AI job disruption is unfolding unevenly worldwide, with the UK and Australia offering an early glimpse of the challenges ahead
Artificial intelligence is reshaping labour markets across the globe, but its impact is far from uniform. New research from Morgan Stanley suggests the United Kingdom is currently experiencing some of the sharpest AI-linked job losses among major economies, while fresh data from Australia highlights a different tension: strong confidence in growth but slower AI adoption and concerns about falling behind.
Morgan Stanley’s study of companies that have used AI for at least a year found that British firms reported an 8% net decline in employment over the past 12 months – the steepest among the countries surveyed, which included the United States, Germany, Japan and Australia. The UK’s net job losses were around double the international average, suggesting AI-related disruption is biting harder there than elsewhere.
The research focused on five industries: consumer staples and retail, real estate, transport, healthcare equipment and automobiles. Across these sectors, businesses worldwide are using AI to automate routine tasks, streamline operations and reconfigure roles. Yet the balance between jobs eliminated and created differs significantly by country.
In the UK, comapneis reported cutting or not backfilling about 23% of roles while creating only 15% new positions. By contrast, employers in other major economies, particularly the US, reported similar productivity gains but a closer match between positions lost and new AI-related roles created.
“The rising costs of employing staff is driving a growing number of smaller businesses to use AI and outsourcing solutions to fulfil roles traditionally filled by local people who are now missing out on these opportunities,” said Justin Moy, managing director at EHF Mortgages in Chelmsford. While his comments reflect UK labour and tax conditions, similar pressures are emerging in other high-cost markets where wage growth and tight margins are accelerating automation.
Australia: confident, cautious and racing to keep up
Australia’s experience illustrates a different side of the global AI transition. Local CEOs are notably upbeat about business prospects but more cautious and measured in their AI deployment.
Almost half of Australian CEOs surveyed in a recent PwC surveysay they are very or extremely confident about revenue growth over the next 12 months, compared with just 30% globally.
That optimism contrasts with their relatively modest use of AI in core operations: only 12% report using AI to a large or very large extent in products and services, versus 19% worldwide, and just 14% say they have already seen revenue gains from AI, compared with 30% globally.
Organisations are nonetheless preparing for a more AI-driven future. Around 68% of Australian companies have formal AI policies in place, and roughly three-quarters are actively training employees to use AI tools. The biggest concern for Australian CEOs is not whether AI matters, but whether their organisations can move quickly enough. Only 28% believe their current AI investment is sufficient, underscoring a sense of urgency to scale up before competitors at home and abroad pull ahead.
Taken together, these figures suggest Australia is at an inflection point: relatively protected from the worst immediate job shocks seen in markets like the UK, but at risk of underperforming if AI adoption and investment fail to catch up with global peers.
Global labour markets under strain
Around the world, AI adoption is colliding with broader economic headwinds, muddying the distinction between cyclical job losses and technology-driven disruption. In many advanced economies, employers face higher wage bills, tighter margins and lingering post-pandemic uncertainty – all of which make automation more attractive.
In the UK, unemployment has climbed to a near five-year high, alongside the fastest pace of job cuts since 2020, as firms respond to rising payroll costs from minimum wage increases and higher national insurance contributions. Youth unemployment has risen to 13.7% in the three months to November, the highest since 2020, with entry-level white-collar roles in areas like administration and basic finance under particular pressure from AI and changing hiring strategies.
Job vacancies in Britain have fallen by more than one-third since 2022, equivalent to around 500,000 roles. Positions viewed as vulnerable to AI replacement – including software developers and consultants – have declined 37% since the launch of ChatGPT, compared with a 26% drop in other occupations, according to Bloomberg analysis of UK Office for National Statistics data. While this is a UK-specific snapshot, similar patterns are beginning to appear in other advanced economies where employers are reassessing demand for mid-level knowledge workers as AI tools become more capable.
Central banks and policymakers are taking notice. Bank of England Governor Andrew Bailey has warned that countries must prepare for AI-driven job displacement and think carefully about how technology might affect the pipeline that allows workers to move into senior roles. Policymakers in the EU, US and across Asia-Pacific, including Australia, are increasingly focused on workforce transition, skills development and guardrails for AI deployment.
An early warning for careers, not just jobs
Rachel Fletcher, Morgan Stanley’s London-based head of EMEA sustainability research, described the bank’s findings as an “early warning sign” of AI’s impact on the labour market. The employment effects of AI have “come up in a lot of our recent investor conversations,” she said, reflecting a growing recognition that automation may reshape not only how many jobs exist, but who gets them and how careers progress.
Across the countries surveyed, employers said they were most likely to eliminate early-career positions requiring two to five years’ experience – roles that typically serve as stepping stones to more senior jobs. That pattern appears to be emerging globally, from the UK and Europe through to North America and parts of Asia-Pacific. If AI continues to erode these entry and mid-level opportunities, it could make it harder for younger and less experienced workers to gain a foothold, even in economies where overall employment remains relatively strong.
For countries like Australia, this underscores the importance of pairing AI investment with skills and workforce strategies. High revenue confidence and structured AI policies may provide a buffer against the most immediate shocks, but without sufficient, well-directed investment in AI capabilities and training, local workers risk watching higher-value roles and opportunities flow to markets moving faster.
A shared challenge with local twists
AI is already delivering meaningful productivity gains. Companies in Morgan Stanley’s study reported average improvements of around 11.5% following AI adoption. In several markets – particularly the US – those gains are being reinvested into new AI-related roles in areas such as machine learning, data analysis, product development and AI governance.
The challenge for policymakers and businesses worldwide is to ensure those new opportunities scale quickly enough, and are accessible enough, to offset the roles being automated away. The UK currently stands out as a market where AI-linked job displacement appears more pronounced than in peer economies. Australia, by contrast, illustrates the risk of moving too cautiously and missing out on AI-driven growth, even as it works to prepare its workforce.
Yet the underlying forces at work – rising labour costs, rapid technological progress and pressure to boost productivity – are global. Seen this way, the UK’s sharper job losses and Australia’s cautious adoption are not opposites, but two sides of the same story: a global race to harness AI’s benefits without leaving workers behind.
