Tech’s Big Layoff season
Dear TFH member,
Welcome to a new week!
Here’s what you need to know about the past week in four headlines:
Before then,
A Snapshot of the Markets last week:
?(Data as of 04/11/22)
1.??????Tech’s Big Layoff Season
2.?????Calls for Windfall Tax
3.?????Netflix ads are here
4.?????Grim outlook for the UK
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1.?????Tech’s Big Layoff season ?
Some saw it coming and here it is. The markets are taking a huge impact on tech companies and the battle is still on. High interest rates, inflation and high cost of living are all affecting demand and operating environment. It’s also hard to raise money in these times. As a result, many tech companies particularly?startups are reducing the number of workers.
Twitter cut 3,700 jobs in the workforce as part of the restructuring plan of its new owner. Some 1500 workers at Stripe and tech sector are getting laid off. Meta is also set to axe some roles this week.
The headcount of most of the tech employees have been questioned.In the boom times such as the pandemic tech companies embarked on massive recruitment. However, other companies too face some tough and trickle times ahead.
?Interestingly, these tech layoffs do not reflect the larger labour market trend in the US as companies added more jobs.
Not only tech
?This economy-induced layoff does not only affect tech companies, layoffs have been observed in areas sensitive to interest rates. Investment banks that have seen a rapid decline in the volume of deals have also cut or are expected to cut jobs. Real estate companies and automobile companies’ workers have also been hit.
2.????Calls for Windfall Tax
The Russia-Ukraine war has led to a surge in the price of oil. Post-pandemic recovery is also boosting the demand for oil across the world. Add OPEC+ oil supply cuts and what you have is record profits for oil companies.
Last week, British Petroleum (BP) posted quarterly profits of $8.8 billion, which was majorly attributed to gas trading. Per Financial Times, oil producers in the United States got a huge windfall of $200billion from the Russia-Ukraine war. Saudi Aramco, the biggest player posted a 39% year-on-year gain for Q3 2022.
So how is it that oil companies are making this insane amount of money while households are suffering from crushing energy bills and rising cost of living?
There have been calls for developed countries to impose windfall tax on oil companies. Taxes help to ?redistribute wealth. A windfall tax is a form of tax where tax is levied on the profits of a oil companies who have made excess profits because of an unusual occurrence which spikes demand but reduces supply. Government is expected to gain more revenue through this tax. .
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Here comes the windfall tax
There is no uniform conception of what a windfall tax would look like. But legislators in the US and UK have been considering it. UK introduced a windfall tax in May which is in a form of a 25% Energy Profits Levy on the profits of companies extracting oil from the UK. A windfall tax will be impactful. Care should also be taken such that producers will not pass the cost to customers and discourage investment. This is because oil companies already pay higher taxes than other companies.
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3.????Netflix’s ads are here
?On Thursday, streaming giants Netflix launched a new subscription plan which would now feature ads for the first time. The new subscription tier is called Basic with Ads.
The subscription plan would be cheaper for users and is also a strategic financial outlet deployed by Netflix to leverage advertising in bolstering revenue. The global video advertising market is estimated at $160 billion
Although Netflix's CEO; Reed Hastings has been slightly opposed to the idea for years, advertising now forms a major part of Netflix's plans to boost revenue going forward.
Recall that earlier in the year; Netflix was rocked by a series of financial dilemmas ranging from loss of subscribers to reduction in stock value – essentially they were in Queer Street.
The reception this new development will get remains to be seen, as not everyone is a fan of ads. Now imagine getting to the best part of your movie or TV series only to be interrupted by an ad
One thing is certain- Netflix would generate sizeable revenue from this development.
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4.????Grim outlook for the UK
The UK is currently preparing for bleak times. The Bank of England warns that the country is on the verge of its longest recession in history. Current interest rates are at a record high as set by the Bank of England with a view to curbing the inflation.
It increased the interest rates to 3% from 2.25%, which is the biggest jump since 1989.
Food and energy prices have increased drastically, partly due to the war in Ukraine, this means that more households would struggle
A recession is defined as when a country's economy declines for two three-month periods - or quarters - in succession.
In times like this, companies typically make less money, most would be looking to cut costs, layoffs would be more frequent and unemployment would increase.
The road which lies ahead is tough for UK households, but the Bank has said It was compelled to act now or else things could have gotten worse later on.
?WRITTEN BY:
Peter Abegunrin
Adeyemi Akinyemi
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Till we see again next week.
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