Artificial intelligence is already contributing to net job losses in the UK, with employers cutting more roles than they create as the technology spreads across the economy, a new report suggests.
It indicates that Britain is being hit harder than other major economies, as companies adopt AI during a period of weaker hiring, rising employment costs and elevated unemployment. While firms are reporting clear productivity gains from automation, those efficiencies are not translating into job creation at the same pace seen elsewhere.
The research was carried out by financial services firm Morgan Stanley, which surveyed businesses across several sectors that had been using AI for at least a year. It found UK companies reported net job losses linked to AI over the past 12 months, in contrast with firms in countries such as the United States, Germany, Japan and Australia.
UK firms report net job losses linked to AI
According to the analysis, British companies reported a net reduction in jobs of 8 percent as a result of AI adoption over the past year. This was the highest rate among the countries surveyed and around double the average reported elsewhere.
Nearly 1,000 businesses took part in the study across five industries considered particularly exposed to AI, including consumer staples and retail, real estate, transport, healthcare equipment and automotive manufacturing. All had been using AI tools for at least 12 months.
Across all countries surveyed, companies said AI had led to the elimination of around 11 percent of existing roles, with a further 12 percent not being back-filled. These reductions were partially offset by the creation of new roles linked to AI, resulting in a net global job loss of around 4 percent.
The UK diverged from this pattern because of weaker job creation. While firms reported eliminating or not replacing roles in line with the global average, they said AI had created fewer new positions than in comparable economies. As a result, Britain recorded the largest net employment decline among the countries studied.
Productivity gains fail to translate into hiring
Despite the employment impact, UK firms reported clear productivity benefits from AI. On average, businesses said productivity had increased by around 11 percent following investment in the technology, broadly in line with the global average and slightly ahead of gains reported in some other countries.
In the United States, similar productivity improvements were accompanied by stronger job creation. By contrast, UK firms appear to be using AI primarily to increase output with existing staff, rather than expanding headcount.
The report suggests this reflects wider labour market pressures. Employers in the UK are facing higher payroll costs, including increased national insurance contributions and a higher minimum wage, while economic uncertainty has made businesses more cautious about recruitment.
Unemployment is at its highest level in four years and job vacancies have fallen sharply since their post-pandemic peak. Data shows vacancies are down by around a third since 2022, equivalent to roughly half a million roles, leaving fewer opportunities for workers displaced by automation.
Quiet attrition replaces large-scale layoffs
Rather than triggering waves of redundancies, AI appears to be accelerating quieter forms of workforce reduction. The research suggests many employers are choosing not to back-fill roles as staff leave, allowing headcount to fall gradually without formal job cuts.
This approach may reduce short-term disruption for employers but can be harder for workers to anticipate. It also risks weakening internal career pathways, particularly in organisations where junior and mid-level roles have traditionally served as stepping stones to more senior positions.
Analysis of employment data has shown UK businesses scaling back hiring in roles most exposed to AI, including software development, consulting and other professional services positions. In some cases, tasks previously handled by early or mid-career staff are being absorbed by automation or redistributed across teams.
Mid-career workers face particular disruption
The impact of AI is not confined to entry-level roles. The research found that mid-career professionals, typically those with between two and ten years’ experience, were among the most affected.
These workers were the most likely to see their roles eliminated or restructured, but they were also the most likely to be retrained, redeployed or rehired into new positions linked to AI. This suggests AI is reshaping career paths as much as reducing overall employment.
However, the disruption raises concerns about progression bottlenecks. If fewer junior and mid-level roles are available, workers may struggle to build experience or move into senior positions, even where headline employment levels stabilise.
Rising anxiety about job security
Separate research points to growing concern among workers about the long-term impact of AI on employment. More than a quarter of UK workers now say they fear their job could disappear completely within the next five years because of AI.
Younger workers appear particularly anxious. Surveys show Generation Z employees are more likely to worry about whether they will be able to adapt to technological change, while older workers nearing retirement tend to express greater confidence about their prospects.
Prolonged uncertainty about job security can contribute to stress, lower morale and disengagement, even among employees whose roles are not immediately at risk.
Warnings from political and business leaders
The findings have added weight to warnings from political and business leaders about the employment risks associated with AI. Earlier this month, London mayor Sadiq Khan warned that AI could destroy large numbers of jobs in the capital and usher in a new era of mass unemployment if action was not taken.
In his annual Mansion House speech, Khan said London was particularly exposed because of its reliance on white-collar employment in sectors such as finance, law, consulting and the creative industries. He argued that entry-level and junior roles were likely to be among the first affected.
Business leaders have echoed those concerns. Speaking at the World Economic Forum in Davos, Jamie Dimon, chief executive of the US bank JPMorgan, said governments and employers would need to step in to support displaced workers or risk social unrest.
Managing workforce change as AI adoption accelerates
The report raises difficult questions about how AI adoption is managed and communicated. While automation can deliver efficiency gains, it can also heighten job insecurity and damage trust if workers believe technology is being used primarily to cut roles.
HR teams may face growing pressure to support reskilling and redeployment, particularly for early and mid-career staff whose roles are changing fastest. Investment in training, clearer internal pathways and more transparent workforce planning may be critical to maintaining engagement.
It also underlines the importance of viewing AI adoption in the context of wider labour market conditions. In a weak hiring environment, even modest reductions in recruitment can have an outsized impact on job opportunities and career progression.
Morgan Stanley’s analysts cautioned that their research focused on industries most exposed to AI and therefore represented a downside scenario. Even so, they said the results provided an early warning of the potential negative employment effects as AI technology continues to improve.
