On Friday morning, I spoke with Simon Coveney. 

From June 2017 until last December, Coveney served as Minister for Foreign Affairs, where his deft handling of Brexit has won him respect both at home and across Europe. Last December, as part of the cabinet reshuffle, he moved to the Department of Enterprise, Trade and Employment. 

It is a significant portfolio, and it is wide-ranging – it oversees everything from foreign direct investment to worker rights to assisting small businesses. Coveney has a reputation for reading his brief, and that brief is extensive.

Since his appointment, however, he has found himself dealing with the wave of layoffs across the multinational tech sector. The announcements, globally, have come thick and fast as the sector seeks to unravel the hiring sprees of the pandemic years. 

To understand what was going on, Coveney went to the west coast of the US in recent days. While there, he met with met 14 companies, that, combined, employ 26,000 people in Ireland. This included high-level meetings with Apple, Meta, Stripe, Cisco, eBay, VMware, Airbnb and Guidewire.

I spoke to him on his return for an article published n Friday. Here are five key takeaways from the interview. 

1.    Mistakes were made

In his column on Thursday, Stephen Kinsella outlined the fundamental mistake of the tech giants over the past two years: overhiring. As Stephen outlined, the underlying business models are solid, but a large cohort of companies imaged that the online bounce during the pandemic was going to last. It did not, and most of the companies that have shed jobs essentially overhired – they banked on growth rather than profitability. This was something that Simon Coveney talked about at length after his trip to the US.

“It was described to me by one CFO as a stampede for talent internationally. It meant that a lot of businesses grew at a pace that was just unsustainable, and now they need to correct that. In a real sense, what has been happening for the last four or five months is that most of the announcements are equivalent to giving back somewhere between 15 and 25 per cent of the growth last year,” he told me.

He added that the financial markets had altered also. “Investors are now more demanding, as indeed are banks. And, of course, the cost of finance is higher. But the measurement of success against that debt is it is now as much about profitability as it is about growth. Whereas, 12 months ago, or 24 months ago, it was all about the pace of growth in the sector. Now, it is about profitability and return on investment. And I think that’s also driving what companies will describe as efficiencies” he said.

2.    Ireland is insulated

Despite the negative narrative, Coveney maintains that Ireland is better insulated from the tech slump than most. Yes, there have been job cuts. But, he argued that the cuts were less than what is occurring in other countries, something he attributed to the quality of the workforce here and also Ireland’s role as a gateway to Europe. 

“If you take Microsoft’s announcement this week. They employ 3,600 people in Ireland. They’ve announced a reduction of 120, which was 3 per cent. But internationally, they had announced a 5 per cent reduction in Microsoft jobs worldwide. And that kind of number has been replicated with other companies,” he said. “When it was a five or 7 per cent cost, there might be a two or 3 per cent cut in Ireland. And again, that is because of the value that they’re getting in Ireland, the importance of their presence here, and the jobs and the skills here are disproportionately positive in terms of contributing to the overall company.”

3.    Unlocking the narrative

The publicity around the job cuts has outweighed their numbers; unsurprising perhaps given the importance of a small cohort of tech companies to Ireland’s taxation receipts. Coveney was particularly anxious to see what it would mean for future employment trends, with reports that the negative publicity around the sector at the moment might deter students from pursuing careers in software and tech. 

“I don’t want to be overly positive. This is a reality check in some ways for a sector that grew too quickly, during and post-Covid. But it certainly isn’t the crisis. And the way Ireland is seen by these companies is as strong if not stronger than ever. They see Ireland as a place for investment and growth when they start growing again, which hopefully we will see towards the back end of this year,” he told me.

4.    The thorny issue of regulation

I asked Coveney what issues the various tech executives had raised with him during his trip in relation to further investment in Ireland. I had expected the answer to be about housing or the panning quagmire in relation to data centres. His first response, however, related to European regulations. “The European Commission, along with member states and the European Parliament, are doing a lot of work in terms of trying to develop a single market for data and for digital services.

“That’s a really complicated thing to do. It involves the regulation of artificial intelligence, of data, of digital services. And we’re in the middle of a lot of that discussion at the moment. And so, a lot of the tech companies watching from afar want a predictable and stable regulatory environment that offers a level playing field across the EU. They also want to avoid over-regulation in this space. That’s no surprise,” he said.

“But I think they see Ireland as a country that is advocating to try to get the balance right here in terms of protecting consumers, and protecting privacy while delivering a fair and competitive market across Europe, but also recognising the commercial realities of keeping the EU competitive versus other parts of the world as well.”

5.    Data centres are here to stay

I pushed the minister on the issues of data centres, a flashpoint in the debate over Ireland’s capacity to generate FDI and our environmental obligations. His response was to the point: data centres are required if Ireland wants to be a world leader in technology. However, he said we need to invest in new ways of generating power. “The idea that we can build an economy that’s based on data management and digital services, and not have data centres in Ireland – or not have more data centres in Ireland – is simply not realistic. The way in which we manage data will be part of how we manage energy in the future,” he said.

“The answer to this, for me, is to accelerate the delivery of renewable clean energy. We are planning now to deliver seven gigawatts of electricity generation offshore by 2030. In my view, at some point in the next decade, Ireland will have become an energy exporter. And, so we should be able to facilitate the building of new data centres – within reason – in Ireland, to allow our digital economy to grow, to allow data to be stored here safely. And we need to ensure that they are powered in the future by renewable power generation. In my view, a lot of that new renewable power generation will come from offshore wind, but there’ll be other sources as well.

*****

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