What is a week in the tech world, without someone having an opinion on artificial intelligence.
But this isn’t some loud man in a pub/bar pontificating after a few drinks. This is Bank of England Governor Andrew Bailey.
He reckons the rapid spread of AI across the UK economy is likely to displace workers in a way comparable to the Industrial Revolution. The technology would transform how people work and which skills employers value, requiring a renewed focus on training and education to help workers adapt.
Speaking to BBC Radio 4’s Today programme, Bailey said people entering the labour market would find it “a lot easier” to secure employment if they had skills that allowed them to work effectively with AI. However, he cautioned that the transition could be disruptive, particularly for younger people seeking their first professional roles.
A familiar pattern of technological change
Bailey compared today’s AI-driven shift to earlier periods of technological upheaval, noting that fears about machines replacing workers have recurred throughout history. He pointed to the Industrial Revolution, when new machinery transformed manufacturing and agriculture.
“As you saw in the Industrial Revolution, now over time, I think we can now sort of look back and say it didn’t cause mass unemployment, but it did displace people from jobs and this is important,” he said. “My guess would be that it’s most likely that AI may well have a similar effect. So we need to be prepared for that, in a sense.”
The implication, he suggested, is not the disappearance of work altogether, but a reallocation of labour. Jobs that involve routine processing of information are likely to shrink, while roles that combine human judgement with AI tools may expand. Preparing workers for that shift will be critical to avoiding long-term scarring in the labour market.
Concerns for young and inexperienced workers
One of Bailey’s key concerns was the effect of AI on entry-level jobs, which traditionally act as a pipeline into skilled professions. He questioned whether automation might reduce opportunities for graduates and school-leavers to gain experience.
“We do have to think about: what is it doing to the pipeline of people? Is it changing it or not?” he said. “I think if it’s people working with AI, I’m not sure it will change the pipeline, but I think we’re right to have an eye on that point.”
These concerns come against a backdrop of weakening employment data. Official figures published this week showed the UK unemployment rate rising to 5.1% in the three months to October. Younger workers were particularly affected, with the number of unemployed 18 to 24-year-olds increasing by 85,000 over the same period, the largest rise since November 2022, according to the Office for National Statistics.
Some economists argue that recent increases in the minimum wage and higher employment taxes have made firms more cautious about hiring junior staff. Others believe the growing use of AI is beginning to alter recruitment decisions, especially in sectors where early-career roles involve repetitive tasks.
Professional services already feeling the impact
Industries such as law, accountancy, and administration are widely seen as among the most exposed to AI-driven change. Tasks that once required large teams of junior staff, such as reviewing documents or analysing data, can increasingly be completed by AI systems in a fraction of the time.
Mohamed Kande, global chairman of accountancy firm PwC, recently told the BBC that the company was scaling back plans to expand its workforce. “Now we have AI. We want to hire, but I don’t know if it’s going to be the same level of people that we hire – it will be a different set of people,” he said.
For clients, the shift promises lower costs and faster results. For workers, it raises questions about how to gain experience in professions where traditional training routes may be narrowing.
Economic growth and productivity hopes
Despite the risks to certain jobs, Bailey argued that AI could provide a significant boost to the UK economy. He described the technology as the “most likely source of the next leg up” in economic growth, largely through improvements in productivity, an area where the UK has lagged for years.
“In terms of its potential to improve productivity growth, I think it’s pretty substantial. It will get used across the economy,” he said, while adding that history suggests productivity gains from new technologies often take time to materialise.
The Bank of England itself is experimenting with AI, although Bailey stressed that its use remains limited. “To get it into sort of mainstream, everyday use will take some time,” he said, emphasising the need to put the right conditions in place, including skills, regulation, and infrastructure.
Bubble fears and financial stability risks
Beyond the labour market, the Bank has also raised concerns about a potential AI-related investment bubble. Rapidly rising valuations of technology firms have drawn comparisons with the dotcom boom of the late 1990s.
Bailey said policymakers would “have to watch the valuation question”, acknowledging the risk that expectations around AI could run ahead of reality. Jamie Dimon, chief executive of US bank JP Morgan, told the BBC in October he was “far more worried than others” about the possibility of a sharp market correction.
While many large AI-focused companies are generating cash, Bailey warned that not all would succeed. “Of course, it’s still the case that it doesn’t mean they’ll all be winners,” he said. “We’re watching it very closely, because we do need to watch, obviously, what the consequences of any sharp unwinding could be.”
Someone still has a job. Former UK Chancellor George Osborne has officially joined OpenAI to spearhead the company’s global expansion efforts.