‘Silent’ tech layoffs despite massive labour shortages

As the year comes to an end, Russian companies are laying off IT staff. Back in 2022, the government and employers were bending over backwards to keep them in the country, offering exemption from military service, preferential mortgages and pay rises. But two-decade-high interest rates are taking a toll: despite an unprecedented shortage of qualified staff, Russian companies have started to halt expensive projects with unclear returns, while cutting costs and staff.

• The surprise wave of lay-offs — amid nationwide labour shortages in almost every civilian sector — are being carried out both by tech companies, and by IT departments in companies from other sectors. Companies themselves are trying to hush it up, various IT recruiters told The Bell. 
• “You could call it a silent round of lay-offs,” one recruiter said. In fact, layoffs have been happening throughout 2024, but in recent months they’ve become more frequent. “Nobody’s going to put it out there in public,” the recruiter told The Bell. “They’ll say: ‘Well, yeah, we fired everyone. Yeah, the whole department, the whole project. But these aren’t lay-offs, what are you talking about?’”.
• Mass redundancies have occurred at VK — Russia’s second largest IT company and a potent Kremlin propaganda tool — and leading mobile operator MTS, two market sources told The Bell. Samolet, one of the largest development companies, is another believed to have cut its IT department. Finally, state-run Sberbank is starting to trim its development costs, even though CEO German Gref harbors dreams of turning the bank into a tech giant inspired by Silicon Valley’s big hitters. 
• The main reason for the layoffs is the same as the main problem facing Russian businesses overall — high interest rates. Borrowing costs have climbed significantly since summer 2023, when they first moved into double digits. In late October, the Central Bank raised the base rate to 21%, the highest level since 2003. This pushes up market rates for borrowing and returns on deposits. The bank assumes that more expensive loans will slow the rate of borrowing, while high returns on savings will encourage the population to save and restrict demand. All of that helps the battle against inflation, it says. 
• Meanwhile, the government needs funds to pay for its war. IT staff, who have been something of a “sacred cow” in recent years, now face tax rises. All of this prompts businesses to abandon expensive long-term projects with uncertain returns, market sources told The Bell. As a result, entire teams are being cut, with both marketers and developers facing the axe. 
• “IT specialists came at a high price and companies’ earnings did not increase that much,” one source explained. “In addition, there were many long-term projects, or projects that never took off. The market was overheated so, in fact, we are now seeing an optimization.” One IT recruiter told The Bell: “We get whole teams coming to us” after being laid off.

Why the world should care

Tech layoffs are a bad sign. “The economy is in the shit,” was how one of The Bell’s sources put it. “It seems like everybody needed IT specialists, there was a shortage of personnel and all that. But there’s no money to develop the market and marketing tools have collapsed. Although we need marketers and IT specialists, there’s no money. But everybody is hiding this — because the Russian economy cannot be in the shit.”