Britain’s labour market has probably never felt more precarious than it does now, as the struggling economy and the rapid rise of AI take effect.
Redundancies are at their highest since the pandemic, unemployment has risen to 5.1 per cent, and entry-level opportunities, the traditional stepping stones for grads and young workers, have all but dried up.
Job-search platform Indeed reports that grad roles have fallen by 13 per cent since 2024, while overall job postings are down by almost a fifth compared to pre-pandemic levels.
Low-wage sectors, from retail to hospitality, have been hit hardest, squeezed from all sides by rising National Insurance contributions, minimum wage increases, or soaring operational costs.
Overlay this with an unprecedented rise in AI adoption, and the picture doesn’t get much rosier: 2025 saw tens of thousands of jobs disappear in the name of automation.
Amazon eliminated 14,000 corporate roles; Microsoft cut around 15,000; Salesforce slashed 4,000.
Crowdstrike, Workday, and IBM also reduced headcount while doubling down on AI investment this year.
“In 2026, organisations face a dual challenge: a growing talent crisis inside their own walls and increased pressure to use AI responsibly”, said Dan Pell, UKI country manager of Workday.
“The rise of microshifting shows a shift toward more flexible, AI-assisted work rhythms, where short, focused bursts replace the traditional ‘always on’ model”.
So the verdict for 2026 goes as follows. The workplace is bifurcating into roles that AI can do better and faster, and into those that demand oversight, creativity or judgement.
The rise of AI agents
What’s more, AI agents are increasingly being trialled across industries on both sides of the Atlantic.
According to a recent Loopex Digital survey, UK and US firms report that these agents can dramatically cut time spent on repetitive tasks, allowing human teams to focus on higher-value work.
In London, financial institutions like Barclays and Lloyds are experimenting with AI agents to streamline basic client queries and compliance checks.
Meanwhile, across the pond in New York, JPMorgan and Goldman Sachs are deploying agents to assist with research and routine financial modelling.
Retailers, including Marks and Spencer (M&S) in the UK and Target in the US, are using agents to generate personalised customer service. Both firms have claimed this investment is set to improve engagement and operational efficiency.
“By 2026, up to 90 per cent of data entry tasks could be automated”, said consultancy giant McKinsey.
AI-driven virtual assistants are also expected to handle most routine inquiries by 2027.
But we have seen that AI is not a wholesale replacement for humans, and that complex decision-making, nuanced client interactions, and strategic oversight still require human judgment.
Mantas Lukauskas, AI tech lead at Hostinger, explained that “while AI can streamline accounting and risk assessment, high-level financial reasoning still requires human expertise”.
“The question isn’t whether AI will transform industries, but how quickly companies and workers can adapt”, he added.
A two-tier labour market
Meanwhile, the economic backdrop exacerbates inequality in employment.
James Cockett, senior labour market economist at the CIPD, warns: “We don’t anticipate a major recruitment rebound in the new year”.
Most worryingly perhaps, “unemployment is set to peak towards the middle of the year, and wage growth will continue to decline”, he added.
Lower-skilled roles are being squeezed most aggressively.
Giles O’Halloran of Go2work says that “demand for lower-skilled, entry or commodity-type jobs is declining, whereas the demand for tech, digital and high-skilled roles will remain highly selective.”
And at the same time, the broader slowdown in the jobs market means competition is fierce even for high-skilled positions.
Georgina Kvassay, a City interview coach, has claimed: “Strong performers continue to walk away from slow, disorganised hiring processes. AI should support hiring, not run it.”
White collar reorganisation
AI is reshaping the mid- and upper-tier of the workforce, too.
OpenAI’s new model, GPT-5.2, now outperforms junior analysts in finance tasks, putting an estimated 27,000 UK banking roles at risk.
Consulting firms are following suit: McKinsey is cutting a few thousand non-client-facing roles, PwC and KPMG are introducing chatbots to streamline support functions, and Deloitte, Bain, and Accenture have all trimmed headcount through AI.
Automation is not just for low-wage roles, and human talent must focus on oversight and decision-making, areas that machines cannot yet master.
Peter Fedoročko, chief tech officer of GoodData, says: “The value now lies in those who can design, monitor, and collaborate with automated systems, not compete against them.”
Jobs that thrive
On the flipside, it would be unjust not to consider how AI is creating opportunity, too.
Job platform MyPerfectCV recently found nine trades that remain resilient. These, naturally, centre around manual jobs: electricians, painters, and mechanics, which demand fine motor skills and human interaction.
This places them beyond the reach of automation, at least for now.
In other sectors, growth is occurring in logistics, childcare, IT and architecture.
TikTok, for instance, plans to create 500 UK jobs even as it trims 300 in content moderation.
Reddit tripled revenue in 2024 while expanding its workforce, and supply chain and stocking roles saw a hiring uptick of up to 20 per cent.
The skills premium has never been clearer, with critical thinking, leadership, and AI literacy defining the employable.
Entry-level roles are not dead, but they are being reimagined to complement AI, rather than utterly compete with it.
Fields like healthcare, technical trades, and hands-on engineering offer high pay and long-term growth potential.
The human factor remains
The great irony of Britain’s digital transition in the workplace is that as the code becomes more sophisticated, the human element becomes more decisive.
We have moved firmly out of the era of “automation” and into the era of discretionary value.
The tech itself won’t dig a competitive moat in 2026, but it will do so through its ‘organisational agility’ to lead through its integration.
This has already been seen in the bedrock of the FTSE 100.
Take Barclays, for example, which is deploying AI agents to handle routine banking operations while reskilling staff to focus on strategic advisory and client engagement.
It is a calculated bet that while an LLM can parse a balance sheet, it cannot (yet, at least) understand the nuances of a client’s long-term trust.
We see the same friction on the high street, where AI-optimised inventory is being used as a lever to liberate staff for the one thing Amazon can’t ship: a high-trust, face-to-face customer experience.
The 2026 landscape isn’t a graveyard for the British worker, but it is a violent restructuring of the ‘value add.’
And within that, the premium is shifting toward a specific hybrid literacy: the ability to provide critical oversight of automated systems while injecting the originality that machines, by their very nature, can only simulate.
In a domestic labour market currently defined by its fragility, where the bridge between graduation and employment is narrowing, this is no longer a ‘what if’.
It’s firmly become a ‘when’ for the graduate, the analyst, and the shopfloor worker alike.
For all parties, the mandate is to become the architect of the tool, rather than its rival.
The workplace infrastructure has already been restructured, and the challenge now is whether we can keep our hands on the wheel.