UK firms expect 3% pay rises but warn AI could shrink jobs, CIPD survey shows | investingLive

British employers expect to raise pay by around 3% over the next year, but growing use of artificial intelligence could reduce headcount, according to a new survey that also highlighted weaker hiring intentions and concern over government tax policy.

The Chartered Institute of Personnel and Development (CIPD) said overall recruitment plans are among the weakest since the pandemic, with hiring especially soft in the public sector.

• One in six firms expects AI adoption to shrink their workforce over the coming year, with a quarter of those anticipating job cuts of more than 10%.
• Clerical, junior managerial, and administrative roles are seen as most at risk.

CIPD senior economist James Cockett warned that the government’s recent rise in employers’ social security contributions has already cooled hiring, and urged Finance Minister Rachel Reeves to avoid further tax measures that could worsen the slowdown. He called for more investment in workforce skills to help employees adapt to AI-driven change.

The survey, conducted between September 19 and October 14, showed median expected pay rises holding at 3% for a sixth straight quarter.

• By contrast, a Bank of England survey found firms predicting 3.7% wage growth in the three months to October, while official data due Tuesday are expected to show annual regular pay rising 4.6% in the latest quarter.

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The CIPD’s survey adds to signs of cooling labour demand as firms balance steady wage growth with rising automation. Slower hiring could reinforce the Bank of England’s case for easing rates, though persistent pay pressures may complicate its December decision.