Rising unemployment and AI

We have a combination of AI and NI resulting in the worsening unemployment figures, as business owners look to move away from the cost of a larger team of staff, and see how AI technology can deliver similar results in a wide range of tasks, on a much lower cost basis. For example, within the mortgage industry, where the traditional office model involved several support team members checking and chasing documents from clients, we now have technology that allows clients to upload documents, and they will be analysed within seconds via AI for authenticity, payment behaviour, and affordability. Replicate that across other business areas, and we have a significant change in how employers will design their processes.

AI is a fundamental game-changer across countless industries. It’s often said you won’t lose your job to AI—but to someone using AI. In truth, we’re already seeing both. I know people in the creative sector who’ve lost jobs directly due to AI tools replacing their work.

But the bigger shift may be more subtle: firms becoming so efficient with AI that they simply don’t need to hire as many people—or replace those who leave. And rising employment costs like higher National Insurance only accelerate this trend. Businesses are incentivised to invest in tech, not people. AI isn’t just reshaping roles—it’s quietly reshaping the entire jobs market.

Recent rises in UK unemployment, falling vacancies, and reduced payroll numbers have been driven mainly by the tightening of economic policy. One particular challenge for employers has been the increase in NI, raising the cost of labour, and impacting recruitment. In addition, overall business confidence has been dented by policy uncertainty. While government policy sets the broader climate, AI adoption is accelerating specific shifts, particularly in sectors focused on administration and entry level positions in other sectors, where job postings have fallen as firms expect AI-driven efficiencies. Many employers are also pausing hiring, anticipating that ongoing advances in tech will further reduce the need for certain roles. In summary, government policy remains the main driver for the downturn, with AI deepening the impact in selected areas.

The unemployment figures tell a tale of two forces: while the Chancellor's National Insurance hikes have made hiring more expensive, AI is quietly reshaping which jobs exist at all. The experts are split—some see businesses choosing algorithms over payroll costs, others argue we're still in AI's early adoption phase in traditionally conservative Britain.
What's clear is that AI isn't just replacing roles, it's redesigning entire workflows. From mortgage brokers using AI to analyse documents in seconds to marketing teams hiring "prompt engineers" instead of traditional developers, we're witnessing a fundamental shift in what work looks like. The question isn't whether AI is contributing to unemployment—it's whether our policies and workforce training can adapt quickly enough to this new reality.

AI might be playing a role, but it's not the main driver behind rising unemployment. The bigger issue is that businesses are under financial pressure, especially with costs like Employer’s NI making it harder to justify hiring or replacing staff. Naturally, some are turning to AI to plug the gaps and improve efficiency, but that’s more a reaction to tough conditions than a grand plan to replace people. If the government wants to protect jobs, it needs to make it easier and more attractive for businesses to grow their teams.