UK Leads Major Economies in AI-Related Job Losses, Morgan Stanley Says

Artificial intelligence is supposed to make work easier. In Britain right now, it’s also making work disappear.

AI is cutting deeper into jobs in the UK than in other major economies, according to new research from Morgan Stanley. While companies say the technology is boosting productivity, Britain is standing out for the number of roles disappearing along the way.

The investment bank’s study shows UK firms recorded an 8% net job loss linked to AI over the past year, the highest among countries surveyed and twice the international average. By comparison, companies in the US, Japan, Germany, and Australia reported smaller losses, with American firms actually creating more jobs than they cut.

The research, shared with Bloomberg, looked at companies that have been using AI for at least a year across five industries: consumer staples and retail, real estate, transportation, healthcare equipment, and automobiles.

UK businesses reported an average productivity gain of 11.5% from AI adoption, similar to gains seen in the US. The difference is what followed. While American firms used those gains to expand hiring, British companies did not.

Instead, UK employers were more likely to cut roles or leave positions unfilled. Around a quarter of jobs were either eliminated or not backfilled, a level broadly in line with other countries, but Britain lagged badly in creating new roles to replace them.

Rachel Fletcher, head of EMEA Sustainability Research at Morgan Stanley and a report author, told Bloomberg the findings are an “early warning sign” of how AI is disrupting the labour market. The technology’s impact on employment has “come up in a lot of our recent investor conversations,” she added.

Young workers face dual squeeze

The AI disruption arrives at a particularly brutal moment for Britain’s labor market. Unemployment has climbed to a near five-year high of 5.1%, with companies cutting jobs at their fastest pace since 2020. Large minimum wage increases and higher employer National Insurance contributions are simultaneously hammering hiring plans.

Youth unemployment tells an even grimmer story. The jobless rate for workers aged 16 to 24 reached 15.9% in September through November 2025, the highest since 2020. Some 729,000 young people were unemployed during that period, up 103,000 from a year earlier, according to House of Commons Library youth unemployment statistics.

It’s part of a wider squeeze. Analysis of job ads by Bloomberg shows vacancies for roles most susceptible to AI, like software developers, have plummeted 37% since ChatGPT burst onto the scene in 2022.

“The rising costs of employing staff is driving a growing number of smaller businesses to use AI and outsourcing solutions to fulfill roles traditionally filled by local people who are now missing out on these opportunities,” Justin Moy, managing director at EHF Mortgages in Chelmsford, told Bloomberg.

Economists and policymakers agree that AI could still transform Britain’s long-term outlook. The Bank of England and the Office for Budget Responsibility have both highlighted its potential to lift productivity, with estimates suggesting AI could add up to 0.8 percentage points to annual productivity growth over the next decade.

But for now, the immediate focus is on disruption rather than growth.

Bank of England Governor Andrew Bailey has described AI as the next “general purpose technology”, on a par with the internet or computers, while warning that the UK must be prepared for job displacement and the strain it could place on career pipelines.

Also read: Bank of England Governor Andrew Bailey warned AI could reshape career pipelines even if it doesn’t cause mass unemployment.

The post UK Leads Major Economies in AI-Related Job Losses, Morgan Stanley Says appeared first on eWEEK.