The UK's economic forecasting watchdog has issued a stark warning to the Treasury, indicating that millions of jobs across key sectors are at risk of being automated by artificial intelligence (AI) in the coming decade. The Office for Budget Responsibility (OBR) analysis suggests a significant potential for job displacement, particularly in lucrative industries vital to the nation's economy.
Key Takeaways
- Up to 2 million jobs in financial, insurance, and professional services could be automated within 10 years.
- Low-skilled roles are identified as the most vulnerable to AI substitution.
- While AI may boost productivity, the government's strategy for managing potential job losses remains unclear.
AI's Impact on the Workforce
The OBR's analysis, detailed within budget documents, highlights that sectors such as financial services, insurance, and professional services are particularly susceptible to AI-driven automation. It estimates that over two million jobs could be "substituted" by AI in these areas within the next decade. Specifically, 1.3 million jobs in professional services and 800,000 in the financial and insurance sectors are identified as being at risk of full automation.
These sectors are significant contributors to the UK's economy, representing a substantial portion of economic output and tax revenue. For instance, financial services alone account for 9% of the UK's economic output and 8.5% of total tax revenue.
Productivity Gains and Job Creation
Despite the concerns about job substitution, the OBR's work does not present an entirely negative outlook. The analysis suggests that AI is also expected to enhance productivity, potentially making the UK 0.2% more productive by the end of the decade. The watchdog categorises jobs into two types: those that can be "substituted" by AI and those that can be "complemented," where AI assists humans in performing tasks more efficiently.
The OBR's broader budget forecast anticipates a fall in unemployment to 4.1% from 5%, implying an expectation that displaced workers will find new employment opportunities. However, the specifics of how this transition will be managed remain a point of concern.
Government Response and Future Outlook
While the UK government is investing in AI infrastructure, its plans for addressing potential workplace upheaval are less defined. The Treasury has commissioned a study into AI's impact on the financial services sector, but this report is not due until mid-2027. Other analyses, such as one from the Tony Blair Institute, suggest a potential loss of one to three million jobs but also highlight AI's capacity to create new roles through economic growth and innovation.
Concerns are also being raised about a potential "worst-case scenario" where up to eight million UK jobs could be at risk, with low-skilled workers being the most affected. This scenario, outlined in a separate report, warns of significant disruption without government intervention. The Department for Science, Innovation and Technology has stated that AI will help tackle productivity challenges and create new roles, framing it as a transformation that will free workers from repetitive tasks for more rewarding opportunities. However, some reports suggest that recruitment freezes, particularly for entry-level positions in consultancy firms, are already occurring due to AI adoption.