New shows the UK suffering the steepest AI‑related job losses among major economies, even as companies worldwide report double‑digit productivity gains
The impact of artificial intelligence on jobs is starting to show up unevenly across major economies, with early evidence pointing to both significant displacement and new opportunities – and with the United Kingdom emerging as one of the harder-hit markets so far.
Research by Morgan Stanley, based on companies that have used AI for at least a year, indicates that British firms reported an 8% net decline in employment over the past year – the steepest among the countries surveyed, which included the United States, Germany, Japan and Australia. The UK’s net job losses were around double the international average, highlighting how the transition to AI is playing out differently across labour markets.
The study focused on five key industries: consumer staples and retail, real estate, transport, healthcare equipment and automobiles. Across these sectors, companies worldwide reported using AI to streamline operations, automate routine tasks and reshape roles rather than simply add headcount. However, the balance between job creation and job losses varied by country.
In the UK, businesses reported cutting or not backfilling about 23% of roles while creating only 15% new positions. By contrast, employers in several other major economies reported more balanced outcomes, with similar productivity gains but a closer match between jobs eliminated and new roles created. In the US, for example, firms cited comparable productivity improvements to those seen in Britain but were more likely to generate new positions linked to AI deployment than to shed existing ones.
“The rising costs of employing staff is driving a growing number of smaller businesses to use AI and outsourcing solutions to fulfil roles traditionally filled by local people who are now missing out on these opportunities,” said Justin Moy, managing director at EHF Mortgages in Chelmsford. While his comments relate to UK conditions – including wage and tax pressures – similar dynamics are emerging in other high-cost labour markets, where smaller employers are particularly sensitive to payroll expenses.
Global labour markets under pressure
Around the world, AI adoption is coinciding with broader economic headwinds, making it harder to distinguish cyclical job cuts from technology-driven disruption. In many advanced economies, employers are grappling with higher wage bills, tighter margins and lingering uncertainty following the pandemic and subsequent inflationary period.
In the UK, unemployment has climbed to a near five-year high alongside the fastest pace of job cuts since 2020, reflecting both cost pressures and structural change. Youth unemployment has risen to 13.7% in the three months to November, the highest level since 2020, as entry-level white-collar roles come under pressure from automation and changing hiring strategies. Similar concerns are being voiced in Europe and parts of Asia, where young workers are finding it harder to secure the first rungs on the career ladder in sectors such as administration, basic finance roles and customer support.
Job vacancies have also fallen sharply in Britain, with openings down by more than one-third since 2022 – equivalent to about 500,000 roles. Vacancies in positions vulnerable to AI replacement, including software developers and consultants, have declined 37% since the launch of ChatGPT, compared with a 26% fall in other occupations, according to Bloomberg analysis of UK Office for National Statistics data. While this is a UK-specific snapshot, similar patterns are emerging in other markets where employers are reassessing demand for mid-level knowledge workers as AI tools become more capable.
Central banks and policymakers in several countries are beginning to flag the risks. Bank of England Governor Andrew Bailey recently warned that economies must prepare for AI-driven job displacement and consider how the technology could affect the pipeline that helps workers move into senior roles. Policymakers in the EU, US and Asia have also started to focus more heavily on workforce transition, training and regulation as AI capabilities accelerate.
An early warning for global labour markets
Rachel Fletcher, Morgan Stanley’s London-based head of EMEA sustainability research, described the bank’s findings as an “early warning sign” of AI’s impact on the labour market. The employment effect of AI has “come up in a lot of our recent investor conversations,” she noted, reflecting growing concern about how quickly automation may reshape workforces.
Across the countries surveyed, employers said they were most likely to eliminate early-career positions requiring two to five years of experience – roles that often serve as stepping stones to more senior jobs. This trend is appearing in multiple markets, suggesting a broader global risk: if AI disproportionately erodes entry and mid-level opportunities, it could undermine career progression and widen inequality, even in economies where overall employment remains relatively resilient.
At the same time, AI is delivering meaningful productivity gains. Companies in the study reported average productivity improvements of around 11.5% following AI adoption. In several markets, particularly the US, those gains are being partially reinvested in new AI-related roles and functions, from machine learning engineering and data analysis to AI governance and compliance. The challenge for policymakers and businesses worldwide is to ensure that these new opportunities scale fast enough – and are accessible enough – to offset the roles being automated away.
For now, the UK stands out as a case where AI-linked job displacement appears more pronounced than in peer economies. But the underlying forces at work – rising labour costs, rapid AI adoption and pressure to boost productivity – are global. That makes Britain less an outlier, and more an early indicator of the difficult trade-offs many countries may soon face as AI reshapes work.
