TL;DR

In its quarterly report on the economy and interest rates, published on 5 November, the Bank of England says AI has so far had close to zero effect on overall UK employment. The Bank’s regional Agents report a quieter shift instead: firms using AI are less likely to hire or to replace staff who leave, though no more likely to fire. Firms expect that pattern to continue as AI’s productivity gains grow.

What the Bank found

The evidence comes from two sources. In the Decision Maker Panel, the Bank’s monthly poll of finance directors, firms put AI’s boost to their productivity at around 0.5% over three years. On the Bank’s arithmetic, AI has added roughly 0.1–0.2 points to yearly productivity growth from early 2024. Separately, contacts of the Agents describe AI adoption “reducing the likelihood of firms hiring or replacing workers, but not materially increasing the likelihood of firing workers so far”.

Looking ahead, panel members expect AI to lift annual productivity growth by around 0.9 points across the coming three years. Roughly half of that, they say, will come from extra output and half from keeping workforces smaller than they would otherwise be.

The Bank is cautious about how much of today’s productivity pickup is AI at all. It attributes most of it to cyclical factors, sees only “a modest AI-driven rise” so far, and notes that some firms say they have cut headcount as far as they can.

The wider picture

The report came alongside an 8–1 Monetary Policy Committee vote lifting Bank Rate a quarter point, to 4%. The jobless rate fell to 4.7% over June to August. The Bank expects it to edge up to 5.1%, with “no widespread labour market shakeout”.

In its analysis of the report, Pound Sterling Live argues that a hiring freeze driven by technology sits largely outside the reach of interest rate policy. That is its view rather than the Bank’s.

Why it matters

For job seekers and people hoping to move roles, fewer openings matter even if no one is laid off. In our view, the finding fits the job-ad evidence in our 5 November report on entry-level roles.

Looking Forward

Firms expect to take half of the next round of AI gains through smaller workforces. If that holds, in our view the effect will show up first as slower hiring of new and junior staff. Employers and policymakers watching unemployment alone may miss it.