UK Leads Major Economies in AI-Driven Job Losses, Morgan Stanley Study Finds
The United Kingdom is experiencing a net loss of jobs due to artificial intelligence at a higher rate than any other major economy, with British companies reporting an 8% reduction in headcount over the past year attributable to AI — even as productivity rises — according to new research from investment bank Morgan Stanley.
The findings have prompted warnings from London Mayor Sadiq Khan about the risk of "mass unemployment" in white-collar sectors, and have led the UK's investment minister to suggest that a universal basic income could be considered as a policy response.
Key Findings
The Morgan Stanley study, which surveyed companies across five industries that had been using AI for at least a year, found that UK businesses reported an average 11.5% increase in productivity attributable to AI — comparable to gains seen in the United States, Japan, Germany, and Australia. However, unlike those countries, British companies were cutting more jobs than they were creating as a result of AI adoption.
The research identified early-career positions — particularly those requiring two to five years of experience — as the most vulnerable to displacement in the UK. More than a quarter of British workers (27%) told a separate Randstad survey that they feared losing their jobs to AI within the next five years, with younger workers expressing the greatest anxiety.
London's White-Collar Warning
Mayor of London Sadiq Khan has warned that AI poses a particular threat to the capital's white-collar economy, with finance, creative industries, law, accounting, consulting, and marketing all identified as sectors at significant risk. Khan has called on both government and business to take proactive steps to create new jobs to replace those displaced by automation.
A separate report from the City of London Corporation estimated that approximately 119,000 clerical roles — predominantly held by women — in the tech and financial services sectors could be displaced over the next decade, and called for urgent reskilling programmes.
Government Response
UK investment minister Jason Stockwood has acknowledged the scale of the challenge, stating that discussions about a universal basic income are "definitely" occurring within government circles as a potential "concessionary arrangement" for workers in immediately displaced roles, alongside mechanisms for retraining.
The UK's competition regulator has also raised concerns about the concentration of power in the AI sector, with chief executive Sarah Cardell warning of "winner takes all dynamics" that could stifle competition and innovation if a handful of tech giants are allowed to dominate the market.
Why It Matters
The UK's position as the country most exposed to net AI-driven job losses among major economies is a significant finding, particularly given that the country is simultaneously experiencing a four-year high in unemployment driven by rising costs and taxes. The combination of AI displacement and broader economic pressures creates a challenging environment for workers across multiple sectors.
What's Next
The government is expected to publish further guidance on AI and the labour market as part of its industrial strategy later in 2026. The full Morgan Stanley research and related analysis is available via The Guardian.
