Sunday, 11 January 2009

Loyalty to a Locality in a Recession

(By Richard Holway) The news (The Times 9th Jan 09) that Dell is to axe 1900 production jobs has stunned Ireland. Dell is shifting its European manufacturing operations to Poland. Let me quote The Times to explain the significance. “Dell, which is Ireland's second largest corporate employer and its biggest exporter, said that it was cutting 1,900 jobs in Limerick. Economists calculate that each Dell job in the country underpins another four to five jobs. It has been calculated that Dell contributed about 5 per cent to Ireland's GDP in recent years”. A Dell worker remarked “This is not about a company that is in trouble. This is about greed, corporate greed. They're going to Poland because apparently they can make an extra 3 per cent.”

Readers, I hope, will recall that I have long bemoaned the fact that we don’t have much of a “UK-owned” tech industry left – whether that’s software, IT services or hardware. I’ve been told that we live increasingly in a ‘Global World’ and that ownership doesn’t matter. Although I have to agree, I have continued to believe that the ‘Location of Control’ – the HQ, where the CEO is located, the main stock exchange listing, the main R&D centre – DO MATTER. The spin off (legal, audit, PR etc) and ‘cluster effect’ (graduate jobs etc) are significant.

The other advantage only occurs in a downturn. The ultimate ‘loyalty’ towards a ‘locality’ I believe only becomes apparent in a downturn. Offices and plants outside the ‘location of control’ will be closed/moved on purely economic grounds. Loyalty will go out the window; ultimately remaining only at the ‘location of control’. Will Microsoft close Seattle? Will Capgemini close Paris? Will IBM abandon New York? More topically, will the US Government support its car makers plants outside the US? If US tech manufacturers get a bail out (unlikely) do you think the US Government will care about UK jobs?

No comments: