Layoffs have been a seemingly endless, inescapable constant within the tech news cycle over the last six months – from Microsoft to Zoom, it seems like no one is safe.

Since the end of 2022, major tech companies have been shedding staff left and right to make up for shortfalls in demand and an economy approaching recession.

But why is this happening all of a sudden? And is there any silver lining to big tech’s mass shedding of talent?

In a country facing a national tech skills shortage, with about one in ten jobs being in the tech sector and industries across the board crying out for tech talent, how can thousands of experienced and skilled tech workers be losing their jobs at some of the most successful companies the world has ever seen?

So What’s Been Happening?

Google, Meta, Microsoft, Twitter, IBM, Dell, Spotify, Zoom, NetApp, PayPal, Yahoo, and GitHub have all announced major global layoffs – but the reasons range dramatically.

Google and Microsoft are both participating in the AI race, as each company competes with their new chatbots.

Both companies directly addressed their pivot to prioritise AI innovation – staff in other sectors took the hit after each team hired a surplus during the pandemic.

Meta’s announcement was not so specific, but the company’s staff expected cuts as earnings dropped. The company was affected by changing privacy policies which impacted their ad selling capabilities – new GDPR rulings are set to majorly impact the use of personalised ads on Facebook and Instagram, and Zuckerberg said that those in the Family of Apps and Reality departments would be hit the hardest.

Layoffs at Yahoo! were largely the result of restructuring in its advertising departments so it would not be in direct competition with market dominators like Meta and Google.

Dell’s lay-offs were directly linked to a decrease in hardware purchases – most of their revenue came from personal computer sales, and with many returning to the office, these plummeted.

Similarly, Zoom announced it was cutting 15% of it’s workforce, likely driven by the return to the office and the advancement of other video conferencing services that are aligned with other services, like Microsoft Teams.

Spotify and PayPal’s announcements were much less specific, as neither company announced why they were firing or what departments would be most affected.

Twitter had a much more publicly contentious round of layoffs. About 50% of its global staff were fired, with some even locked out of their offices. Elon Musk’s infamous purchase of the company has exhausted the tech news cycle, and the firings came due to a massive loss in revenue as advertisers backed out of the platform.

IBM’s layoffs were a different story – two spin offs from the company meant IBM was effectively releasing workers through the layoffs. The company was actually performing quite well and intends to continue hiring during the progress.

For many companies, the tidal turn is simply a reflection of changing times after the pandemic – demand for tech was high across the board during the pandemic, and many giants took the opportunity to vacuum up talent. Now, the shift in the economy has left tech companies scrambling to make up for lost demand, and often they’ve turned to letting go their most valuable asset: people.

“The tech sector has pivoted from ‘the great resignation’ to ‘the great redundancy’ in the space of only a few months,” Martin Taylor, Co-Founder and Deputy CEO at Content Guru said. “Bullish post-Covid hiring collided with a tough macroeconomic outlook, just as the well of cheap investment cash dried up under the heat of interest rate hikes.”

Many tech workers were attracted to big companies due to a perception of stability as well as more benefits and larger salaries.

“However, given the size and scale of the layoffs, people are now doubting the stability of the largest players and are looking to up-and-coming smaller firms rather than the Big Tech monoliths,” Laurent Descout, CEO of Neo commented.

Silver Linings

It’s no secret that the UK tech sector is enduring a massive skills and talent shortage. Digital transformation projects are hampered by limited tech skills, retraining and up-skilling initiatives are all the rage, and there seem to simply not be enough tech workers to meet demand.

“Hiring and retaining talent in 2021-22 was definitely tough, it seemed that every candidate had four or five offers on the table from companies with big chequebooks,” explained Yoko Spirig, CEO of Ledgy.

But things are looking up for smaller companies.

“It’s never good to see rounds of layoffs but we see a huge opportunity for the ecosystem as a result of the biggest tech companies cutting back,” Spirig said.

“Big tech has got old,” Tom Price-Daniel, Head of Revenue at Teamed said. “The hype cycle ends, and they will seek to reinvent themselves. These headlines mask the explosion in startups globally, driven by decreased costs of failure and increased access to capital. The reality is that the demand for innovation and access to international talent is increasing despite global uncertainties.”

Small companies and start-ups can benefit greatly from the boom and bust of big tech.

“This trend certainly isn’t reflective of the market as a whole which remains incredibly buoyant and we are still seeing a steady demand for tech talent given the widely reported skills shortages, but this has shifted from the larger brands, to the smaller, fast-growth firms,” Craig Freedberg, Regional Director, Technology at Robert Half said.

“Throughout last year, SME employers struggled to recruit because the best talent were being snapped up by the big players. This balance has now swung back to the smaller businesses where we expect the lion’s share of the hiring demand to stay for the coming months.”

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The UK cannot squander the opportunity these massive layoffs provide. Smaller companies struggled to attract talent when competing with tech giants, but now the tables have turned.

“With big tech hoovering up less of the talent, startup and scaleup companies can find the quality skilled employees they need to help a small business grow,” Martin Ford, CEO of POPX said.

“Taking advantage of this available talent is a sure-fire way to help further the UK as a tech giant, hopefully turning larger cities into digital hubs that continue to attract businesses and talent from across the globe to promote economic growth,” Michelle Stark, Sales and Marketing Director at Fasthosts said.

But small businesses have to prove themselves in the fight for tech talent.

“There will be people all over the UK affected by these layoffs, and tech companies big or small should be taking advantage of this fact,” Stark continued. “It’s a vital time to reassure those affected that the skills they have accrued are irreplaceable — offering roles with competitive pay, and assured job security, to prevent the tech industry from losing an immense amount of talent.”

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