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Media and Technology businesses are not alone in contending with workforce challenges against a backdrop of rising interest rates and rising inflation. 2022 was marked by significant layoffs across the entire industry. As boards attuned to worsening market conditions throughout 2022, many made decisions to adjust their workforces. Ambitious projects were paused and hiring budgets were frozen. 

Whilst the dramatic headlines of significant layoffs in 2022 have not been repeated, technology companies in particular have been cautious about hiring and there have been smaller rounds of layoffs and downsizing in Big-Tech. Recent research by Glassdoor noted that the employee confidence in US information businesses had dipped to 48.8% in October, a decline of 13.1% year on year and the largest industry decrease. Against this backdrop we surveyed UK business leaders on their thoughts.

Recruitment challenges

The challenge to find the right people remains a critical business issue - 78.5% of respondents were finding recruiting new staff somewhat, or extremely difficult. 

Given our findings from a recent (June 2023) topical report, People Perspectives – redefining the workforce, from The Real Economy, this is unsurprising, and resembles trends across the broader middle market. Economic challenges, such as rising interest and inflation, has created employee demand for higher salaries, with 41% of businesses saying they were experiencing rising salary costs. 

For technology businesses in particular workforce costs have soared over the last decade. Ambitious corporate aspirations have been fuelled by readily available capital. Technology workers enjoyed enviable compensation in world-class office facilities. As the industry slowed through 2023 balancing workforce expectations of salary against budget has been a significant challenge for many. Technology and media roles often require a very specific skillset – which creates greater challenges to find and retain the right people.

Layoffs continue

83% of respondents to our survey reported layoffs of between 5% and 25% over the last year. What is clear now is that the sharp, deep pain during the late 2022 layoffs has not been enough and layoffs have persisted in the industry. Employment costs are not the only expenditure that boards are having to manage as investors ask to see returns and progress in both the immediate and medium term. Boards faced rising costs and increasing pressure to deliver results, often against accelerated timeframes.

The disruption of the layoffs will have been a distraction within the business, and maintaining stability and moving forward will be a challenge. The expectation to keep workforce costs under constant review will be exhausting to many business leaders who will also be acutely aware of the need to monitor morale and retain institutional knowledge. When experienced employees leave, valuable expertise is lost. 

Immigration may be a key to unlock innovation 

One specific challenge to address in the United Kingdom is maintaining healthy levels of skilled immigration. The Government often cite the success of Silicon Valley as an aspirational goal. If the UK is to achieve this level of success, then embracing an inflow of skilled talent into the UK ecosystem is essential.

A report by the National Foundation for American Policy in 2022 found that, of the 582 start-ups valued at $1bn or greater in the US, over 55% had at least one immigrant founder. Of these 319 companies, 48% were founded in the Bay area, including Stripe, Bex and Instacart. 

Healthy levels of skilled immigration is a good thing. Skilled migration enhances the wider ecosystem, bringing in diverse ideas and innovation. And this is particularly important in a sector that is defined by pushing boundaries.

In 2022, almost 54,000 international workers applied and migrated to work in the UK’s technology sector, a figure which has risen each year since 2017. Research from TechNation indicates that during 2022 4.7m people worked in the UK digital technology economy – rising from 2.69m in 2017. Immigration levels have risen broadly in line with increasing employment in the technology sector. However, immigrant workers only account for around 1% of the 5m people in the sector. With the obvious benefits of employing skilled international workers, this is a cause for concern. An inflow of skilled migrant technology workers will be needed to support growth and innovation if the UK is to truly lead on a global scale.