Ireland is a major international success story for attracting foreign direct investment (FDI). According to the Department of Enterprise, Trade and Employment, it is estimated that 20% of jobs in Ireland can be attributed directly or indirectly to FDI. Data from the American Chamber of Commerce further highlights the positive impact by US multinationals alone bringing direct and indirect employment of 324,000 to Ireland.
Foreign direct investment in the tech sector in particular has been especially strong in Ireland. Employment has peaked recently, with an additional 25,000 employed in the tech sector here compared to pre-pandemic levels. To a large extent, it has been a positive story – with IDA Ireland (IDA) continuously reporting on the extraordinary delivery of FDI. The exchequer has also seen larger-than-expected tax returns from multinationals, especially in 2021 and 2022 when the global tech sector performed strongly.
FDI in Ireland has also been unusually resilient by international standards with many subsidiary operations evolving over the years to retain their relevance to their parent organisation. For example, the American Chamber of Commerce reports that one third of US multinationals operating in Ireland have been here for more than 20 years. Intel’s continued investment in Ireland, spanning more than three decades, represents just one example of the sustained contribution that FDI in the tech sector has made to Ireland Such longevity is not the norm: a study of divestments by US multinationals has found that more than 20% of their foreign subsidiaries were closed within 15 years of observation.
This is the positive or happy side of FDI, and typically what we see celebrated in media reports. But the tech sector is now experiencing a major rebalancing globally, and Ireland is becoming a victim of its own success. The high levels of FDI attracted make Ireland vulnerable to decisions made in Silicon Valley and like Meta, Twitter, Stripe, Amazon and Microsoft of impending layoffs are also impacting their Irish operations. We are seeing a wave of redundancies hitting the tech multinational sector in Ireland that is unprecedented.
From a broader, macro perspective, these lay-offs can be regarded as part of the normal life cycle of FDI. Multinational corporations undertake foreign investments to create value for their organisation, such as capturing opportunities for growth in international markets. The accelerated shift to online working and ecommerce prompted by the pandemic led to phenomenal growth in the tech sector.
This has now come to a halt and inflation, concerns of a widespread and deep recession and growing political uncertainty have resulted in many tech firms becoming more cautious about the future business outlook. In response, tech multinationals are taking decisions to protect the future of their organisations overall: they are battening down the hatches, introducing cost saving measures and retrenching global operations. It is important to note this does not excuse such organisations from irresponsible ways of reaching and executing retrenchment and restructuring decisions. Rather, it is about recognising the economic reality of running multinational corporations.
For Ireland, these lay-offs reveal the sad side of FDI. For the employees affected, the job losses are a cause of dismay and individual distress – the layoffs are an emotional journey. Our recent research on subsidiary closure found that for those directly involved, especially employees who are leaving involuntarily, feelings such as anger, shock and betrayal come to the fore. The emotions felt by employees facing subsidiary downsizing or closure is often similar to the loss felt when someone very familiar, like a close friend or relative, dies.