UK firms plan modest pay rises amid AI fears
Employers warn of weaker hiring, rising costs and growing automation risks
That's according to the latest survey by the Chartered Institute of Personnel and Development (CIPD) that was conducted among 2,000 employers, between 19 September and 14 October.
The survey found that 17% of UK employers expect AI to reduce their workforce over the next 12 months.
Among those anticipating cuts, nearly one in four (26%) expect to lose more than 10% of their staff. Clerical, administrative, and junior professional positions are seen as the most vulnerable, with 62% of those expecting AI-related job losses predicting cuts in these areas.
The risk is most pronounced in large private-sector companies, where 26% anticipate a reduction in staff numbers, compared with 17% across the private sector as a whole and 20% in the public sector.
The findings, the CIPD said, highlight the urgent need for retraining and reskilling programmes to help workers adapt to the rapid spread of AI across industries such as finance, IT, and administrative services.
"AI is transforming the way many people work and has great potential for improving productivity and performance, but it also risks leaving many people behind," said James Cockett, senior labour market economist at the CIPD.
“Junior roles stand to be most affected by AI, but we need a national drive to retrain and upskill people of all ages and career stages. It's crucial that we see rapid progress on the development of the Growth and Skills Levy, informed by genuine consultation with employers, to ensure workers are equipped with the skills for an AI-driven economy.”
The CIPD’s conclusion goes against a prediction made by Bank of England governor Andrew Bailey in February, who admitted that AI brings risks but will not be a “mass destroyer of jobs.”
Weak hiring and pay growth plateau
The CIPD's survey suggests hiring intentions are around their weakest since the pandemic, particularly in the public sector.
Just 61% of employers intend to hire new staff over the next three months, unchanged from the previous two quarters but down from 67% a year ago.
Recruitment plans are strongest in the public sector, where 74% of employers expect to take on new staff.
In the private sector, 58% of employers plan to recruit, while only 13% expect major difficulties filling vacancies over the next six months.
Meanwhile, expectations for pay growth appear to have plateaued. Across all sectors, the median expected rise in basic pay remains 3%, the sixth consecutive quarter at that level.
A Bank of England survey released last week showed wage growth expectations ticking up to 3.7% in the three months to October, the highest level in five months.
Economists polled by Reuters expect official data next week to show regular pay growth slowing slightly to 4.6% in the three months to September, down from 4.7%.
Beyond AI, employers are worried about the impact government fiscal policy will have on hiring.
The CIPD urged Finance Minister Rachel Reeves to avoid further measures that could deter recruitment in her upcoming 26th November budget.
Last year, Reeves announced a significant increase in employers' social security contributions, which many businesses say has dampened hiring and confidence.
The CIPD warned that employer confidence remains at a record low outside of the pandemic, and further tightening through the Employment Rights Bill or new tax measures could worsen the situation.