Reeves warned against trashing the jobs market as AI hits hiring

Rachel Reeves has been warned against hitting Britain’s fragile labour market with tax rises after employers warned that artificial intelligence (AI) risks surging job losses.

The Chancellor must not “undermine hiring” by increasing costs for businesses in her upcoming Budget, according to the Chartered Institute of Personnel and Development (CIPD), which said that employer confidence remains at a record low.

Fears over a Labour tax raid have emerged as the Chancellor scrambles to fill an estimated £30bn black hole in the public finances, with the threat of higher employer costs clouding an already weak jobs market.

The rise of AI has weighed on hiring, as a new CIPD survey shows that one in six employers is set to shrink their workforce over the next year as they increasingly replace humans with technology.

Junior and administrative roles are most at risk, the survey found.

Of the companies that expect to cut roles due to AI, a quarter said they were preparing to lose more than one in 10 staff. The biggest cuts are expected to come from within large private companies.

It follows a string of major businesses announcing AI-related job cuts.

Microsoft earlier this year said it would cut 9,000 jobs as it increases its investment in AI, while the likes of Deloitte and EY are also hiring fewer graduates as technology takes on more entry-level work.

CIPD economist James Crockett said AI risked “leaving many people behind”, adding: “Jobseekers are already feeling the impact of slower hiring since employment costs rose in the last Budget, and measures in the Employment Rights Bill could make it even harder for employers to take on people with less experience and more development needs.”

The HR group said the Government now needed to “ensure that measures in the Budget and Employment Rights Bill don’t undermine hiring further”.

As well as drawing up potential tax rises, Labour is also preparing to strengthen workers’ rights by introducing day-one protections against unfair dismissal.

The change – part of the upcoming Employment Rights Bill – is expected to make it more expensive and risky to hire workers.

Ms Reeves is expected to use her Budget to raise the minimum wage from £12.21 to at least £12.70 an hour, further increasing labour costs after she hiked employer National Insurance (NICs) rates last year.

This has already led to vastly reduced hiring across the UK, as retail and hospitality trade groups claimed Ms Reeves’s NICs tax raid led to hundreds of thousands of jobs being lost.

On Monday, a separate survey of 1,000 business owners from Employment Hero found that a third of companies said they would delay hiring if Ms Reeves increased the cost of employment further, while 24pc said they would consider redundancies.