Research by Morgan Stanley has found that the adoption of AI led to a net 8 per cent reduction in roles across UK businesses over the past 12 months double the average job loss recorded in comparable economies including the United States, Germany, Japan and Australia.
The findings are likely to frustrate Sir Keir Starmer, who has repeatedly pledged to position Britain as an AI “superpower”, while intensifying debate over the technology’s long-term impact on employment.
UK Lags Behind Peers on Job Creation
The study, which surveyed nearly 1,000 businesses across five countries, focused on companies that had been using AI for at least a year. On average, respondents said 11 per cent of existing roles had been eliminated because of AI, while a further 12 per cent were not replaced.
Although AI adoption also led to a 19 per cent increase in new roles, this only partially offset the losses, resulting in an overall 4 per cent net decline in jobs globally.
The United States emerged as the biggest beneficiary of the AI shift, with companies there reporting that the technology is creating more jobs than it is making redundant.
In contrast, UK firms said 23 per cent of roles had either been cut or left unfilled, in line with the global average. However, they reported only a 15 per cent increase in new hires, leaving the country trailing its international peers.
Mid-Career Workers Most Affected
Morgan Stanley’s analysts found that mid-career professionals, defined as those with between two and ten years’ experience, were the most affected by AI-driven change. This group was the most likely to lose roles, but also the most frequently retrained, redeployed or rehired into new positions.
Some business leaders argue that AI is replacing specific tasks rather than entire jobs. Others are less optimistic, warning that automation is increasingly leading to permanent role reductions.
Productivity Gains Amid Hiring Slowdown
Despite job losses, UK companies reported an average 11 per cent increase in productivity following AI investments. This performance was broadly in line with the global average and exceeded productivity gains recorded in both the US and Germany.
However, the productivity boost comes at a difficult time for the UK labour market. Employers remain cautious about hiring amid economic uncertainty, geopolitical tensions and rising payroll costs.
As a result, companies are scaling back recruitment in roles most exposed to AI disruption, including software developers and consultants, according to a Bloomberg analysis of official employment data.
Vacancies Continue to Decline
Job vacancies in the UK have fallen by around one-third since 2022, equivalent to approximately 500,000 roles. Data published by job site Adzuna shows that job adverts declined for a sixth consecutive month in December.
Morgan Stanley cautioned that its survey focused on industries most likely to be affected by AI, meaning the findings represent a “significant downside case” for employment trends.
“Even so,” the analysts said, “the results provide an early warning of the potential negative employment effects as AI technology continues to advance.”
