The United Kingdom’s labor market is increasingly dividing into two distinct segments as the influence of artificial intelligence (AI) reshapes demand for certain skills, according to recent data from the job search platform Indeed. While overall job vacancies declined by around 10 percent in January 2026 compared to the same month in 2025, the drop masks significant variation across industries and job types.

Positions requiring advanced AI expertise and experience, particularly in software development, have seen a resurgence. Vacancies for software developers rose 14 percent, driven mainly by senior roles and jobs directly related to AI technologies. Similarly, roles in IT and engineering—fields where AI can enhance worker productivity by automating routine tasks—have remained relatively stable since mid-2025.

In contrast, vacancies in sectors more susceptible to automation, such as retail, manufacturing, accounting, and marketing, have declined substantially. Manufacturing job postings have fallen by 58 percent since June 2022 and remain 18 percent lower than last summer. Blue-collar roles including installation, maintenance, loading, stocking, and construction have also struggled to recover.

Jack Kennedy, senior economist at Indeed, described the emerging pattern as a “two-speed” labor market, with demand concentrating on experienced professionals possessing specific AI-related skills, while opportunities for less specialized or entry-level positions diminish. He noted that this shift raises challenges for many jobseekers, particularly those entering the workforce or looking to change roles, as the qualifications needed become more specialized and less accessible.

This trend complicates efforts by UK officials to promote technical qualifications among young people as a means of future-proofing careers. Prime Minister Andy Burnham recently emphasized the value of practical skills in a social media post, stating that while AI might be able to write essays, it cannot perform manual tasks such as train manufacturing.

The slow pace of hiring for blue-collar occupations has coincided with a surge in youth unemployment, which has reached its highest level in over ten years. Bank of England Governor Andrew Bailey attributed some of this to a “low hire, low fire” economic environment, where employers are cautious about expanding their workforce.

Kennedy concluded that the evolving market raises the bar for jobseekers early in their careers. The growing need for either specialist AI capabilities or significant professional experience means that the benefits of economic growth and technological advances are not uniformly distributed across the labor force.