Artificial intelligence (AI) is rapidly transforming the United Kingdom’s job market, driving both hope and anxiety across industries, policymakers, and households. On December 19, 2025, Bank of England governor Andrew Bailey issued a stark warning: the scale of job displacement caused by AI could rival that of the Industrial Revolution. As the nation grapples with rising unemployment—especially among young people—Bailey’s comments have ignited a debate over how Britain can best prepare for a future shaped by intelligent machines.
Speaking to BBC Radio 4’s Today programme, Bailey drew a direct line between the past and the present, saying, “As you saw in the Industrial Revolution, now over time, I think we can now sort of look back and say it didn’t cause mass unemployment, but it did displace people from jobs and this is important. My guess would be that it’s most likely that AI may well have a similar effect.” His remarks echoed concerns that technological upheaval, while ultimately beneficial for productivity, often comes with painful transitions for workers—especially those at the start of their careers.
Official data released this week by the Office for National Statistics paints a sobering picture. The UK unemployment rate climbed to 5.1% in the three months to October 2025, with the number of unemployed 18 to 24-year-olds surging by 85,000—the sharpest increase since late 2022. Recruiters and economists alike point to a confluence of factors: higher minimum wages, increased employment taxes, and, crucially, the accelerating adoption of AI across business sectors. According to City AM, permanent placements in the UK dropped to 536,000 in 2024 from over 800,000 the previous year as firms delayed long-term hiring decisions.
But why are younger workers bearing the brunt? Bailey explained, “We do have to think about what it’s doing to the pipeline of people. If it’s people working with AI, I’m not sure it will change the pipeline, but we’re right to keep a close eye on that.” The concern is that entry-level roles, once the traditional launching pad for graduates and inexperienced professionals, are being automated at a pace that outstrips the creation of new opportunities. Sectors like law, accountancy, finance, and administration are especially vulnerable, with AI systems now able to process vast volumes of data, identify patterns, and automate complex tasks that once required teams of junior staff.
Professional services giant PwC is emblematic of this shift. Global chairman Mohamed Kande told the BBC, “Now we have artificial intelligence. We want to hire, but I don’t know if it’s going to be the same level of people that we hire—it will be a different set of people.” He acknowledged that tasks that once took weeks can now be completed in minutes by AI models, reducing the need for large teams of consultants. This sentiment is echoed across banking and professional services, where generative AI tools are advancing quickly. OpenAI, for example, recently unveiled a new version of ChatGPT that it claims can outperform human experts on tasks typically assigned to junior investment banking analysts.
The potential impact is staggering. City AM previously reported that AI could replace about 10% of roles in the UK banking sector—roughly 27,000 jobs—by 2030, with banks expected to invest £1.8 billion in generative AI technology. As firms become more cautious about recruiting at the entry level, the career pipeline for young professionals risks becoming fragmented, raising fears of a “lost generation” in the workforce.
Yet, amid the disruption, Bailey remains optimistic about AI’s long-term benefits. He described the technology as “the most likely driver of the next phase of UK economic growth,” particularly through its potential to lift productivity. “In terms of its potential to improve productivity growth, I think it’s pretty substantial. It will get used across the economy. How quickly it comes through is another question, history would suggest that it does take some time.” Bailey’s caution is rooted in historical precedent: technological revolutions rarely deliver immediate results. The gains, he suggests, will be real—but patience and preparation are essential.
Preparation, in Bailey’s view, hinges on investment in training, education, and skills. “The UK needs to have the training, education, [and] skills in place so workers could shift into jobs that use AI,” he said. Without these foundations, the labor market could become more fractured, with opportunities flowing disproportionately to those able to work alongside new technologies. As Bailey put it, “People seeking work would find it a lot easier if they had the skills needed to work alongside AI.”
The Bank of England is not standing still. Bailey revealed that the central bank is experimenting with AI, though he admitted that, like many institutions, its use remains at an early stage. “To get it into mainstream, everyday use will take some time, but it’s critically important that we obviously focus on getting the pre-conditions and all the conditions in place for that to happen,” he explained. The UK government, for its part, has announced billions of pounds in investment aimed at turning Britain into an AI hub and creating thousands of new jobs—a bet that displaced workers can be retrained fast enough to keep up with the pace of change.
However, the rush to embrace AI has also sparked concerns about financial stability. Bailey acknowledged growing unease over a potential AI bubble, with some technology companies commanding valuations reminiscent of the dotcom era. “We have to watch the valuation question. Most of the big companies are generating cash flow, but that doesn’t mean they’ll all be winners. We’re watching it very closely because we need to understand the consequences of any sharp unwinding,” he said. The Bank of England has recently sounded the alarm over a possible crash in the value of AI firms, warning that a sharp correction could pose risks to the broader financial system.
Not everyone agrees on the root causes of the current hiring slowdown. Some economists argue that higher minimum wages and increased taxes have made businesses more cautious about hiring entry-level staff. Others, however, point squarely at AI’s growing role in automating tasks that were once the exclusive domain of junior employees. Regardless of the cause, the effect is clear: young people are facing a tougher job market, and the path into professional careers is becoming less certain.
As the UK stands at the crossroads of technological transformation, policymakers, business leaders, and workers alike are being forced to confront difficult questions. Can the education system evolve quickly enough to equip the next generation with the skills they need? Will new industries and roles emerge fast enough to absorb those displaced by automation? And can the country strike a balance between harnessing AI’s promise and protecting the most vulnerable members of its workforce?
One thing is certain: the debate over AI’s impact on jobs is no longer theoretical. It is playing out in real time on Britain’s high streets, in its boardrooms, and across its universities. As Bailey and others have made clear, careful management, investment in skills, and vigilant oversight of financial risks will be essential if the UK is to navigate this new industrial revolution without leaving swathes of workers behind.
