AI to Drive Staffing Cuts in One in Four Large UK Businesses

TL;DR: CIPD survey reveals 26% of large UK private sector organisations and 20% of public sector employers expect AI-driven headcount reductions within 12 months. Financial services leads at 37%, with junior professional and administrative roles most vulnerable. Among employers anticipating cuts, a quarter expect decreases exceeding 10%.

More than a quarter of large UK businesses anticipate cutting headcount within the next year due to artificial intelligence impact, with junior roles most likely to be axed, according to research from the Chartered Institute for Personnel and Development. The findings highlight a stark divide between large organisations streamlining operations and SMEs maintaining staffing levels whilst deploying AI.

Sector and Scale Variations

The CIPD found 26% of large private sector organisations and 20% of public sector employers expected fewer staff in the next 12 months because of AI, compared with just 9% of small- and medium-sized enterprises. “While SMEs appear to be doing more with the same number of people, large private sector employers appear to be streamlining,” the HR professionals’ body observed.

Financial services showed the starkest change, with 37% of employers expecting AI to reduce headcount, followed by IT at 26% and legal, accounting, and consultancy at 24%. Among employers anticipating AI-driven reductions, a quarter expected decreases exceeding 10%.

Impact on Junior Roles

The survey reinforces concerns about AI’s effect on young people entering the workforce, as employers identified junior professional and managerial roles, alongside clerical and administrative positions, as most likely to be affected.

James Cockett, senior labour market economist at the CIPD, acknowledged that whilst AI holds “great potential for improving productivity… it also risks leaving many people behind.”

Youth Employment Crisis

Younger UK workers already face a prolonged hiring slump and job cuts in sectors like retail and hospitality—traditional career entry points hit hard by increased wage taxes. Official data shows almost 950,000 people aged 16 to 24 (12.8%) were not in education, training, or employment in Q2 2025, up from 10.7% at end-2019.

This increase has been driven by rising numbers of young people citing ill health—particularly mental ill health—as preventing them from working. The government announced former Labour health secretary Alan Milburn would lead an independent investigation into workforce participation challenges, due to conclude next summer.

Hiring Intentions at Record Low

The CIPD found employers’ hiring intentions remained at their lowest on record outside the pandemic. The net employment balance—the difference between employers expecting to increase staffing and those expecting cuts—remained unchanged at +9.

Conflicting Evidence

Whilst no conclusive evidence yet confirms AI is eliminating graduate jobs, the pattern differs across markets. In the US, where AI rollout is furthest advanced, unemployment has risen more sharply among recent labour market entrants without college education than for graduates.

Looking Forward

The research highlights AI’s dual nature: potential productivity improvements alongside significant displacement risks, particularly for junior roles. Large organisations appear to be pursuing efficiency through headcount reduction, whilst SMEs maintain staffing levels whilst adopting AI technologies.

The challenge for policymakers and employers will be managing this transition to prevent an entire generation from being excluded from workforce participation before their careers have begun, whilst navigating the legitimate productivity opportunities AI presents.

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