Irish tech sector ‘dominated’ by Big Tech, report claims

6 Mar 2023

Image: © 4kclips/Stock.adobe.com

The report said Ireland’s tech sector is reliant on a small number of multinationals, as domestic companies account for less than 10pc of overall output.

Ireland’s reliance on the international tech sector presents a risk to the economy if a prolonged downturn occurs, according to a new Central Bank report.

The report said the ICT sector makes a “significant” contribution to Ireland’s economy and has grown rapidly in recent years. The Central Bank said this sector accounted for 6.4pc of employment and more than 21pc of corporation tax in 2021.

This sector also contributes to other parts of Ireland’s economy which account for roughly 30pc of overall employment, such as the administrative, manufacturing and retail trade sectors.

However, the report warned that Ireland’s economy is at risk if the sector faces a prolonged or significant downturn. The report also said Ireland’s ICT sector is reliant on a small number of large firms.

“The sector is dominated by a small number of foreign-owned multinational enterprises (MNEs) that account for the majority of output, employment and tax revenue,” the report said. “In contrast, the domestic part of the sector has expanded more slowly and accounts for less than 10pc of overall ICT output.”

Job losses and Big Tech dominance

The global tech sector has faced a downturn since last year, with various Big Tech companies reporting a drop in their market value, according to the report.

The Central Bank article said Ireland’s ICT employment was 164,600 in the last quarter of 2022, an increase of nearly 30pc compared to 2019.

But companies such as MetaStripe and Twitter have had reductions to their staff numbers in recent months, both internationally and in Irish offices.

The report said the estimated job losses are 1.4pc of overall ICT employment, or 6.2pc per cent of the increase in employment since the end of 2019.

“To date, the number of job losses is small, relative to the existing workforce,” the report said. “Despite this, characteristics of the ICT services sector in Ireland indicate important risks to growth, employment and tax revenues if a more severe or prolonged downturn were to materialise.”

The report said Ireland’s reliance on a small number of multinationals in the ICT sector presents a “structural vulnerability” to its economy.

“Policies that contribute to improving the resilience of the economy, such as increasing investment and productivity in indigenous firms and saving unexpected corporation tax revenues in the National Reserve Fund, would lessen the negative effects of any future sectoral downturn,” the report concluded.

Last December, a report by The Economic and Social Research Institute warned that nearly €34bn of value in the Irish economy is at risk in the event of a major shake-up in our tech sector.

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Leigh Mc Gowran is a journalist with Silicon Republic

editorial@siliconrepublic.com