It may be “several weeks” before the impact of job reductions at technology companies which have “sounded warnings” becomes clear, the IDA has told an Oireachtas committee.
It has also warned that constraints in housing, infrastructure and other areas risk damaging Ireland’s competitiveness for foreign direct investment (FDI) amid an “altered political and economic landscape.”
IDA wrote to the committee on Wednesday morning, telling it that technology companies it works with have “in recent days sounded warnings about reducing costs”. The agency said it may be several weeks before the impact of any cutbacks becomes clear.
Nonetheless, the IDA argues there is now a need for a strategic review of Ireland’s Foreign Direct Investment (FDI) policy, outlining how issues in housing and infrastructure capacity are damaging Ireland’s ability to win jobs.
Outlining how “the global economy faces severe headwinds in 2023″, the IDA wrote that “our FDI base of companies are not immune to these headwinds”.
While it said its companies are “generally optimistic” and that there is a “healthy pipeline” of investments for the first half of next year, it said that technology client companies “that have in recent days sounded warnings about reducing costs will in some cases take several weeks to work through the detail of job reductions in their Irish sites”.
[ Meta to begin Irish job cuts on WednesdayOpens in new window ]
In some cases where companies have business units in multiple locations around the globe, it said that “it may take time before the detail of any impact on Irish operations is fully worked out and communicated”.
The agency told the committee it is working with the Department of Enterprise, Trade and Employment on a forthcoming white paper on enterprise, and that considering changes that have happened and are to come, “it is an opportune moment to set a renewed medium term vision for Ireland’s enterprise policy”.
While client companies remain positive about Ireland and the strengths of the country, the agency warned that to remain successful, Ireland has to remain competitive while also “working to address immediate competitive issues related to the carrying capacity of the economy with regard housing, energy, water, infrastructure and planning.”
Twitter has begun laying off its Irish staff as part of a global cost-cutting plan, with more than 50 per cent of Irish-based staff expected to be affected by the cuts.
Separately, appearing before the committee Enterprise Ireland chief executive Leo Clancy said there was “a resilient base” of Irish tech companies that remain part of “a very vibrant ecosystem” despite the high-profile difficulties at large multinationals.
Irish tech enterprises are diversified between consumer technology and business-to-business technology but are more weighted towards the latter, making them less exposed to downturns in consumer sentiment, he said.
“It’s a sector that will continue to be in demand as companies transform themselves with digital across all sectors in the coming years, so I would be optimistic.”
Still, if consumer-facing companies can’t reprice their products fast enough amid rising inflation, they will soon find themselves becoming unprofitable.
The trading environment for Irish businesses “has become more challenging” throughout 2022 and job losses cannot be ruled out, Mr Clancy said.
“From our daily interactions with client companies, we are hearing that economic headwinds are causing businesses to consider the moderation of their growth ambitions,” Mr Clancy told the Joint Committee on Enterprise, Trade and Employment.
Companies hit by energy price rises and other areas of sharp inflation are having to consider whether their business will continue to be sustainable.
“At the very outside, I would not rule out that there would be job losses,” Mr Clancy said.
