UK tech faces double crisis: Fewer foreign workers and AI-driven job cuts

The UK's technology sector is facing a perfect storm of challenges, with new research revealing a significant decline in international workers seeking visas to work in the country alongside widespread job cuts attributed to artificial intelligence adoption.

According to consultancy RSM UK's Technology Industry Outlook 2026 report, visa applications from international workers to the UK tech sector dropped 11 percent between Q2 and Q3 2025, and were down 6 percent year-on-year. The findings, based on interviews with 300 tech executives, paint a concerning picture for an industry already grappling with domestic talent shortages.

The AI paradox: Growth driver and job destroyer

The report highlights a stark contradiction in how tech companies view AI. While 98 percent of surveyed executives report using AI, the technology is simultaneously being blamed for workforce reductions. More than a quarter of respondents said they had cut headcount in the past year, with 51 percent citing roles augmented or replaced by AI as the primary reason, compared to just 23 percent who blamed economic conditions.

This finding sits uncomfortably alongside other research. A recent study from the National Bureau of Economic Research found that more than 80 percent of companies have seen no discernible impact from AI on either employment or productivity. RSM's own data shows AI as both a source of confidence—with 82 percent of AI companies expecting growth under the current UK government—and a driver of job losses.

Skills gap widens as executives leave

Adding to the sector's woes, a separate study by investment management firm Rathbones Group claims that 6,000 business owners have left the UK over the past two years, with the tech sector representing the largest proportion. Data from Companies House shows 8,423 companies saw one of their owners leave the country, with the United Arab Emirates being the primary destination, followed by Spain and the United States.

"Tech businesses are being hit with both a decline in skilled immigration and existing talent shortages. Workforce is likely to be one of the biggest challenges for the UK tech industry in the year ahead," said James Bull, RSM technology industry senior analyst.

The skills crisis is compounded by the difficulty of upskilling existing staff. Domestic talent is described as expensive, while non-technical staff prove challenging to train in new technologies. This creates a vicious cycle where companies struggle to fill positions while simultaneously cutting jobs through automation.

Policy responses and industry demands

When asked what would help address these challenges, 20 percent of respondents called for better incentives to encourage financial investment in British AI, while nearly as many said greater skilled immigration was essential—a notable request given the political sensitivity around immigration issues.

Around 16 percent in each case wanted direct government funding for AI companies and government-backed initiatives to address skills gaps. The tech sector appears to be caught between the need for international talent and the political reality of tighter immigration controls.

The adoption dilemma

Companies face a difficult balancing act when it comes to AI implementation. "Employers are having to grapple with AI—adopt it too quickly and there's a risk of damaging employee engagement, but adopt it too slowly, and businesses could lose out on increased productivity and growth opportunities," Bull added.

The situation reflects broader concerns about the UK's competitiveness as a tech hub. With business owners citing economic competitiveness, tax pressures, and the attractiveness of other jurisdictions as reasons for leaving, the country risks losing its position as a leading destination for tech innovation and talent.

As the sector navigates these challenges, the tension between AI-driven efficiency gains and the human cost of automation will likely remain a central issue. The UK tech industry's ability to attract and retain international talent while developing domestic skills will be crucial in determining whether it can maintain its competitive edge in an increasingly AI-driven global economy.