The Bank of England governor warned that artificial intelligence is likely to displace workers from jobs in a similar way to the industrial revolution, as concerns grow about the impact of technology on entry-level and younger workers.
Andrew Bailey said the rapid adoption of AI across the economy had made it essential for the UK to invest in education, training and skills to help workers transition into new roles created by the technology. Without these foundations, he warned, there is a risk of greater fragmentation of the labor market.
Speaking on BBC Radio 4’s Today programme, Bailey said job seekers would find it “much easier” if they had the skills to work with AI, but admitted there was growing concern about the impact on the career planning of younger and less experienced professionals.
“We need to think about what it does to the pipeline of people,” he said. “If it’s people working with AI, I’m not sure that will change the pipeline, but we’re right to keep a close eye on it.”
AI is increasingly integrated into everyday life and business operations. Companies use the technology to process massive amounts of data, recognize patterns and automate complex tasks. While the productivity benefits are widely recognized, there is growing concern about the impact on hiring, particularly among junior talent.
Official figures released this week showed the UK unemployment rate rose to 5.1 percent 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 during this period, the largest increase since the end of 2022.
Some economists argue that higher minimum wages and higher payroll taxes have caused companies to become more cautious about hiring new employees at the entry level. Others say the introduction of AI is already changing hiring decisions as companies rely more on technology and fewer talent.
Professional services firms are among those reassessing their staffing needs. PwC global chief executive Mohamed Kande recently said the company would scale back headcount growth as AI takes over tasks that previously would have required teams of consultants. Tasks that once took weeks can now be completed in minutes using AI models, he said.
Bailey said fears of technological disruption are nothing new, noting that similar fears have cropped up throughout history. He referred to concerns raised during the Industrial Revolution, which ultimately led not to mass unemployment but to significant job losses.
“I suspect that AI could well have a similar effect,” he said. “It hasn’t caused mass unemployment, but it has pushed people out of jobs and we need to be prepared for that.”
Despite the risks, Bailey identified AI as the most likely driver of the next phase of the UK’s economic growth, particularly given its potential to boost productivity. However, he cautioned that history suggests it could take time for these gains to be fully realized.
The Bank of England itself is experimenting with AI, although Bailey said that, like many other institutions, its use is still in its early stages. “It will take time to get into the mainstream and into everyday use,” he said, adding that creating the right conditions is “critical.”
Bailey also acknowledged growing concerns about a potential AI bubble, with some tech companies sporting valuations reminiscent of the dot-com era. The central bank has warned that a sharp correction could pose risks to financial stability.
“We have to keep the valuation issue in mind,” he said. “Most large companies generate cash flow, but that doesn’t mean they will all be winners. We’re watching this very closely because we need to understand the consequences of a drastic cut.”
The comments underscore a growing consensus among policymakers that while AI offers significant growth opportunities, its impact on jobs, skills and market stability will require careful management in the coming years.
