04/10/2025 by Tony Redondo
Leading AI executives and thinkers share a stark message. People have approximately 18 months to retain their advantage over AI (artificial intelligence) in the workforce.
AI is transforming employment in complex ways with 25-40% of jobs globally exposed to AI disruption. Job displacement is occurring in roles involving routine tasks, but history suggests technology typically creates more jobs than it destroys over time. Job creation is happening in AI development, data science, prompt engineering, AI ethics/governance, and roles managing AI systems. Many existing jobs are being augmented rather than replaced, with workers using AI as a productivity tool. Skill shifts are accelerating demand for technical literacy, critical thinking, and uniquely human skills like creativity, emotional intelligence, and complex problem-solving.
https://www.mirror.co.uk/money/warning-over-using-ai-plan-36008276.amp
AI is projected to significantly boost economic output with increased productivity across sectors like healthcare diagnostics, logistics optimization, and software development. The automation of time-consuming tasks allows workers to focus on higher-value activities and history suggests new products, services, and entire industries will emerge from AI capabilities. Estimates suggest AI could add $15-20+ trillion to global GDP by 2030-2035 with productivity gains of 20-40% in AI-intensive sectors. Early adopters like the US and China will gain a competitive advantage over slower adopters.
AI’s inflation effects could be nuanced with deflationary pressures from lower production costs, improved supply chain efficiency, reduced need for labour in some sectors but potentially inflationary pressures from the initial implementation costs, increased energy demands for AI infrastructure, wage pressure for AI-skilled workers, and the potential market concentration if a handful of companies dominate. The net effect will likely depend on adoption speed, regulatory approaches, and whether productivity gains are broadly distributed.
Governments could face revenue challenges as automation reduces payroll tax revenue and corporate profits shift to AI-centric companies, often with favourable tax structures. It’s currently difficult to tax digital/AI services and VAT revenue may also potentially decline from displaced workers’ reduced consumption.
Educationally, AI has already had an impact. How does a teacher evaluate a student’s ability if their essay has been entirely written by AI? Some suggest that students are going to emerge from university with degrees, and into the workforce, who are essentially illiterate. The demise of writing matters because the act of writing is an act of thinking. Anyone who lets AI do the writing for them will find their screens full of words and their minds emptied of thought. As AI becomes abundant, there is a clear and present threat that deep human thinking will become scarce.
For the equity markets, there should be obvious winners like the tech giants, AI-native companies, cloud infrastructure, and semiconductor manufacturers. The losers are likely to be any company slow to adopt AI and traditional service providers facing automation. The volatility is likely to be significant, as market reprices which companies/sectors will thrive. The UK’s FTSE 100 index is heavily weighted toward “old economy” (energy, mining, finance) that could potentially underperform AI-driven indices.
AI should be a boon for the commodity markets with ever increasing demand for copper and rare earth metals to satisfy the surge in demand for AI hardware, a massive increase in electricity demand for data centres leaving the UK vulnerable with its high energy costs.
In the currency markets, the UK’s position as net importer of tech could pressure the Pound if its AI trade deficit widens.
Currency Exchange Rates Update
The Pound opened its account for October at a ten day high against the Euro before falling to within 0.5% of its lowest level since November 2023. The Pound has now lost value against the Euro for four straight months as UK fiscal fears ramp up, whilst the hawkish ECB (European Central Bank) outlook keeps the euro supported.
Against the US Dollar, the Pound also opened its October account at a ten-day high but failed to hold the psychologically important $1.35 (interbank) level, its 10-year average.
The Pound’s performance is the result of a stagflationary environment, a mix of high inflation and weakening growth. Higher inflation expectations offer near-term support for the Pound by reducing the likelihood of further BoE (Bank of England) interest rate cuts, but that support is short-lived, as deteriorating growth erodes investor confidence.
Andrew Wishart, Berenberg Bank economist says fears of a Pound sell off in 2026 is a key concern for investors. Wishart said, “Many worry that political developments could trigger a major sell-off in gilts and the pound next year.” The main risk, he argues, is that Labour could replace Starmer with a leader less committed to deficit reduction. “Wholesale abandonment of the government’s commitment to fiscal sustainability would likely trigger a major sell-off in gilts and the pound that forces any new prime minister to change their tune and recommit to fiscal responsibility,” says Wishart.
This week, the key economic data releases include:
Tuesday UK Halifax House Prices Index
Wednesday NZ RBNZ Interest Rate Decision
Friday US Consumer Sentiment Survey
What’s in the news?
A Deutsche Bank poll suggests that of all the major economies, the UK is the second most at risk from a debt crisis in the next two years as investors remain unconvinced by the country’s growth prospects and efforts to keep a lid on spending. France is the only major economy more likely to face a bond crisis before 2028, then the UK, Japan and the US.
49 years ago on 29 September 1976, Labour Chancellor Denis Healey asked the IMF for a bail-out loan. The British economy was mired in problems with inflation at 14.5% (down from a high of 23.7% earlier that year); the balance of payments deficit was ballooning at more than £2bn; and Britain’s foreign exchange reserves were at a record low of just over $5bn. The Labour government had been running a fiscal deficit of 10% of GDP, and the cabinet could not agree on meaningful reductions in public expenditure. Over the next months, foreign loans amounting to $18bn were due for repayment, and the usual institutional investors had stopped buying government debt. Britain had run out of credit.
UK
The latest survey by Find Out Now puts Reform UK 16 points ahead of Labour after Keir Starmer used Labour’s conference to hit out at the insurgent party. The poll puts Reform in the lead with 35%, up two points from the week before with Labour trailing in second place with 19%, also up two points. The Tories are third on 14%, while the Lib Dems are down four on 12% and the Greens are down one on 11%.
A More In Common poll found Reform has returned to a 10-point lead in the polls, up 2 points in the past week to 30% support with Labour dropping by 5 points, down to 20%, tied in joint second with the Conservative Party. The LibDems are up one point to 14%, with the Greens and SNP recording no change on 8% and 3% respectively.
Polling expert Sir John Curtice warned Sir Keir Starmer that focusing on Reform UK is a “mistake” for Labour. The polling guru said that Nigel Farage’s insurgent party is the “principal threat” at the next election but is “far from the only threat”, suggesting Labour should not “repeat the Tories’ mistake” of focusing on immigration, and that improving the economy and the NHS was more likely to return voters to the party. Curtice added, “The mystery of Keir Stamer, who is he, what does he stand for, that mystery, we are maybe two thirds of the way through the novel, but we are still not sure where the body lies.”
The UK is the “sickest man of the G7” with a percentage of workforce missing due to long-term sickness double that of some of our competitors and a record number of people, most of whom young, claiming benefits for anxiety and mood disorders with the total swelling by 250 EVERY day under this Labour Government. This costs the country £130 BILLION in lost output. According to the ONS (Office for National Statistics), total public service productivity has grown by 0.3% in total in 27 years.
Not so good news
The ONS reported that the UK economy stalled in the second quarter, growing by just 0.3% in another major setback for Chancellor Rachel Reeves. The ONS also said business investment fell 1.1% between April and June, a key measure for showing whether companies are looking to expand.
The OBR (Office for Budget Responsibility) has handed Reeves its first evaluation of the state of the UK economy and crippled public finances, setting policy discussions about likely £30bn tax rises and possible savings in motion and warned the Chancellor that the UK’s outlook is significantly worse than was assumed at the time of the Spring Review in March.
Analysts at Goldman Sachs and Berenberg have warned the Chancellor that poorly designed tax rises could keep inflation high and prevent interest rate cuts being made by the BOE which would help to reduce borrowing costs worth more than double the size of the defence budget. UK growth would also be damaged from higher taxes on households and firms. Last year’s budget with £40bn tax rises, largely through a 2% rise in the employers’ national insurance contributions has played a major part in the nearly 300,000 jobs lost in the following ten months in addition to keeping the UK with the highest inflation in the G7 this year.
Business activity expansion fell to a five-month low after a “subdued” services sector experienced a dull end to the third quarter according to the S&P’s UK Services Purchasing Managers Index.
Insolvencies are nearly 20% up since January with bars, restaurants, and hotels particularly struggling under the weight of soaring costs.
A closely watched survey of businesses, the BoEs Decision Maker Panel revealed bosses plan to raise prices at their fastest rate since the height of the cost-of-living crisis and do not plan to increase staffing levels.
KPMG’s latest Consumer Pulse survey reports a worsening economy with plummeting consumer confidence. Rising food inflation and higher energy bills are key factors contributing to this pessimism.
Financial services activity fell at the quickest rate since June 2020 in the third quarter of 2025, according to the latest CBI Financial Services Survey with headcount expected to decline at a slower rate.
The S&P Global PMI (Purchasing Managers’ Index) for manufacturing in September shows the sector has suffered yet another downturn in activity over September to a five-month low with export orders from the US, the EU, the Middle East and Asia declining at their quickest paces in years. Manufacturing output is now similar to pre-2008 levels. Employment in the sector also fell for the eleventh consecutive month.
New figures from the BRC (British Retail Consortium) reveal that over 80% of costs of the new packaging tax, the Extended Producer Responsibility (EPR) scheme are likely to be passed onto already hard-pressed consumers. The new tax came into effect at the start of this month.
USA
The first US federal government shutdown since 2019 started on Wednesday and with neither Democrats nor Republicans willing to offer an olive branch will continue into next week. Treasury Secretary Scott Bessent said US GDP could take a hit from the government shutdown. Growth in the US has been on upward trajectory over the past two quarters.
Private-sector payrolls declined by 32,000 in September. US factory activity also contracted for the seventh consecutive month, with the orders component slipping but the manufacturing index edged up but remains in contraction territory.
US consumer confidence fell in September to a five-month low, driven by labour market concerns.
The US stock market posted its best September in 15 years and according to Vanguard, the $11 trillion firm, and is “priced for perfection” and likely to disappoint. The S&P 500’s price-to-sales ratio hit an all-time high of 3.3 in September, meaning that investors’ enthusiasm for companies is outpacing that of their customers. That metric hit a ratio of 2 during the dot-com boom and over 3 during the pandemic’s frothy markets and muted economy. For now, the stock market continues its merry rise, with all four benchmarks hitting all-time record highs on Friday.
A new Gallup poll suggests fewer Americans have confidence in newspapers, television, and other forms of mass media than ever before with far fewer Republicans expressing confidence in the mass media (8%) than Democrats (51%) and independents (27%), though the latter two groups still express historically low trust levels. The polling is the latest evidence that traditional journalism in the US is facing a moment of crisis with Americans losing faith in legacy publications and flocking to podcasts and other, newer forms of media.
The EU
Eurozone inflation came in line with analysts’ expectations.
Nicolas Dufourcq, the head of France’s state investment bank Bpifrance, warned that Europe is becoming “doubly colonized” by Chinese industry and US tech saying, “It’s not in the future; the consequences are now”.
Europe has seen a substantial 52% decrease in illegal immigration during the first eight months of 2025 compared to 2023 as the continent pursues a widespread crackdown beyond its borders. The EU built a “big, invisible wall” by striking deals with foreign governments to intercept migrants en-route.
Others
China’s manufacturing sector contracted for the sixth consecutive month. New orders came in at 49.7, and export orders at 47.8, indicating continued weakness. A figure below 50 spells contraction. The data highlights persistent factory struggles throughout the third quarter of this year, weighed down by soft domestic demand and ongoing pressure from US tariffs. The services sector offered little relief, with the non-manufacturing PMI slipping to 50.0 and missing forecasts. China’s industrial profits surged 20.4% in August, marking the first rise in four months. The jump came off a low base and stronger margins. Profits for the first eight months of the year edged up 0.9%, defying forecasts for a 1.6% drop. Factory deflation eased for the first time in half a year, helped by Beijing’s push to curb overcapacity.
The RBA (Reserve Bank of Australia) left Australian interest rates unchanged at 3.6% amid ‘heightened’ uncertainty and a cautiously optimistic domestic outlook. While recent months have shown stabilisation in the private sector and tentative signs of recovery in consumer spending and housing, sentiment data indicates that households and businesses remain sensitive to cost-of-living pressures and global uncertainty. Inflation, particularly in services, remains sticky.
Gold prices soared to a new record high on Wednesday, hitting $3,917.10 an ounce while US gold futures for December delivery extended gains to hit a high of $3,922.70. Its gold’s 39th record high this year. Amid all the global uncertainty, gold is typically viewed as a safe haven asset.
Quote
Henry Ford, American industrialist and business magnate, “Thinking is the hardest work there is, which is probably the reason why, so few engage in it.”
