Artificial intelligence is causing the United Kingdom to lose more employment than it is creating, and at a faster rate than its overseas counterparts.
This is in line with Morgan Stanley’s analysis, which discovered that the substantial advantages for businesses implementing the technology come at a particularly high cost to British workers, burdening an already contracting labor market.
According to a survey shared with Bloomberg, British employers reported that AI caused 8% net job losses over the previous 12 months. It was double the global average and the highest amount among a group of American, German, Japanese, and Australian businesses.
The study polled businesses in five industries that have been exposed to AI for at least a year: consumer staples and retail, real estate, transportation, healthcare equipment, and automobiles. Many of them have already seen a return on their tech investments.
AI increased productivity by 11.5% on average for U.K. businesses, with nearly half reporting even higher increases. However, their US counterparts, who reported nearly identical productivity increases, increased employment rather than decreased it due to AI.
The AI revolution in the UK coincides with employers’ struggles with payroll expenses, sluggish development, and increased political unrest. According to the most recent official statistics, companies are eliminating jobs at the quickest rate since 2020, and unemployment is at a nearly five-year high as significant increases in the minimum wage and national insurance contributions continue to impact staffing plans.
According to a Bloomberg examination of online job openings data from the Office for National Statistics, while job posts are generally falling, U.K. companies are reducing positions that are likely to be impacted by AI, such as software developers or consultants, more quickly. Job openings for these positions have decreased by 37% since the launch of OpenAI’s ChatGPT in 2022, while other job openings have decreased by 26%.
According to Justin Moy, managing director of EHF Mortgages in Chelmsford, northeast of London, “an increasing number of smaller businesses are using AI and outsourcing solutions to fulfill roles traditionally filled by local people who are now missing out on these opportunities due to the rising costs of hiring staff.”
According to the Morgan Stanley analysis, companies in the United Kingdom, like their counterparts in other nations, eliminated or refrained from backfilling about one-fourth of their positions due to AI. However, because of the technology, U.K. companies were much less inclined to increase jobs.
The British economy could be saved from its slow growth trajectory by AI. The Bank of England and the Office for Budget Responsibility have highlighted the potential. According to the fiscal watchdog, the technology could increase productivity growth by up to 0.8 percentage points over the next ten years, which would raise living standards and improve public finances.
But for the time being, the emphasis is on how AI is making the job situation in the United Kingdom worse, especially for young people and white-collar workers.
According to official data released last week, the number of open positions in the economy has decreased by more than a third since 2022, or half a million positions. Some of the industries most likely to be impacted by AI, including IT, administrative services, and professional, scientific, and technical activities, accounted for a fifth of that reduction.
As AI disrupts entry-level white-collar jobs and the Labor Party’s tax plans affect employment in retail and hospitality, the youngest workers in the United Kingdom are being pressed from both sides. With a rate of 13.7% in the three months ending in November—the highest since 2020—youth unemployment has increased more quickly than the general rate.
According to BOE Governor Andrew Bailey, artificial intelligence (AI) is developing as the next “general purpose technology,” similar to previous waves of innovation that drove growth, such computers and the internet. But he cautioned last month that the United Kingdom must prepare for employment displacement caused by AI. Additionally, he issued a warning that the technology might have an impact on the talent pipeline that enables employees to advance into more senior positions.
Early-career positions requiring two to five years of experience in the United Kingdom were most likely to be eliminated, according to employers surveyed by Morgan Stanley for the report.
According to one of its authors, Rachel Fletcher, Head of EMEA Sustainability Research in London, the results offer a “early warning sign” of how AI is changing the job market. The impact of technology on jobs has “come up in a lot of our recent investor conversations,” she continued.
