The Growing AI Skills Gap: Time for Government Action

The AI revolution is here, and its potential to drive productivity across industries is immense. Yet, there is a growing crisis—a skills gap that threatens our progress. New research from Gigged.AI paints a clear picture: UK businesses are eager to adopt AI, but government policies, particularly around IR35 and rising National Insurance contributions, are standing in the way of building the skilled workforce necessary to lead in this new era.

Data reveals that 92% of companies are prioritising upskilling in Generative AI for 2025. With AI set to save workers an average of 4 hours per week, businesses want to leverage its full potential. But restrictive policies are hindering this ambition. A substantial 35% of businesses expect to hire fewer people due to the rise in National Insurance contributions. At the same time, 34% of businesses say IR35 is significantly hampering their ability to attract skilled professionals. These policies directly affect the UK’s ability to remain competitive in the global AI race.

Businesses need flexibility to hire top-tier talent, particularly contractors and freelancers who bring specialised skills. But the rigid IR35 structure, reformed in 2017 and fully implemented in 2021, continues to act as a barrier. Freelancers are deterred by the tax implications, and many are choosing to work outside the UK, where IR35 does not exist. The talent needed to help the UK become an “AI superpower” is slipping away.

The challenges don’t end with IR35. The rise in National Insurance contributions compounds the issue, further restricting businesses’ ability to scale quickly in response to AI-driven demands. For many, these policies are a financial burden that limits investment in talent acquisition and training, just when the UK needs to be scaling its workforce to meet AI demands.

This isn’t theoretical—it's already impacting businesses. Nearly half of UK businesses predict AI will be used by 48% of their workforce by 2025, with some expecting significant job displacement—up to 50% of roles in certain sectors by 2028. As businesses race to meet AI demands, restrictive policies are limiting their options.

What needs to change?

‍With the Spring budget approaching, change can happen.First, the government must address the misalignment between policy and business needs. Scrapping the National Insurance increase will prevent companies from outsourcing AI work abroad, helping the UK remain a hub for AI innovation.

Second, IR35 reforms must be revisited. The current legislation hampers companies’ ability to hire AI talent, especially in a rapidly evolving field where speed and flexibility are crucial. Freelancers should not be penalised by tax rules that push them out of the UK. These workers are key to meeting the UK’s AI needs, and businesses should be able to hire them without unnecessary regulation.

Finally, the UK must focus on internal mobility and upskilling. A significant 38% of senior tech leaders reported uncovering internal AI skills through skills tracking. By creating a platform for government departments to share talent, we can make the most of the skills already available within the UK.

The AI skills gap is not a distant problem—it’s here now. The government must take immediate action to reform policies like IR35 and National Insurance contributions that limit businesses’ ability to build the workforce needed for the future. If we want the UK to lead in AI, we must rethink workforce development and create an environment where businesses can thrive, upskill their employees, and tap into the talent critical for success.

The time for change is now. Let’s ensure the UK remains at the forefront of the AI revolution.

About GIGGED.AI
Gigged.AI is a skills-powered Talent Marketplace solving the tech skills shortage for enterprises through internal mobility and open talent. Gigged. Ai's products employ AI and skills-based matching to help tech leaders put the right people into the right roles with rapid speed and efficiency. Headquartered in Glasgow and founded in 2019, Gigged.AI was recently included in Gartner’s Market Guide for Internal Marketplaces and Sifted HR Tech Startups to watch 2024. Gigged.AI is a member of TechPassport with an 82% enterprise readiness score and is rated 5 Stars on Gartner Peer Insights Internal Talent Marketplaces. For more information or to book a demo, visit Gigged.AI.