AI's Impact on UK Job Market Slowdown

Published Date : 13/07/2025 

The UK job market is experiencing a slowdown, and while there are multiple factors at play, the rise of artificial intelligence (AI) is increasingly being seen as a significant contributor. This article explores the impact of AI on the UK job market and what it means for workers and businesses. 

Ask ChatGPT whether artificial intelligence (AI) 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 growing concerns that AI could be one of the culprits behind the slowdown, as the technology displaces workers in various sectors.

The telecoms company BT has warned that advances in AI could lead to more job cuts, having already outlined plans to shed up to 55,000 workers over two years, partly due to investment in digital automation. Amazon has also cautioned white-collar staff that their jobs could be at risk, while Ocado has cut hundreds of roles to reduce costs by leveraging AI. Microsoft is shedding 9,000 jobs worldwide, adding to the growing list of high-profile changes.

Despite these significant shifts and mounting anecdotal evidence, most economists believe that Britain’s slowing labour market has little to do with accelerating investment in AI. ChatGPT lists the top five reasons for the slowdown:

- 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 these statistics, separate figures from HM Revenue and Customs show that 276,000 jobs have been lost since the chancellor Rachel Reeves’s autumn budget. Business groups complain that hiring has become more costly due to 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 that recruitment plans are being put on ice.

Economic growth is expected to remain sluggish in 2025, at about 1%, which is about half the average annual rate recorded in the decades before the 2008 financial crisis. This outlook is influenced by weak consumer confidence and business concerns over the impact of Donald Trump’s erratic trade war. Lingering high inflation and elevated borrowing costs are also weighing on consumer demand, potentially pushing employers to turn to AI for solutions.

Rising wage bills could encourage companies to invest in technology as an alternative to hiring humans, bringing the two propositions closer in cost. The retailer Next, for example, 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 that half of UK companies were planning to redirect investment from staff to AI due to rising employment costs. The International Monetary Fund estimates that 60% of jobs in advanced economies like the US and UK are exposed to AI, and half of these jobs may be negatively affected.

The number of comments made about AI during earnings calls among UK companies has surged from a few dozen in the early 2020s to over 200 in the first quarter of 2025, according to data from AlphaSense. Some sectors are bracing for more significant changes than others. Research by KPMG suggests that jobs in writing and translation, programming, IT-user support, public relations, graphic design, and the legal profession could be among the most heavily affected. AI-generated adverts, press releases, and IT chatbots are already 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. This is partly because rookie workers are typically given the simplest tasks, which are now easier to automate.

However, there are also opportunities. Using AI to handle routine functions could free up workers to focus on more interesting tasks. While AI 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. Yael Selfin, the chief economist at KPMG in the UK, notes, “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 case. 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 how the gains from technological progress are distributed. For workers, the goal is to transition into new, more rewarding, and higher-paid work. For employers and business owners, the aim is to achieve higher profits. As the AI revolution gathers pace, the signs are mixed. Britain’s economic troubles are still the biggest determinant of work opportunities, but technological change is also creeping in. 

Frequently Asked Questions (FAQS): 

Q: What is the current unemployment rate in the UK?

A: The unemployment rate in the UK rose to 4.6% in the three months to the end of April, up from about 4.4% at the start of the year.

Q: How many jobs have been lost since the chancellor's autumn budget?

A: According to HM Revenue and Customs, 276,000 jobs have been lost since the chancellor Rachel Reeves’s autumn budget.

Q: Which sectors are most affected by AI in the UK?

A: Research by KPMG suggests that jobs in writing and translation, programming, IT-user support, public relations, graphic design, and the legal profession could be among the most heavily affected by AI.

Q: What is the government doing to support workers in the AI transition?

A: The UK government has announced £44bn of AI investment, which has created 13,250 jobs in 12 months. They are also working with tech firms to train 7.5 million people in AI skills.

Q: What are the potential benefits of AI in the job market?

A: AI can free up workers to focus on more interesting tasks, and while it will destroy some jobs, it will also create new ones. The goal is to transition workers into new, more rewarding, and higher-paid work. 

More Related Topics :