UK faces critical AI skills gap as firms struggle to adapt

Research conducted by Gigged.AI has revealed that the AI skills gap in the UK has reached a critical level, with businesses identifying AI and machine learning as the most in-demand skills for 2025.

The report entitled "The AI Talent Crisis: How Skills-Powered Organisations Can Unlock the UK's Potential" warns that government policies, specifically reform of IR35 and increasing National Insurance contributions, are obstructing companies from recruiting and training necessary talent to bridge this skills gap.

The study found that UK companies predict almost half (48%) of their employees will utilise Generative AI by 2025. This is anticipated to improve efficiency, saving each employee an average of four hours per week.

AI and machine learning have been identified as the most sought-after skills for the future, but nearly one-third (30%) of businesses fear that between 11% and 25% of roles could be displaced by Generative AI by 2025. By 2028, projections suggest that between 26% and 50% of roles could be affected. Three in five businesses indicate that AI has already significantly augmented human work, particularly in customer service sectors.

Businesses anticipate reducing hiring due to rising National Insurance contributions, with 35% of respondents indicating a decrease in recruitment efforts. Additionally, 34% believe IR35—regulations affecting freelance work—is negatively impacting their ability to recruit skilled AI professionals.

Half of the businesses expressed discontent with the government's support in tackling the growing AI skills gap, with 44% concerned that current employees are being overlooked as focus shifts to skilling future generations.

The study points out that a significant portion of the skills required may already exist within organisations, albeit unrecognised. A notable 87% of senior tech leaders acknowledged the benefits of skills tracking in employee upskilling, and 38% discovered existing AI skills within their workforce through such processes.

The report highlights that IR35, which underwent reforms in 2017 and was fully implemented in the private sector in 2021, continues to disrupt access to skilled contractors. According to 34% of businesses, IR35 is an obstacle to hiring the needed talent in fields like AI and machine learning. These contractors and freelancers often possess the specialised expertise required but are deterred by the tax implications, compelling them to work outside the UK.

Simultaneously, the rise in National Insurance contributions has exacerbated hiring challenges, with some businesses scaling down recruitment efforts due to these financial pressures. These policies are particularly detrimental for companies needing to expand rapidly to accommodate the surge in AI.

Rich Wilson, Chief Executive Officer and Co-Founder of Gigged.AI, stated, "The AI revolution is upon us, but businesses are being forced to scale back their recruitment efforts due to government policies that restrict access to skilled talent. The rise in national insurance and the lack of addressing IR35 continues to place an undue burden on freelancers and businesses alike. Without reform, IR35 restricts companies' ability to bring in skilled AI contractors, while freelancers are left in an environment that limits their potential and job security."

Wilson further commented, "Whilst the government seems to be embracing AI with this new plan, its actions in the Autumn budget will mean a delay in the fundamental elements needed to fully embrace AI in the UK. The AI skills gap is no longer a future problem—it's here. We need to rethink education and training pipelines to meet the demands of emerging technologies and ensure the UK remains competitive on a global stage."

Wilson suggests three measures to enhance the availability of AI talent in the UK: "Scrap National Insurance increases so companies stop outsourcing AI work outside the UK. Scrap IR35 Reform so companies can easily tap into freelance and contract AI talent that is currently having to work outside the UK (Mostly the US). Create an internal mobility platform so all government departments can share talent and share the upskilling and displacement of jobs."

The report advocates for internal mobility as a solution businesses should adopt to utilise existing talent pools. One-third of open positions over the past year were filled by internal hires, reflecting a growing dependency on internal job boards and development programmes. Despite this strategy, 73% of businesses reported that outdated methods were less effective than skills tracking software in resolving skills shortages.

Hung Lee, Curator of Recruiting Brainfood, observed, "It's one of those 'harsh but true' observations that most companies do not know what skills or capability they have within the organisation. This includes organisations who really should know, like professional services consultancies. It's hard work to collect data, validate it and keep it current. The rise of AI presents both challenges and solutions as businesses can no longer afford this 'skills blindspot' and yet now also have the promise of a transformational innovation which can handle data problems of practically infinite scale. The organisations who will be the leaders of the AI-enabled era are likely to be those who have the strongest skills intelligence."