Could AI be accelerating slowdown in the UK job market?

The Guardian

a day ago

Ask ChatGPT whether artificial intelligence is contributing to Britain's cooling jobs market and the chatbot acknowledges its own role – but adds a caveat: 'Yes, AI is contributing to job losses in the UK, but its impact is nuanced and varies by industry, skill level, and job function.'
There are concerns that AI could be one culprit behind the slowdown, as the ascendant technology destroys workers' jobs.
The telecoms company BT has said advances in AI could lead it to cut more jobs, having already outlined plans to shed up to 55,000 workers two years ago – including as a result of investment in digital automation. Amazon has warned white-collar staff that their jobs could be replaced, Ocado has cut hundreds of roles to reduce costs while using AI instead, and Microsoft is shedding 9,000 jobs worldwide.
Despite these high-profile changes and mounting anecdotal evidence, most economists reckon that, so far, Britain's slowing labour market has little to do with accelerating investment in AI.
ChatGPT agrees. It spews out the top five reasons in bullet points.
Rising employment costs and higher taxes.
Monetary tightening and high interest rates.
Broader economic slowdown.
Weaker hiring demand.
The labour market adjusting to a 'new normal'.
Unemployment rose to 4.6% in the three months to the end of April, up from about 4.4% at the start of the year. While there are questions over the reliability of the headline statistics, amid well-documented troubles at the Office for National Statistics, separate figures from HM Revenue and Customs show 276,000 jobs have been lost since the chancellor Rachel Reeves's autumn budget.
Business groups complain that hiring has been made more costly by a £25bn rise in employer national insurance contributions, introduced in April, and a 6.7% increase in the national living wage. Bank of England research suggests recruitment plans are being put on ice.
Meanwhile, economic growth is expected to remain sluggish in 2025, at about 1% – about half the average annual rate recorded in the decades before the 2008 financial crisis. The outlook comes amid weak consumer confidence and business worries over the hit from Donald Trump's erratic trade war. Lingering high inflation and elevated borrowing costs are also weighing on consumer demand.
Such conditions could tempt employers to turn to AI for the answers.
Rising wage bills could encourage companies to invest in technology as an alternative to hiring humans by bringing the two propositions closer together in cost. The retailer Next has said it does not expect to cut jobs but plans to use more mechanisation in its warehouses and shops.
In January a survey by Boston Consulting Group suggested half of UK companies were planning to redirect investment from staff to AI as a result of rising employment costs. The International Monetary Fund estimates 60% of jobs in advanced economies such as the US and UK are exposed to AI and half of these jobs may be negatively affected.
Looking at tech investment to bolster the bottom line is increasingly in vogue. The number of comments made about AI during earnings calls among UK companies have rocketed from a few dozen in the early 2020s to more than 200 in the first quarter of 2025, according to figures from the data provider AlphaSense.
Some sectors are braced for a bigger change than others. Research by KPMG suggests jobs in writing and translation, programming, IT-user support, public relations, graphic design and the legal profession could be among the most heavily affected. Already AI-generated adverts, press releases and IT chatbots are proliferating.
Younger workers are being particularly hard hit. UK university graduates are facing the toughest jobs market since 2018, while the number of entry-level job vacancies has plummeted by a third since the launch of ChatGPT in November 2022. That is in part because rookie workers are typically given the simplest tasks, which are now easier to automate.
There are, however, opportunities. Getting AI to do routine functions could free up workers to do more interesting tasks. While it will destroy jobs, others using the technology will be created. Ministers have trumpeted £44bn of AI investment in Britain since last year, saying it has created 13,250 jobs in 12 months. The government is working with tech firms including Amazon, BT, Google, IBM, Microsoft and Sage to train 7.5 million people in AI skills.
'When you look at any technology, it creates jobs – not just destroys them,' says Yael Selfin, the chief economist at KPMG in the UK. 'There will be destruction. [But] overall, net-net I'm not sure we'll see fewer jobs, but they are likely to be different jobs.'
For centuries this has been the example. The worries of the 19th-century Luddite machine-wreckers have turned into a stock example in economics about the fallacies of technological innovation slashing economy-wide job levels.
However, there are still big debates about how the transition is managed; how workers are supported, and about how the gains from technological progress are divvied up. For workers: through new, more rewarding, and higher-paid work. For employers and business owners: through higher profits.
As the AI revolution gathers pace, so far the signs are mixed. Britain's economic troubles are still the biggest determinant of work opportunities. But technological change is also creeping in.