AI disrupts UK hiring for tech and entry level roles
UK employers are significantly scaling back hiring roles at risk of being disrupted by artificial intelligence (AI), adding signs of a broader labour market slowdown.
New data from McKinsey & Co revealed that online job postings fell 31 per cent in the three months to May, compared with the same period in 2022.
Yet the decline was most pronounced in roles identified as highly exposed to AI, such as software engineering, finance, and consulting, where job listings dropped by 38 per cent – nearly double the overall fall.
The contraction comes as businesses face multiple headwinds, including high interest rates, sluggish economic growth, and increased labour costs following recent tax changes.
AI-sensitive roles see sharpest drops
McKinsey’s report showed a sustained decrease in demand for certain white-collar jobs.
Over the past three years, vacancies for positions like software developers, management consultants, and graphic designers have declined by more than 50 per cent.
Entry-level roles have also been affected. Job postings for internships, apprenticeships, and junior positions not requiring degrees have dropped nearly one third since late 2022, coinciding with the rise of generative AI tools like ChatGPT, according to jobs platform Adzuna.
“The anticipation of significant – albeit uncertain – future productivity gains, especially as the technology and its applications mature, is prompting companies to review their workforce strategies and pause aspects of their recruitment” said Tera Allas, senior adviser at McKinsey.
Hiring slowdown spreads beyond AI-sensitive sectors
The broader labour market is also showing signs of strain.
Permanent job placements in London fell in June at the sharpest rate in nearly two years, while demand for temporary staff also declined, according to data from the Recruitment & Employment Confederation (REC) and KPMG.
Neil Carberry, REC’s chief executive, said that ongoing tax changes – particularly the increase in employers’ national insurance contributions – were weighing on hiring confidence.
“Much of the hesitation stems from the scar tissue left by the Spring tax hikes,” he said.
Sectors including retail and hospitality have reported notable job losses.
The hospitality industry alone has shed 69,000 jobs since April, according to the Office for National Statistics.
What’s more, UKHospitality has warned that as many as 200,000 jobs could be lost over the next year if current trends continue.
AI already influencing hiring
New figures from Indeed have showed that roles involving AI development or deployment are also being affected.
Job postings in mathematics, including data science and analytics roles, have halved since pre-pandemic levels, despite being among the most AI-focused in terms of job descriptions.
Conversely, sectors with limited AI exposure like real estate and education have seen vacancy growth.
This reflects a wider shift, with data from PwC showing that job listings in the 25 per cent of roles least exposed to AI have increased significantly since 2012, while those most exposed have remained flat or declined.
Monetary policy outlook shifts as market slows
The job market slowdown comes as Bank of England governor Andrew Bailey signalled that interest rates could be cut more rapidly if labour market weakness persists.
In an interview on Monday, Bailey said businesses were adjusting to higher employment costs, particularly as a result of changes to NICs introduced by Rachel Reeves.
“I think the path [for interest rates] is down,” Bailey said. “But we continue to use the words ‘gradual and careful'”.