As Chancellor Rachel Reeves prepares to deliver her Budget today there are warnings of a “perfect storm” brewing for the UK’s professional jobs market.

Rising employment costs, limited government support, and the rapid adoption of AI are combining to make entry level hiring an unaffordable risk for many small firms. As such there are calls for the UK government to do more to reduce the risks of graduate hiring for businesses. It comes at a time when the increasing use of artificial intelligence is also pushing employers to consider whether the technology is cheaper than recruiting an additional member of staff.

Sarah Vaughan, founder and director of Angelica Solutions comments: “Hiring a graduate into a professional role costs a small business nearly £40,000 in the first year, before they contribute meaningfully to the bottom line, that is if they even stay long enough for that. Government apprenticeship funding barely touches the sides, and SMEs are left carrying the full financial and operational risk. If we want to grow high value industries and get young people into skilled work, the next Budget must offer real incentives.”

The company added recruiting a graduate into a technical or analytical role such as actuarial, pricing, or data science, typically involves a minimum £28,000 in salary, plus another 20% in National Insurance and pension costs, before factoring in training and supervision.

“In year one, graduates are an overhead, not an asset. By year two, they might just about break even. By year three, they finally become real contributors, if they stay that long,” Vaughan added. “The overhead and retention risks are colliding with advances in automation, as right now, it’s cheaper to automate than to upskill and that’s not a sustainable path forward. Employers are making tough choices: take a £40,000 hit on a graduate or deploy AI tools that can perform 60–70% of the work immediately. It’s easy to see why many small firms are choosing the latter.

“Despite these pressures, Angelica Solutions has long championed graduate development seeing it as a cornerstone of sustainable growth”

Vaughan added the Government really needs to investigate targeted corporation tax relief for SMEs that invest in and train entry level professionals as a practical, growth focused policy that rewards firms investing in people, not just technology. This isn’t about promoting inefficiency, but if we don’t train new job seekers now, we won’t have business leaders in the future.

“Upskilling the next generation shouldn’t be a luxury it’s the foundation of sustainable economic growth. If the Government wants innovation led growth, it needs to make investing in people the more attractive option,” she concluded.