Rachel Reeves is making it more difficult to hire people even as AI threatens jobs
The future of work is arriving faster than Westminster imagined, and Britain is sleepwalking into a jobs crisis of its own making. While artificial intelligence and humanoid robotics advance rapidly, the Government has chosen this precise moment to make employing humans more expensive than ever before. It’s a policy collision that threatens to accelerate job displacement just when the economy needs breathing room to adapt.
The scale of the challenge is staggering. The Tony Blair Institute predicts that one to three million UK jobs could be displaced by AI by 2050, with the transformation happening gradually but relentlessly. The same research suggests companies could save almost a quarter of private-sector workforce time with AI, equivalent to the output of 6 million workers. Even if these projections prove overly cautious, and the pace of technological change suggests they may be, the direction of travel is unmistakable. Yet rather than easing the transition, the Chancellor has delivered a triple blow to employment costs that reads like a masterclass in economic mistiming.
From April 2025, employer National Insurance contributions have jumped from 13.8 per cent to 15 per cent, while the threshold from which employers pay NICs for each employee has dropped from £9,100 to £5,000 per year. This means employers will pay an additional £900 for each employee on median average earnings. Simultaneously, the national living wage has risen by 4 per cent in real terms for 2025, while the Employment Rights Bill promises to further increase the cost and complexity of hiring. The message to British businesses could hardly be clearer: humans are expensive, risky, and getting more so by the month.
The private sector has already begun responding with ruthless efficiency. British Telecom has announced plans to cut 55,000 jobs by the end of the decade, with around 10,000 of these roles being replaced directly by artificial intelligence. This isn’t distant speculation — it’s happening now. BT’s CEO has been refreshingly honest about the company positioning itself as “a huge beneficiary of AI going forward,” a sentiment that will be echoed in boardrooms across the country as the new employment costs bite.
The telecommunications giant isn’t alone in this calculation. IKEA has already deployed its AI bot “Billie” to handle customer phone queries, retraining 8,500 call centre workers to become interior design advisers, a transition that sounds progressive but masks the underlying reality that fewer human workers are needed for the same workload. Meanwhile, Duolingo has declared itself an “AI-first” company, cutting 10 per cent of its contractor workforce in 2023 and continuing layoffs through 2024, with CEO Luis von Ahn announcing plans to “gradually stop using contractors to do work that AI can handle”. These aren’t abstract projections, they’re business plans being implemented by companies that can no longer afford to ignore the mathematics of automation.
Artificial intelligence has reached a tipping point where it can credibly replace human workers
The Government’s timing couldn’t be worse. Just as businesses face the steepest increases in employment costs in years, artificial intelligence has reached a tipping point where it can credibly replace human workers across vast swathes of the economy. The technologies that seemed futuristic just five years ago — conversational AI, computer vision, robotic process automation — are now mature enough to be deployed at scale. Meanwhile, the cost differential between human and artificial workers has never been more stark.
Consider the calculation facing a typical small business owner. A customer service representative on the national living wage costs approximately £25,000 annually in direct wages, plus employer National Insurance, pension contributions, holiday pay, and the administrative burden of compliance with ever-expanding employment regulations. An AI system capable of handling 80 per cent of customer inquiries costs a fraction of that amount, never calls in sick, requires no training, and poses no employment tribunal risk.
Each provision, however well-intentioned, increases the cost and risk of human employment
The Employment Rights Bill adds another layer of complexity to this already stark comparison. The legislation introduces day-one rights to unfair dismissal protection, flexible working requests, and statutory sick pay, while strengthening collective bargaining rights and expanding family leave entitlements. Each provision, however well-intentioned, increases the cost and risk of human employment. Small businesses now face the prospect of employees who can claim unfair dismissal from their first day, demand flexible working arrangements that may not suit operational needs, and access enhanced protections that make workforce planning increasingly difficult. An AI system, by contrast, can be “dismissed” instantly, works any hours required, and comes with no statutory rights whatsoever. The Bill’s timing couldn’t be more unfortunate, just as artificial alternatives become viable, the Government has made human workers more expensive and legally complex to manage.
The political response has been predictably tone-deaf. Ministers speak of “making work pay” while simultaneously making workers prohibitively expensive for many employers. They promise to create “high-quality jobs” while pricing marginal workers out of the market entirely. The reality is that every additional cost imposed on employment doesn’t just reduce hiring — it accelerates the business case for automation.
This isn’t just about job numbers; it’s about the fundamental structure of British society. The jobs most vulnerable to AI displacement are often those that provide entry-level opportunities for young people, career changes for older workers, and employment for those without advanced qualifications. When these positions disappear, they take with them not just pay cheques but pathways to economic participation. The social consequences of mass unemployment have been forgotten by a generation of politicians who have never experienced anything but continuous economic growth.
The Government’s approach betrays a fundamental misunderstanding of how labour markets adapt to technological change. Historical precedent shows that while technology does create new forms of employment, the transition period can be lengthy and painful. The industrial revolution took decades to generate sufficient new jobs to replace those lost to mechanisation. But the current AI and robotics revolution dwarfs every previous technological shift in both scope and speed. Where steam power mechanised physical labour and computers automated data processing, artificial intelligence targets human cognition itself — the very faculty that has distinguished human workers throughout history. When combined with advanced robotics, AI threatens to automate not just manual labour or routine tasks, but creative, analytical, and interpersonal work that was previously considered uniquely human. This isn’t merely the next step in technological evolution; it’s a transformation that could eclipse the combined impact of the printing press, steam engine, electricity, and the internet. Yet the Government seems to believe it can simultaneously accelerate job displacement and slow job creation without consequences, as if the rules of economic disruption somehow don’t apply to the most profound technological revolution in human history.
The international competitive implications are equally troubling. While Britain loads additional costs onto its employers, other countries are racing to position themselves as AI-friendly destinations. Singapore offers tax incentives for companies implementing AI systems. Estonia has streamlined regulations for digital businesses. Even within Europe, countries like Ireland and the Netherlands are crafting policies that support rather than penalise technological adoption. Britain risks becoming a cautionary tale rather than a leader in the AI revolution.
The solutions are neither simple nor painless, but they exist. Instead, we’re witnessing a perfect storm of policy incoherence. At the moment when technological change demands maximum flexibility and support for human employment, the Government has chosen to make hiring more expensive, firing more difficult, and automation more attractive. The result will be a jobs crisis that seems to have appeared overnight but was actually telegraphed years in advance.
The robot revolution isn’t coming — it’s here. The question isn’t whether British jobs will be displaced by AI, but how quickly and how devastatingly. By making human workers more expensive just as artificial alternatives become cheaper and more capable, the Government has accelerated a transition that needed careful management. The consequences will be measured not just in unemployment statistics, but in the social fabric of a nation that forgot how to make work pay for anyone except the robots.
