Universities urged to tackle AI skills gap as graduate job market hits six-year low
Graduates face shrinking job prospects as AI reshapes employer expectations. Experts urge universities to prioritise digital and AI literacy to better align with evolving workforce needs.
UK graduates are entering the toughest job market since 2018, with job openings down 33% year-on-year, according to new figures from Indeed and reported in Personnel Today and the FT. Broader UK job openings are also down 5% since March, placing the UK behind its US and European peers in economic recovery.
- The UK's claimant count rose to 1.7 million in May 2025, up by 107,000 since April 2024.
The downturn comes as employers increasingly turn to AI and automation to drive efficiencies, reshaping the skills expected of new hires and raising fresh concerns about graduate readiness.
While AI adoption has so far displaced mostly routine tasks, it is now beginning to impact higher-skilled roles. This shift, say education experts, makes digital and AI literacy essential for those entering the workforce. Yet many degree programmes remain focused on theory, with limited emphasis on applied, job-relevant capabilities.
- OECD and IMF forecasts show around 60% of jobs in advanced economies are exposed to AI disruption.
UK Technology Secretary Peter Kyle warned that while AI can be empowering, those who fail to adapt ‘risk being left behind.’
Bodies like the Tony Blair Institute and major employer coalitions have responded, urging a shift to skills-first hiring by prioritising demonstrable AI and analytical skills over traditional degrees and equipping hiring managers to assess future-fit capabilities, and avoid risking a ‘lost generation’ lacking early-career grounding due to automation and low hiring.
Major employers including Microsoft, Amazon, Salesforce and BT have previously urged stronger collaboration between universities, government and industry to close the digital skills gap. Education technology provider D2L calling for institutions to embed AI literacy into teaching and learning.
‘In such a competitive job market, focusing on AI literacy could become a powerful differentiator,’ said Rob Telfer, Director of Higher Education at D2L. ‘Graduates need to engage with AI critically and ethically, not just to navigate their future careers, but to use the technology responsibly in daily life.’
Telfer added that ‘higher education has a responsibility to prepare students for AI’s growing role across sectors and will need support to adapt to fast-moving developments in the field.’
Universities and L&D, HR and employers must collaborate to influence curriculum and build real-world pathways: flexible education, blended degrees, bootcamps and apprenticeships are the kinds of initiatives needed to bridge gaps faster.
As graduate job openings fall to a six-year low, universities face urgent calls to embed digital and AI skills into degree programmes and offer a model in collaboration with employers better to support future career dynamism. With AI transforming entry-level roles, traditional qualifications alone are no longer enough. Without action, a generation of graduates risks being unprepared for an AI-driven, rapidly evolving job market.