Is it time to worry when big companies slash their workforce?

February 6, 2025

While US president Donald Trump was threatening China, Mexico, and Canada with trade tariffs, some of America’s biggest companies were making headlines of their own. Beauty giant Estee Lauder – whose brands include Clinique, MAC, and Aveda – unveiled plans to cut 7000 jobs from a global employee pool of 62,000, after pre-tax losses of $650 million. Starbucks CEO Brian Nichol warned of redundancies in March (without specifying how many jobs will go), while Meta – owner of Facebook, Instagram, and WhatsApp – said it would cut its global workforce by 5%.

When big companies take an axe to their staff, it really is time to worry as short-term fixes have long-term implications including a drop in investment and R&D (research and development), reduced customer service quality, and a weakened brand reputation. Down the line those factors could undermine a company’s market position and decrease its shareholder value. Nobody is suggesting that Estee Lauder, Starbucks, and Meta are heading for the rocks, but when companies reduce their workforce to save costs and raise profitability, the effect on the wider economy is huge. Suppliers, contractors, and others who rely on these businesses take a hit from slower economic activity, falls in consumer spending, and rising unemployment rates. Losing staff, whose value lies in their knowledge and expertise, can also hinder a company’s ability to innovate, stay competitive, and even attract top talent.

Bosses of some of the UK’s biggest companies predicted a doom loop of stagnant growth, higher regulatory burdens, and weaker business investment after Rachel Reeves unveiled her first budget as Chancellor of the Exchequer. Critics feared its contents of tax relief changes, hikes to National Insurance, and increased staffing costs would undermine businesses and dampen the very growth it was designed to stimulate. Are they crying wolf, or do they have a point? That depends on who you believe, but if the latest survey from the Confederation of British Industry is anything to go by (CBI), the road ahead will be tough. CEO sentiment has dropped, firms are urgently assessing their budgets, while others are scaling back their investments or mitigating costs with price increases and workforce cuts.

Although job cuts are largely driven by economic pressure the influence of technology and automation shouldn’t be ruled out either. Advances in AI and other technologies allow companies to automate jobs previously carried out by humans, resulting in greater efficiency and cost savings. That may be a positive, but it also raises a number of questions including the financial cost of reskilling/upskilling workers to help them function in a rapidly changing employment market.

Looking to the future, it’s important that governments implement policies to support workforce development and job creation. That could include funding education and training programmes, coupled with tax incentives for companies that invest in their staff. However, traffic runs both ways and businesses should also invest in staff development, find and use alternatives to redundancy, and prioritise long-term sustainability over short-term gains. If bosses and policy makers are committed to changing the narrative around work, they should join forces to mitigate the impact of job cuts while shaping the employment landscape to everyone’s benefit.