Britain’s labour market is at a crossroads. Just as many economists have argued that the slowdown is due to other causes outside of the furious investment in artificial intelligence (AI), year to date, AI investments have been nothing short of amazing, totaling £44 billion and generating the creation of approximately 13,250 jobs. The larger economic picture remains one of tepidness. According to IHS Markit, UK economic growth won’t even reach 1% in 2025. Taken together, this forecast paints a sobering picture of the current job market challenges.
In the decade before the 2008 financial crisis, Britain enjoyed annual growth rates of about 2.5%. That shows just how far today’s projections nationwide miss the mark. Companies are arguing that they’re being squeezed by increasing employment costs. Our councils are staring at a £25 billion pound hit from rising employer national insurance contributions introduced in April and an overall 6.7% increase in the national living wage.
As employers struggle to manage these increasing costs, many are choosing to move their investment from people to machines. Around 50 percent of UK businesses say they plan to make the switch as the costs of keeping employees rise sharply. These decisions are being made amid the most challenging job market facing university graduates since at least 2018. We explored this previously and found that since the launch of ChatGPT in November 2022, vacancies for entry-level jobs have declined by a third. This drop-off is striking and underscores the increasingly tenuous labor market prospects for new entrants to the labor force.
AI’s effect on the labor market is a contentious topic. Critics claim that as technology improves, jobs are eliminated. Some think these innovations eliminate the need for jobs while others think these new innovations lead to new jobs. Yael Selfin, chief economist at KPMG in the UK, emphasized this point by stating:
“When you look at any technology, it creates jobs – not just destroys them.”
This view of AI deployment reinforces the complex, intricate impact AI has on different sectors and job functions.
It follows the findings of a recent report, which analysis of AI-related activity across UK firms. Through earnings calls, remarks jumped from a few dozen in the early 2020s to upwards of 200 in the first quarter of 2025. This recent uptick is an encouraging indicator that enterprises are starting to understand AI’s transformative effects on business operations and their workforce structure.
However promising the boom in investment and AI jobs, Britain’s broader economic malaise remains a significant hindrance. These chronic problems further restrict potential job creation nationwide. This trend is evident across nearly all industries as large companies are laying off or rescinding offers for entry-level jobs. Rookie workers, who usually take on less complex tasks, are now competing more with automation. This change has helped create a more competitive space for grads and entry-level applicants.
ChatGPT has already identified its positioning of how the UK’s labour market will be impacted. It is careful to stress that its effect is complicated and nuanced. The AI platform stated:
“Yes, AI is contributing to job losses in the UK, but its impact is nuanced and varies by industry, skill level, and job function.”
Artificial intelligence poses a threat to many jobs. Yet, it opens up new roles — roles that require an entirely different skill set.