Business leaders are using AI as a “license to reduce headcount” – new Morgan Stanley research lays bare the impact on UK workers

Brits are being hit harder by the impact of AI on jobs than the US and other major economies, but experts warn business leaders could be jumping the gun with workforce cuts.

That's according to a report from Morgan Stanley, which surveyed organizations who had been using AI for at least a year in the US, Japan, Germany, and Australia across five industries.

The study found that AI had caused 8% net losses in jobs across those sectors in the UK – higher than other countries that were surveyed. The survey also reported UK businesses saw an 11.5% increase in productivity thanks to AI, although that might come as little benefit to those already laid off.

British companies surveyed saw 23% of jobs lost over the last 12 months, but also posted 15% new hires. Japan saw similar figures at 24% of jobs lost versus 17% new hires for a net loss of 7%.

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Germany and Australia both posted 24% jobs lost and 20% new hires. Notably, however, the US is gaining jobs because of AI, with 17% jobs lost and 19% new hires.

Those figures only cover five specific industries, namely the automotive, healthcare equipment, consumer staples and retail sectors, as well as real estate, and transport.

However, the report's authors said the data could be seen as an "early warning sign" of looming employment disruption.

A report from the Department of Education in 2023 highlighted the fact that specific sectors are most likely to be affected by AI, notably insurance and finance, while a survey by General Assembly predicted more layoffs were looming in roles that were easy to automate or among workers without AI skills.

Warning signs

The Morgan Stanley research comes amid a wider debate around the true impact of AI on jobs.

A report by Forrester found that AI will lead to the loss of 10 million roles over the next several years – more than the job losses caused by the recession of 2008. However, the consultancy also predicted that new roles would eventually take the place of those lost.

On the other hand, a recent study by Oxford Economics suggested the evidence of AI disrupting work is "patchy" and that claims of impact on the job market are "exaggerated".

While companies are cutting jobs, that's not human workers being replaced by AI – instead, it's traditional restructuring being pinned on the technology.

Atlassian denied its recent cuts had anything to do with AI, while Amazon pinned last year's redundancies on efforts to reduce bureaucracy.

"Overall, though, firms don't appear to be replacing workers with AI on a significant scale and we doubt that unemployment rates will be pushed up heavily by AI over the next few years," the Oxford Economics report said.

Are businesses jumping the gun?

Rebecca Hinds, Head of the Work AI Institute at Glean, said the Morgan Stanley research shows many businesses are making rash decisions when pursuing workforce cuts, often without having unlocked any tangible gains from AI.

As ITPro reported last year, research shows that UK business leaders have come to regret acting too hastily and cutting staff in favor of AI.

“Reports that AI-related job losses are disproportionately impacting the UK - with net cuts outpacing job creation more sharply than in other major economies - underscore a familiar but troubling pattern: executives are conflating early tool investment and adoption with license to reduce headcount, often before demonstrating genuine productivity gains,” she said.

“UK boardrooms appear particularly susceptible to cutting first and measuring later - a dynamic potentially driven by shareholder pressure, cost-saving mandates following economic uncertainty, and a political climate fixated on headcount efficiency.”

Despite the ongoing debate about the future of their jobs, British workers aren't panicking: a survey by Asana showed nine-in-ten remain largely open to using AI in their work, with two-thirds predicting their company will maintain or increase the number of human roles at their organisation.

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