The transformation of tech sector
The tech sector was forced to reorganise twice, at first due to higher demand and then because of inflation, leaving over 55,000 unfilled positions. Wealth Professional

After being severely hit by a post-pandemic shock and high inflation, the tech sector has gone through massive layoffs for the past couple of years targeting both SME and Big Tech companies.

The pandemic triggered new consumer behaviours and habits due to social distancing which pushed most of them towards online services of all kinds.

Demand for services such as food delivery, e-commerce and online streaming subscriptions then skyrocketed between 2019 and 2022, leading tech companies to increase their hiring rate.

According to a recent report published by USA Today, tech giants Amazon, Microsoft and Meta increased their hiring rates by 93 per cent, 53 per cent and 92 per cent respectively during autumn 2020.

However, two years later those same companies each cut more than 10,000 jobs, furthermore, according to the tech sector layoffs tracking website, 1,000 companies have laid off more than 265,000 people between them since 2022. We are now looking at 593 companies that have laid off nearly 170,000 employees in 2023.

More consumers are now going back to more traditional consuming habits by physically going shopping and spending less.

Moreover, with inflation hitting the UK and energy costs increasing, consumers are setting their priorities straight and investing their money in essential daily items and mandatory payments.

This new consuming trend has been shown in the latest report on the UK Consumer Trends Index 2023 led by the software company Cheetah Digital, which has shown that 73 per cent of consumers in the UK are "very pessimistic" regarding the increasing cost of life and energy leading to 62 per cent of them making less impulsive purchases and 46 per cent relying on loyalty perks when making a purchase.

Most consumers are looking to make smarter purchases and are avoiding binge shopping or accumulating too many online subscriptions to prevent unneeded expenses.

Consequently, this new dynamic has changed the workflow of the tech sector as lower demand necessitates lower staff levels. Moreover, this means leaning towards a more selective approach to hiring only experienced individuals to fulfil the current demand trend.

With the reduction in how consumers purchase goods and services from the tech sector, the industry as a whole is witnessing its annual revenue plummet due to this drastic change caused by inflation and the cost of living crisis.

Based on the 12-month drop in the Nasdaq, investors in the tech industry have lost roughly $7.4 trillion, with tech stocks falling by over 30 per cent in 2022.

The recently updated report of the Robert Half Jobs Confidence Index (JCI) has shown that there are still over 55,000 unfilled job positions, with talent shortage still plaguing the industry. Despite an annual decrease of 21.4 per cent in unfilled vacancies during quarter four in 2022, companies still struggle to fill those positions with adequately skilled workers.

In 2018, a report by the Open University stated that 97 per cent of organisations working in STEM and 96 per cent of finance companies faced difficulties hiring during the past year. The multi-disciplined firm Bidwells found that the STEM industry had the largest employment gap with 69.49 per cent more jobs than enrollment and hiring postgraduates studying related courses. This national economic slowdown cost over £2 billion.

However, the annual earning amount in the UK tech sector is still far superior compared to the national average, with the annual income of employees in the tech sector averaging £62,500.

The lack of experienced staff at a company impacts its ability to serve its customers properly, which in turn damages its brand, making it harder to recruit new staff and secure new investments.

Craig Freedberg, Regional Director of Technology at Robert Half, stated that this slowdown in mass recruiting by Big Tech companies has led to the rebalancing of SMEs and start-ups, who struggled to recruit talented staff last year.

He also added that in the face of such an uncertain background, candidates with the right skill set are certainly in the driving seat, and employers are having to develop compelling attraction strategies.

Employers will have to go the extra mile and entice applying candidates with decent remuneration but they will also have to create a steady and reliable work environment for candidates to be genuine long-term assets.

Moreover, not only are those layoffs affecting e-commerce and online retail services in general, but this collapse in recruitment is also affecting the cybersecurity sector which could have greater consequences in the long run.

Early this year, three cybersecurity firms, Sophos, Okta and more recently Secureworks confirmed they would be reducing their workforce.

Secureworks is planning a reduction of 9 per cent of its workforce, erasing around 200 jobs. Okta is planning on cutting its workforce by 5 per cent representing around 300 jobs and Sophos is planning up to a 10 per cent cut, with 450 jobs going away.

However, analysts and experts remain optimistic, saying few cybersecurity-targeted specialists have been impacted by the wave of layoffs.