Half of London businesses say their existing workforce lacks some of the skills and capacity needed to meet current organisational requirements, as artificial intelligence changes roles across the capital.
A survey of 2,043 business leaders found that 50% believed their employees had all the necessary capabilities, down from 63% one year earlier. The research was conducted by Survation for BusinessLDN as part of the London Local Skills Improvement Plan.
Significant Skills Gaps Reach Record Level
The proportion of businesses reporting significant skills and capacity gaps rose from 4% in 2025 to a record 15%. A further 35% said they faced some gaps.
Advanced digital capabilities were among the most common shortages. Of the businesses reporting skills gaps, 60% lacked advanced digital skills, while 23% reported shortages in basic digital abilities.
Demand is expected to continue increasing. Around 78% of respondents said they would have a significant need for advanced digital skills over the next two to five years, compared with 66% last year and 56% in 2023.
Three-quarters of surveyed businesses already use AI in some form. Another 12% plan to adopt it, while 8% are investigating possible applications and only 5% have no plans to use the technology.
Among businesses already using AI, 85% said it had changed the skills they required. Employers reported greater demand for critical thinking, ethical reasoning, and decision-making alongside technical abilities.
Training Investment Continues to Increase
A record 81% of businesses plan to increase their investment in workforce training over the coming year. That figure rose from 80% in the previous survey and 69% in 2023.
Another 13% expect their training spending to remain unchanged, while 5% plan to reduce it. BusinessLDN policy delivery director Mark Hilton said employers were investing more but needed a skills system that could respond more quickly to changing requirements.
The survey found that 83% of businesses currently had job vacancies. However, only 32% reported difficulties filling positions, down from 46% a year earlier and the lowest level recorded by the annual study.
One in Five Firms Plans Job Cuts
Around 20% of businesses plan to reduce staff numbers, while 76% do not expect to cut their workforce. Among those planning reductions, 25% cited general cost-cutting.
Another 24% pointed to lower demand for entry-level workers because of AI, while 23% expected reduced demand for mid-career employees. Economic conditions and changes to business models were each cited by 14%.
The findings come as London continues to record the UK’s highest regional unemployment rate. The Office for National Statistics estimated that unemployment in the capital stood at 6.6% between February and April 2026.
Featured image credits: PickPik
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