The AI smokescreen for getting rid of thousands of staff

EMMA TAGGART

Tue, February 17, 2026 at 3:00 PM GMT+9 5 min read

The AI smokescreen for laying off thousands of staff

Tech giants like Amazon, which hired aggressively over the past few years, have been cutting thousands of roles in recent months, including 16,000 in January.

In total, there have been over 25,000 job losses in the tech industry in 2026, a sharp reversal of the high demand for new staff seen during the pandemic.

Many businesses have highlighted AI as the driving force behind their decisions to make staff redundant.

While Amazon did not explicitly link AI to its cuts, chief executive Andy Jassy has previously warned the technology would “reduce our total corporate workforce”.

But now there is growing scepticism about how often bosses cite AI when laying off staff.

Some economists and academics think that some companies are using the technology as a smokescreen for the fact that they overhired over the past few years.

Fabian Stephany, who focuses on AI at the Oxford Internet Institute, says he believes the technology is being used for “rubber stamping and scapegoating” redundancies.

He says bosses are tempted to link lay-offs to AI because it creates the image that they are at the forefront of investing in new technologies.

“It has the advantage that you can get rid of people, maybe because of an economic trend or because of strategic decisions that have been bad in the past, but you can frame it in a way that makes your company sound very agile and progressive,” Stephany says.

“We might be seeing simply a correction of this over-hiring from back then,” Stephany adds.

Philippe Aghion, the Nobel Prize-winning economist, also believes businesses are exaggerating the number of job cuts caused by AI.

“Some companies have laid off a lot recently. They mentioned AI, but it’s not truly because of AI. It’s things they were planning to do before, and they take AI as a pretext – so it’s overestimated,” he says.

“They give catastrophic figures of job destruction, which they all attribute to AI – that’s not true. I think we exaggerate the extent of job destruction due to AI.”

Britain is at the forefront of AI fears, after Morgan Stanley research found the UK is losing more jobs to AI than most other countries.

The report found that British companies recorded net job losses of 8pc last year – twice the international average.

It also revealed that AI prompted British employers to either cut or hold off on filling around one quarter of their roles, a level similar to that of competitors abroad.

The big four accounting giants PwC, EY, Deloitte and KPMG, are cutting back on entry-level recruitment as AI now performs many of the tasks typically carried out by junior staff.

PwC set a target of recruiting 100,000 staff over a five-year period in 2021, but has since abandoned this goal.

”When we made the plans to hire that many people, the world looked very, very different,” Mohamed Kande, the global chairman of PwC, said last year.

”Now we have artificial intelligence. We want to hire, but I don’t know if it’s going to be the same level of people that we hire – it will be a different set of people.”

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Sadiq Khan, the Mayor of London, has also warned that developments in AI could “usher in a new era of mass unemployment”.

Yet others have cast doubt on these claims.

A report from Oxford Economics found there is little evidence that AI is driving large-scale job losses or a sharp rise in unemployment, despite significant focus on the risks.

“It’s not clear from the data that we’re seeing that it’s the dominant force in the way that some narratives have perhaps suggested,” says Ben May, director of global macro research at Oxford Economics.

The economics consultancy said it was sceptical that businesses can easily replace employees with AI, even in sectors such as tech and customer service, where it is likely to have a significant impact on how tasks are carried out.

May adds that some businesses may be attempting to put a “positive spin” on their redundancies by saying they are using AI to improve company efficiency.

“That suddenly sounds like quite a positive story, in a way that ‘we got it wrong last year, and we hired too many people in this area that we don’t need now’ [does not]. That’s obviously a less positive story for management,” he says.

Reskilling staff

For unions, it’s clear that as the technology is rolled out across businesses, employers need to focus on reskilling their staff.

Joanne Thomas, the general secretary of the Union of Shop, Distributive and Allied Workers (Usdaw), wants pro-worker AI regulations to ensure that employees are supported as the technology alters how jobs are carried out.

“It remains too easy and too cheap to make workers redundant in the UK, which encourages bad employers to dismiss rather than retrain their workforce,” she says.

“We need to ensure that workers can benefit from technological developments at a time when the rapid adaptation of AI across the economy is changing the nature of work and could damage job security.”

As AI rapidly shifts how some employees complete tasks, Andy Prendergast, national secretary of the GMB union, also believes the new technology could open the door to new roles.

He says that instead of companies looking to replace staff with the technology, they should implement AI agreements to “manage what is potentially quite a disruptive process”.

“We’ve seen in some of the Scandinavian countries that they’ve got good agreements. That’s often led to people getting more rewarding jobs, and there are more roles coming out of it,” says Prendergast.

As some businesses weigh up whether to cut jobs, others are finding that when they do replace staff with AI, there are challenges along the way.

Last year, Klarna announced it would partially reverse 700 job cuts linked to AI following a decline in customer service quality.

As workers navigate a changing world of work, it’s clear that businesses are unlikely to stop using AI as the explanation for redundancies.

“It is definitely a noticeable trend that it is being used as part of the argument to justify the decision,” says Prendergast. “AI is supposed to make life easier. It is not simple to replace huge numbers of people.”

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