James Reed has said that the government should tax companies that use robots, including AI and chatbots, in a wide-ranging interview discussing the future of the labour market.

The chairman and CEO of Reed Recruitment said that many people in business felt the Labour Party’s language and focus on growth in the 2024 general election were encouraging, but that its actions in government have been very different.

Talking on the BBC’s Big Boss Interview, Reed said this was one of the toughest periods in his 30 years as chief executive, similar to the financial crash and the start of the pandemic.

“A difference here, though, that worries me particularly, is that both in 2008 and 2020, there was a sense in the country – and in the world more widely – that we need to sort this out or do something about it,” he said.

“I don’t see that at the moment. It’s sort of like rabbits in a way, looking into the headlights of these changes, not sure what to do. And my sort of mantra on this is that I believe we should back humans and tax robots, but that’s going to take some designing.

“It’s going to take some careful thought, but taxing work and workers feels very early 19th century to me.”

He continued: “There are big warehouses now that will have many robots in them, where they might not have had the same number of humans in them as in previous times.

“I don’t think just the sort of robots that run marathons, I mean chatbots and AI… the provision of those services is consuming huge amounts of energy and contributing significantly to climate change, it is said, I don’t see any reason to disbelieve that, and yet we’re taxing employers who hire young people to pick up beer glasses in gardens, and not robots.”

‘Tax robots’

He said: “It would take some designing. It might be that if you replace people in your business with robots, there’s a surcharge, a tax. Or it might be that if you use robots, whether that’s in the service sector or in manufacturing, then there’s an extra tax on that, rather like VAT.”

He added: “I think that is a policy that needs proper consideration, because that’s the future, that’s where the wealth is going to be created… so, that’s where the taxation should follow.”

Asked what he would say to the UK’s next prime minister, following Sir Keir Starmer’s resignation on Monday, Reed said: “It’s an opportunity to reset the government’s relations with business and actually row back on what I feel strongly was some early mistakes that were made in that first Budget in October 2024 when £25 billion was put on employers’ national insurance as a massive tax increase.

“That was effectively a tax on jobs, and we’ve seen the consequences of that since then in the shrivelling up of opportunities for people, and the great reduction in the number of vacancies.”

New chancellor

Reed said there needs to be a new chancellor because of Rachel Reeves’ actions against business, particularly small businesses. He said family businesses were still “reeling” from the changes announced on inheritance tax, adding that the revenue raised was “pitiful” and that business property relief should be reinstated.

“Fifty-seven per cent of the people in this country work in family businesses, so those family businesses are thinking, well, I don’t want to grow my business because I only get whacked for tax if one of the family dies.”

On the impact of the national insurance increase in the “Halloween Budget”, he said that while it may have raised billions of pounds in the short run, the impact has been expensive.

“It’s really stopped businesses from hiring, and it’s worse, actually, because the timing was so unfortunate. It’s encouraged businesses to look at alternatives, particularly automation, at a time when AI is really advancing very fast, so particularly automation, but also offshoring jobs, and we’ve seen that too.”

He said businesses were looking again at offshoring following the increases in the costs of employing people. “I know for a fact that you know it’s much cheaper to hire someone in Hungary than it is in Northamptonshire, because we have offices in both places, so it has become topical again,” he said.

Reed also warned that AI is “burning through entry-level jobs,” destroying opportunities for young people at a pace the UK is not prepared for. He said vacancy numbers on the reed.co.uk have been in decline for three years, adding that graduate vacancies on the jobs site have collapsed from 180,000 to 50,000 in four years, and are still falling.

The hardest-hit group is 21 to 25-year-olds, many of whom emerged from university with degrees that have, Reed said, “no currency out there in the world”.

 

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