Half of London Firms Say Workers Lack AI-Era Skills

London's business community is confronting a widening skills crisis as artificial intelligence reshapes workplace requirements, with half of employers now saying their workforce lacks the capabilities needed to operate effectively in an AI-driven environment.

The proportion of London firms confident their employees possess necessary AI-era skills dropped to 50% from 63% just one year earlier, according to a survey of 2,043 business leaders conducted by Survation for BusinessLDN between November 2025 and January 2026. More concerning, the share of companies reporting significant skills and capacity gaps jumped to 15%—nearly quadruple the 4% recorded in early 2025 and the highest level since the annual survey began.

Why it matters

This skills mismatch arrives precisely as AI adoption accelerates across the capital. The gap between technology deployment and workforce capability threatens to constrain productivity gains and competitive advantage for London businesses, while potentially displacing workers who lack opportunities to reskill. The findings also suggest that despite record training investment, the pace of AI-driven change is outstripping traditional workforce development approaches.

Rapid AI adoption drives demand shift

Three-quarters of surveyed businesses reported already using AI in some capacity, with only 5% indicating no plans to adopt the technology. Among firms deploying AI, 85% said the technology had altered the skills their workforce requires, with employers citing increased demand for critical thinking, ethical reasoning, and decision-making capabilities.

The digital skills shortage has intensified across experience levels. Among businesses reporting skills gaps, 60% identified shortages in advanced digital skills, while 23% lacked workers with basic digital competencies. Looking ahead, 78% of firms anticipate significant need for advanced digital skills within two to five years—up from 66% last year and 56% in 2023.

Job cuts and training investment both rise

The workforce transformation is producing contradictory signals. While 83% of businesses reported current job vacancies, companies planning reductions cited multiple AI-related factors: 24% pointed to reduced demand for entry-level staff due to AI, and 23% identified decreased need for mid-career employees. Cost-cutting accounted for 25% of planned cuts, with economic conditions and business model changes representing 14%.

Simultaneously, employers are responding with unprecedented training commitments. A record 81% of firms planned to increase workforce development investment over the coming year, up from 69% in 2023. Yet the difficulty filling open positions dropped to 32% from 46% a year earlier—the lowest level recorded—suggesting the challenge has shifted from finding candidates to finding qualified candidates.

Mark Hilton, policy delivery director for people and skills at BusinessLDN, emphasized the need for more responsive systems: "While London businesses are embracing AI, many are finding it challenging to stay on top of their workforce skills needs given the pace of change. Positively, employers are responding by increasing investment in training, but to properly close skills gaps it is essential we have a more agile skills system that is responsive to these rapidly changing needs."

The survey results were first reported by BBC News and follow recent Office for National Statistics data showing London has the highest regional unemployment rate in the UK.