The UK is the country most severely impacted by AI-related job displacement.

Morgan Stanley's latest research shows that the UK is becoming the developed country whose job market is most severely impacted by artificial intelligence technology, with an 8% net layoff rate due to AI over the past 12 months—far surpassing its international peers. Morgan Stanley's research covered companies in the United States, Germany, Japan, and Australia. The net layoff rate due to AI in UK companies is twice the international average. Although UK companies have achieved an average productivity increase of 11.5% through AI, almost equal to that of American companies, U.S. companies have, in contrast, created more jobs while adopting AI. This trend comes as UK employers face rising wage costs, sluggish economic growth, and increased political instability. Official data shows UK companies are laying off employees at the fastest rate since 2020, and the unemployment rate has risen to a near five-year high. Significant increases in minimum wage and national insurance contributions continue to affect enterprise staffing plans. Bank of England Governor Andrew Bailey warned last month that the UK must prepare for AI-driven employment replacement and pointed out that the technology may impact the talent pool available to help employees advance to higher-level positions. AI Layoff Rate Leads Developed Countries Morgan Stanley’s research surveyed companies in five sectors affected by AI—consumer goods and retail, real estate, transportation, medical devices, and automotive—which have used the technology for at least one year. Data show that UK companies’ 8% net layoff rate due to AI is the highest among all surveyed countries. The study found that UK companies have cut or foregone replacement for about a quarter of positions due to AI—a ratio similar to their international peers. However, the likelihood of UK companies expanding recruitment because of this technology is significantly lower. For many businesses, tech investments have begun to pay off, and nearly half of UK companies report even greater productivity gains. Justin Moy, Managing Director of EHF Mortgages in Chelmsford, northeast London, said: "Rising costs of employing staff are driving more and more small companies to use AI and outsourcing solutions to fill roles traditionally held by local employees, who are now losing these opportunities." White-Collar Workers and Young People Bear the Brunt Bloomberg's analysis of online job vacancy data from the UK Office for National Statistics shows that while job postings are generally declining across industries, UK companies are cutting positions that may be affected by AI, such as software developers or consultants, at a faster rate. Since OpenAI launched ChatGPT in 2022, vacancies for these positions have fallen by 37%, compared to a 26% drop for other roles. Official data released last week show that, since 2022, job vacancies across the entire economy have fallen by more than a third, equivalent to 500,000 positions. One-fifth of that decline is driven by industries most likely to be affected by AI, including professional, scientific and technical activities, administrative services, and the IT sector. Britain’s youngest workers are experiencing a double squeeze. AI has disrupted entry-level white-collar jobs, while Labour’s tax policies have pressured recruitment in retail and hospitality. In the three months ending November, youth unemployment rose to 13.7%, the highest level since 2020 and at a faster rate than overall unemployment. Employers surveyed by Morgan Stanley indicated they are most likely to cut early-career positions in the UK that require two to five years of experience. Productivity Gains Fail to Mask Job Pain AI has the potential to rescue the UK economy from its path of slow growth. Both the Bank of England and the Office for Budget Responsibility have emphasized this possibility, with fiscal oversight agencies estimating that the technology could increase productivity growth by up to 0.8 percentage points over the next decade—a boost that would improve living standards and public finances. For now, however, the focus is on how AI is worsening the UK’s employment crisis, particularly for young people and white-collar workers. Bailey said AI is becoming the next “general purpose technology,” similar to previous waves of innovation that spurred growth, such as computers and the Internet. Rachel Fletcher, EMEA Head of Sustainability Research at Morgan Stanley in London and one of the report’s authors, said the findings offer “early warning signals” of how AI is disrupting labor markets. She added that the technology’s impact on jobs “has come up in many of our recent conversations with investors.” Risk Warning and Disclaimer The market carries risks, and investment should be approached cautiously. This article does not constitute personal investment advice and has not considered individual users’ specific investment objectives, financial situations, or needs. Users should consider whether any opinions, views, or conclusions in this article suit their particular circumstances. Investment is at one’s own risk.