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UK businesses shift investments from employees to AI

UK businesses shift investments from employees to AI

January 14, 2025
ai generative ,Artificial Intelligence technology big data.globalization and analytics management

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Half of UK businesses plan to prioritise investment in artificial intelligence over hiring because of Chancellor Rachel Reeves’ decision to increase employers’ tax bills, according to a survey commissioned by Boston Consulting Group shared with the Financial Times (paywall).

The survey found that 51% of UK business leaders said they planned to “redirect investment from staff to AI” as a result of an increase in employers’ national insurance contributions announced in the October Budget.

At the same time, as many as 57% of executives surveyed by BCG said they would hire fewer people in 2025 as a result of the government’s planned workers’ rights reforms. The poll of leaders at 251 UK businesses with more than 50 employees each found that investing in AI was a priority for 44% of respondents this year.

“People are starting to see, with AI and generative AI, the potential of those technologies to be more productive . . . in a world where the costs of employment are increasing,” said BCG managing director and partner Nick South. “Over time you will see organisations reshaping the size and shape of their workforces.”

An executive at one of the UK’s largest employers told the FT that the government was “increasing the costs of employing people in multiple ways simultaneously right at the point when AI cost-cutting possibilities emerge”. “It’s going to accelerate job cuts across the economy, no question,” the executive added.

Digitisation is already affecting hiring. Telecoms group BT announced in 2023 that it would slash up to 55,000 jobs, or 42% of its workforce, by the end of the decade. The FT reported previously that 10,000 of the planned job cuts were because of digitisation and automation.

Klarna chief executive Sebastian Siemiatkowski said in August that AI could help the Swedish ‘buy now, pay later’ group reduce its number of staff by about half. The company’s headcount fell by more than a fifth to 3,500 last year.

On a more optimistic note, James Corcoran, head of recruitment at staffing firm Sanderson’s government and defence practice said “AI will replace some jobs, support some jobs and generate some jobs, it will balance itself out.”