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May 27, 2022

Tech jobs hiring boom could be over as start-ups make redundancies

Start-ups such as Klarna and Nuiri have announced layoffs due to the economic downturn. Will this impact the wider job market?

By Sophia Waterfield

A wave of European start-ups have announced redundancies this week, raising the question whether the tech sector’s post-pandemic hiring spree is over. A slow down in the number businesses advertising new tech jobs could reduce wages across the industry, recruitment experts have warned.

Buy-now-pay-later service Klarna, Turkish rapid delivery start-up Getir and another similar business, Berlin-based Gorillas have all announced redundancies, with Gorillas also pulling out of four markets. Jiffy, founded in April 2021 and secured $28m in Series A investment in September 2021, is transitioning from a hyperlocal grocery delivery service to a software development company, a move which will see it “gradually reduce” its headcount.

Buy now, pay later service Klarna is one of a number of European start-ups to recently announce redundancies. (Photo: Hollie Adams/Bloomberg via Getty Images)

In the UK, recruitment website Adzuna says that in April 2022, there were 181,045 tech jobs on its platform, up from 53% a year ago. These jobs accounted for 15% of the jobs it platforms across the country. The average tech salary was £57,760 in April 2022, 5% higher than in £54,966 but lower than the current level of inflation.

However, this may not last. Recruiters who spoke to Tech Monitor expect to see a slow down in the coming months, and say that salaries could be affected during a time when inflation is at an all-time high.

Start-up tech jobs slashed across Europe

Tech start-ups across Europe have been making layoffs as they struggle to deal with the changes in the industry. Fintech start-up Nuri, for example, announced on Wednesday that it was making layoffs due to the “start-up ecosystem experiencing extreme shifts”.

In a letter by Kristina Walcker-Mayer, CEO of the start-up, writes that “2022 has been a challenging year for the startup ecosystem” and that massive corrections in tech and fintech valuations since the end of Q4 as well as the interest rate turnaround in the US and rising inflation.

“Venture capitalists have become more cautious and compared to 2021, the venture capital investment records have slowed down considerably,” she says. “To get funding now and in the near future, companies have to show that they are on the home stretch to profitability – and this is also true for us.”

Though Nuri quadrupled its revenue in 2021, Walcker-Mayer says it needs to achieve profitability fast, and as a result is cutting its team. “The saddest decision is the reduction of our workforce and therefore parting with some of our team members,” he says. “In every single case, we went through all possible scenarios to keep our team together and preserve the positions.”

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Other start-ups who have made sizeable layoffs include fintech firm Klarna, which said this week 10% of its workforce would be let go and digital health company Kry, which is making a similar reduction. Online events platform Hopin, which thrived during the pandemic, announced that it was making 12% of its staff redundant earlier this year.

Economy will influence slow down in hiring and lower salaries for tech jobs

With redundancies being made across the European start-ups, more workers will end up applying for jobs with larger companies. However, there might not be enough roles to go around, as the bigger players are also slowing their hiring. This week, Bloomberg reported Microsoft is slowing hiring across three divisions, and Deliveroo is also putting the brakes on recruitment as a result of the wider economic climate.

“I would be surprised if we don’t notice a slowdown in the next three-four months,” says James Hodges, sales director, at IT recruiter Simply Commerce. “That said, usually our September to December is our peak period; it will be interesting to see what happens in the coming months.

He says that while there is a trend of tech companies making lay offs, this is generally because they are hyper growth businesses that cannot sustain the losses they have incurred for the past few years.

Paul Lewis, chief customer officer at Adzuna, says that secondary effects such as fewer higher-paid positions might occur: “We may see fewer of the highest paid positions as the tech giants – often the companies offering the fattest pay cheques – reign in their spending.”

He also notes that “wider workers” employed by the tech industry in support roles such as marketing, recruitment and sales could find it harder to secure a new job if made redundant: “The big tech crash will have a short term effect on those workers made redundant, but against the context of the ‘great resignation’ the bigger, longer-lasting consequences will be for big tech investors, or tech companies looking to secure funding against a more cautious backdrop,” he says.

Recruiters remain confident that tech sector hiring will stay steady

Conversely, some recruiters that work within the technology sector don’t believe that redundancies will effect the industry overall.

David Potter, managing director for technology at Henderson Scott, argues that tech has and will “always experience elements of boom and bust.” He says: “It’s the nature of operating at the forefront of current technological capability,” adding that “organisations such as Klarna that re-write the rule book are equally subject to this and with their recent redundancies it might lead people to think there is reason to panic; that the entire industry might wobble.”

But Potter does not believe this will be the case. “The industry is so multifaceted with technology literally powering or interacting with every single business sector in some way that we are still, and we believe will continue experiencing unprecedented levels of demand for tech talent across all verticals with candidates often receiving multiple offers in a matter of days,” he says.

Backlog of UK tech jobs will help jobseekers

Adzuna’s Lewis believes that while redundancies are happening, jobseekers within the tech sector should be reassured despite the high profile layoffs, with many roles remaining unfilled due to much published skills shortages.

The CCO says that beyond April, Adzuna’s real-time data reveals the tech hiring boom is showing “no signs of slowing down” despite the tech stock market downturn and resulting layoffs. In its State of the National report, BCS, the Chartered Institure for IT, said there were more than 64,000 vacancies for UK tech jobs in the third quarter of last year, up by 191% on the same period in 2020.

April 2022 saw UK Tech hiring hit its highest level in more than five years, with over 180,000 job vacancies lying open across the sector,” Lewis explains. “A lack of tech talent means job vacancies have been lying open for longer and accumulating, while widespread digitisation has expanded the need for workers with tech skills.”

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