Historically, IT has been the disruptor. From Retail to Transportation, the integration of technology has meant that monopolistic incumbents have lost market share to new upstarts, who have carved out their own share of the market. As an example, imagine that 20 years ago, Black Cab drivers could expect to earn £100,000+ per annum. With Uber, the profession has been permanently changed. Similarly, in New York, the yellow taxi badges would trade on the market for 500,000+ USD (for the right to drive a yellow taxi.) Now they are basically worthless. And for the companies able to establish market dominance, the prize is huge, but the risks are high. Specifically, the nature of technology is that the spoils go to the winner, and second place is nowhere. Take Microsoft, which have dominated the business to business software arena with Office for decades. Equally once google entered the market for search, in this aspect they lost almost all their market share. Similarly with social, the acquisition strategy of Facebook, resulting in the integration of Whatsapp and Instagram, means we all use Meta. Does anyone even remember ConnectU?

The new Government has recognized the benefit of having market leading companies within the UK, as the advantage of having a global leading cluster, is not just the immediate implication for jobs, but also in how this leads to innovation. For example, it is not a surprise that in Fintech, two of the global leading firms (Wise & Revolut) were both founded and headquartered in London, where neither have British entrepreneurs. Hence the UK will host an International Investment Summit on 14 October 2024, to promote growth with executives from up to 300 leading companies attending. The UK is Europe’s leading tech ecosystem, with the highest number of ‘unicorn’ companies in Europe and also leads the continent in venture capital investment funding. The hope being, that this then results in further commitments for investment, be that in Atom Valley, the golden triangle, within London fintech, or any of the other leading technology clusters the UK has.

However, for the Labour Party, the struggle will be how to square the circle, of AI led innovation. When Mark Carney was the Governor of the Bank of England, he gave a speech where he discussed the impact of technological advancement, and likened it to how a tree grows over time. Simply put, the metaphor he provided is that the disruption caused by a technological advance, is akin to the bark of a tree shedding. Hence, in stages of rapid advancement, more jobs are lost, than created in the first instance. Overall, there is no doubt that innovation leads to both economic growth and more opportunities. Equally the transition is the danger point, and now with AI starting to be embedded into systems and process, the challenge is that more jobs could be lost than created, right now.

As an extreme example of how investment into AI and automation can result in greater productivity, take the example of agriculture in Japan. To address the severe challenges of tight immigration policy, labour shortages, an aging society, and a lack of successors to undertake on agricultural work, in 2019, the Ministry of Agriculture, Forestry, and Fisheries (MAFF) announced a strategy for the business expansion of smart farming technology and services. As part of the strategy, MAFF collaborates with private companies, universities, and research institutes to achieve ultra-labor-saving while maintaining the quality of agricultural production. As an example, Soratan, a Japanese Agrotech, has developed technology that acts to prepare farmland for organic fertilizer in as little as one month, instead of the usual three to five years, whilst increasing yields by up to 70%. And other Japanese companies in the sector are similarly  laser focused on how to boost productivity to resolve their manpower issues.

Now with the birth of Open AI though, the technology sector is becoming disrupted from within and that is resulting in the cannibalization of jobs, for arguably the first time, in the sector. A recent study conducted by OpenAI estimated that generative AI tools could impact 47% of all development tasks, which means that for companies looking to have in-house teams, where their developers are a cost centre, arguably they would be better off with smaller teams. Indeed, in a study by the US Government, it was forecast that by 2040, machine learning and natural language processing technologies will be so advanced that they will be capable of writing better software code. And they’ll do it faster than the best human developers.

Up to now Open AI has only been trained on open source directories, meaning that PHP and Python have been the primary languages being disrupted, equally given Microsoft own OpenAI it is surely only a matter of time, before the same processes are applied to .NET. And by the same token, Apple will be not far behind.

The final factor to consider is the ongoing rise of nearshoring and IT outsourcing hubs, where developers based there, can utilize AI to provide a comparable service on application development, at a fraction of the cost, along with businesses moving their IT operations to lower cost countries. As an example, Warsaw today employs 5,000+ people across the international banks, from JP Morgan, Goldman Sachs, Citi, Merrill Lynch, etc, where this has happened in the last decade alone. Hence looking at the mid term, despite economic activity in the UK on the up along with VC funding increasing, there is a real question for UK based businesses about what size in-house IT teams they need. And as they look at the options, the chances are that development roles will be streamlined and outsourced.

Nonetheless, if there is a silver lining, it is that IT Management will become paramount. IT Managers who understand how to utilize the various technological solutions and best integrate them, along with organising remote teams will be in demand. And for Developers looking to get a step ahead, certification into project management is a vital step. For recruiters, this is a chance to shine and be consultants for candidates, so they understand how they need to develop themselves, to remain relevant, and avoid becoming redundant.