AI likely to displace jobs in a modern Industrial Revolution, warns Bank of England governor

Artificial intelligence is likely to displace workers from jobs in a way comparable to the Industrial Revolution, the governor of the Bank of England has warned, as concerns grow over the impact of the technology on entry-level employment and younger workers.

Andrew Bailey said the rapid adoption of AI across the economy made it essential that the UK invested in training, education and skills to help workers transition into new roles created by the technology. Without those foundations, he cautioned, the labour market risked becoming more fragmented.

Speaking on BBC Radio 4’s Today programme, Bailey said people seeking work would find it “a lot easier” if they had the skills needed to work alongside AI, but acknowledged mounting worries about the effect on the career pipeline for younger and less experienced professionals.

“We do have to think about what it’s doing to the pipeline of people,” he said. “If it’s people working with AI, I’m not sure it will change the pipeline, but we’re right to keep a close eye on that.”

AI has become increasingly embedded in everyday life and business operations, with companies using the technology to process vast volumes of data, identify patterns and automate complex tasks. While the productivity benefits are widely acknowledged, there is growing unease about its impact on hiring, particularly in junior professional roles.

Official figures released this week showed the UK unemployment rate rising to 5.1 per cent in the three months to October, with younger workers bearing the brunt. The number of unemployed 18 to 24-year-olds rose by 85,000 over the period, the sharpest increase since late 2022.

Some economists argue that higher minimum wages and increased employment taxes have made firms more cautious about recruiting at the entry level. Others say AI adoption is already reshaping hiring decisions, with companies relying more on technology and fewer junior staff.

Professional services firms are among those reassessing their workforce needs. PwC’s global chairman, Mohamed Kande, recently said the firm was scaling back headcount growth as AI takes on work that would previously have required teams of consultants. Tasks that once took weeks can now be completed in minutes using AI models, he said.

Bailey said anxieties about technological disruption were nothing new, noting that similar fears had surfaced repeatedly throughout history. He cited concerns raised during the Industrial Revolution, which ultimately did not cause mass unemployment but did lead to significant job displacement.

“My guess would be that AI may well have a similar effect,” he said. “It didn’t cause mass unemployment, but it did displace people from jobs, and we need to be prepared for that.”

Despite the risks, Bailey described AI as the most likely driver of the next phase of UK economic growth, particularly through its potential to lift productivity. However, he cautioned that history suggested it could take time before those gains were fully realised.

The Bank of England itself is experimenting with AI, although Bailey said its use, like that of many institutions, remained at an early stage. “To get it into mainstream, everyday use will take some time,” he said, adding that putting the right conditions in place was “critically important”.

Bailey also acknowledged growing concerns about a potential AI bubble, with some technology companies commanding valuations reminiscent of the dotcom era. The central bank has warned that a sharp correction could pose risks to financial stability.

“We have to watch the valuation question,” he said. “Most of the big companies are generating cash flow, but that doesn’t mean they’ll all be winners. We’re watching it very closely because we need to understand the consequences of any sharp unwinding.”

The comments underline a growing consensus among policymakers that while AI offers significant opportunities for growth, its impact on jobs, skills and market stability will require careful management in the years ahead.

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AI likely to displace jobs in a modern Industrial Revolution, warns Bank of England governor