Employers are cutting roles at the quickest rate since 2020
New research by Morgan Stanley reveals that the UK is experiencing more job losses due to AI than comparable economies, with firms reporting significant cuts despite productivity gains.
Britain is shedding more jobs than it is creating because of AI, with the impact on workers more severe than in comparable economies, according to new research by Morgan Stanley.
The bank’s analysis of companies that have been using AI for at least a year found UK firms reported net job losses of 8% over the past 12 months linked directly to the technology.
This figure is highest among countries surveyed, including Germany, the United States, Japan and Australia and is roughly double the international average.
The findings come as the UK labour market shows signs of strain.
Employers are cutting roles at the quickest rate since 2020, with unemployment hovering near a five-year high, according to official data, as firms grapple with rising wage bills, weak economic growth and geopolitical uncertainty.
Morgan Stanley surveyed companies across five sectors seen as particularly exposed to AI: retail and consumer staples, estate agency, transport, healthcare equipment and automobile.
Many firms said their technology investments were already delivering results. UK businesses reported average productivity gains of 11.5% from AI, broadly in line with gains seen in the US.
But the report highlights a stark divergence in employment outcomes.
While American companies with similar productivity boosts went on to create more jobs than they cut, UK firms were far less likely to increase hiring as a result of adopting AI.
Research published by Deloitte and PwC showed that, whilst AI adoption was driving productivity gains, that wasn’t yet translating into increased profits. Hiring patterns may account for some of that disconnect.
A separate Bloomberg analysis of vacancy data from the Office for National Statistics suggests that British employers are pulling back fastest from roles most likely to be affected by automation, such as software developers and consultants.
Since the launch of OpenAI’s ChatGPT in late 2022, vacancies for those occupations have fallen by 37%, compared with a 26% decline elsewhere.
Overall vacancies across the UK economy have dropped by more than a third since 2022 – around half a million roles – with about a fifth of that fall concentrated in professional, scientific and technical services, administrative work and IT.
Youth unemployment has risen particularly sharply, reaching 13.7% in the three months to November, its highest level since 2020.
Employers surveyed by Morgan Stanley said early-career positions requiring two to five years’ experience were most likely to be cut or left unfilled in the UK.
While companies here were just as likely as overseas peers to avoid backfilling roles lost to AI, they were significantly less inclined to step up recruitment elsewhere.
Earlier this month, London mayor Sadiq Khan said AI could become a “weapon of mass destruction of jobs” if left unchecked.
Speaking at Mansion House, he urged leaders to harness AI’s benefits while putting safeguards in place to avoid “a new era of mass unemployment”, particularly in London’s finance and creative industries.
A poll conducted by City Hall London last November found 56% of London workers expected AI to affect their job in 2026.
Business leaders, however, continue to press ahead with the technology.
Research published in October by the British Standards Institution found two-thirds of executives planned to increase AI investment, with more than 40% saying it was being used to reduce headcount and a third reporting they now look to AI before hiring new staff.
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