The UK's Hiring Slowdown Has a Quiet Culprit: Automation Is Already Here

The latest UK labour market figures read like a familiar economic story: vacancies down, costs up, businesses cautious. But one line from Suren Thiru, chief economist at the Institute of Chartered Accountants in England and Wales, deserves more attention than it's getting. He pointed to greater automation as a factor squeezing some entry-level roles, and for anyone watching the tech sector, that's not a footnote. It's the headline.

What do the numbers actually show?

Vacancies fell to 707,000 in the May to July period, the lowest level in more than five years. Small firms are driving most of the decline, citing higher labour and operating costs as the reason they're holding back on new hires. The unemployment rate held at 4.9%, and the ONS described the labour market as broadly unchanged rather than deteriorating sharply. Wage growth tells a split story. Regular earnings rose 3.5% annually in the three months to June, but that number is propped up by public sector pay, up 6.1% due to the timing of NHS awards, while private sector pay growth slowed to 2.8%. Economists reading this data described the market as stuck in a low-churn holding pattern, where employers are avoiding big moves in either direction rather than actively cutting.

Why does automation matter more here than the headline suggests?

Every recession-adjacent hiring slowdown gets blamed on the same suspects: interest rates, energy costs, National Insurance increases, minimum wage rises. All of those are real pressures on this data. But automation is different because it doesn't reverse when costs ease. A business that cuts a graduate role due to cash flow tends to rehire once conditions improve. A business that replaces that role with an AI-assisted workflow usually doesn't. Entry-level and early-career roles are disproportionately exposed to this shift because they tend to involve the kind of structured, repeatable tasks that current AI tools already handle well: first-pass drafting, basic data entry, initial customer triage, junior-level coding support. We've tracked this exact dynamic building for the past year, and it lines up closely with the pattern we described in our piece on whether AI is the real cause behind tech layoffs.

What should business leaders take from this?

The practical risk for employers isn't just fewer vacancies today, it's a shrinking pipeline of trained mid-level talent five years from now. If entry-level hiring keeps softening while automation absorbs that work, companies eventually run into a gap: not enough experienced people to promote into senior roles, because fewer people were hired into junior ones in the first place. For workers and teams trying to stay ahead of that shift, the more useful response isn't panic, it's deliberate upskilling toward the parts of a job that automation doesn't reach yet: judgment calls, client relationships, ambiguous problem-solving. We laid out a practical starting point for that in our guide to AI upskilling programs for professionals.

Is this slowdown likely to ease soon?

Not based on current signals. Analysts don't expect wage growth to trigger inflation concerns, which makes it unlikely the Bank of England moves on interest rates at its September meeting. Without a rate cut acting as a hiring trigger, and with energy and payroll costs still elevated, small firms have little immediate incentive to reverse course. Automation adoption, meanwhile, only tends to accelerate once businesses have already restructured workflows around a smaller headcount, making reversal even less likely on the other side of this slowdown. For the full data release, see BBC's original coverage of the ONS figures.