Damien Storan/PA
Fine Gael leader and Tanaiste Leo Varadkar makes his keynote address at the Technological University of the Shannon in Athlone - Damien Storan/PA

These include cloud data company NetApp announcing it will create 500 jobs by 2025 in the city of Cork.

In the short term, Ireland’s growth looks set to continue, but headwinds are looming. Official EU figures predict economic growth of 7.9pc this year, falling to 3.2pc in 2023. In part, that reflects the tech downturn.

According to economists and Dublin-based ESRI, Ireland’s economy “continues to demonstrate a significant degree of resilience”, despite the bleak economic outlook across the world.

Ministers are now planning a €6bn “rainy day fund” for future spending to deal with the cost of living crisis. Its coffers have been filled at least in part by the state's Big Tech tax income.

But the reality of Big Tech companies are halting hiring across the board and slashing jobs by the tens of thousands, a trend looking likely to continue into 2023. Expect the freeze in Silicon Valley to send shivers across Ireland’s technology sector.

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