Key Points:
- UK employers expect average pay rises of 3% over the next year, according to a CIPD survey.
- One in six firms anticipate workforce cuts due to AI adoption, especially in junior and clerical roles.
- Hiring confidence remains near post-pandemic lows, with the public sector hit hardest.
Wage Growth Holds Steady as Hiring Confidence Weakens
British employers are planning to raise wages by an average of 3% over the next 12 months, but many remain cautious about hiring amid mounting economic pressures and the growing influence of artificial intelligence (AI) on the job market.
According to the Chartered Institute of Personnel and Development (CIPD), hiring intentions across the country are among the weakest since the pandemic, particularly in the public sector, where budget constraints and hiring freezes have become common. The findings come ahead of the November 26 budget, with the CIPD urging Finance Minister Rachel Reeves to avoid tax policies that could further dampen employment prospects.
“People looking for jobs are already feeling the impact of slower hiring since Reeves’ first budget,” said James Cockett, the CIPD’s senior labor market economist. “We need to see a stronger focus by the government and employers on long-term workforce planning and investment in skills to help people use AI effectively or transition into new roles.”
The survey of over 2,000 businesses found that median expected pay growth remains at 3%, marking the sixth consecutive quarter at that level. This figure aligns with the Bank of England’s latest report, which recorded employer wage growth expectations rising slightly to 3.7% in the three months to October — the highest in five months.
AI Prompts Fears of Job Reductions
While wage increases appear steady, employers are increasingly anxious about the effect of artificial intelligence on employment. The survey revealed that one in six employers expects AI to enable workforce reductions within the next year.
Of those anticipating cuts, a quarter expect reductions of more than 10%, with junior managerial, clerical, and administrative positions most at risk. Many firms see AI as a way to streamline operations, automate repetitive tasks, and boost efficiency — but experts warn that without proper workforce retraining, the technology could displace thousands of employees.
The CIPD emphasized that the UK government should prioritize skills development and digital literacy programs to help workers adapt to the evolving labor landscape. “AI is changing how we work, but it shouldn’t come at the cost of opportunity,” Cockett noted.
Economists expect official labor data due Tuesday to show a slight slowdown in overall wage growth, with regular pay projected to rise 4.6% year-on-year, down from 4.7% in the previous report.
As businesses balance the need for cost efficiency and innovation, the UK faces a delicate challenge: managing technological transformation without sacrificing employment stability or fair pay.
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