2025 Wrapped could be epitomised by a ‘Survivor’s Budget’. 2026 needs to be different. We need a new model for automation and economic growth.

The dust is well settled on the Budget – the accusations, leaks and resignations that surrounded it calmed – but it is only with that settling that the bigger narratives and challenges for 2026 have surfaced. In particular, the dominant but oversimplistic narrative that AI is a wand we can wave to deliver shared prosperity has been unpicked on several fronts.

In their analysis, the OBR recognise AI as a plausible structural driver of growth alongside sectoral shifts but warned against over-reliance, noting that ‘AI will likely provide a smaller boost to productivity growth over the next five years than the ICT revolution did before 2008'. They also note ‘significant uncertainty’ around the magnitude, timing and distributional effects of AI, which is currently bounded by low-productivity pathways.

Interrogating technological readiness and transformation at systems, firms, and job levels across the country was a core focus of the IFOW’s 2025 Pissarides Review, supported by the Nuffield Foundation’s strategic fund. The Review proposed a new model of human-centred automation aimed at high-discretion augmentation, achieved through a new socio-economic paradigm of good work.

Our message for 2026 is clear: this new model of human-centred automation and pro-worker AI is what is needed if we are to reorient and reboot the UK’s structurally weak economy.

Aside from the Budget, initiatives such as the current review of the Green Book – HM Treasury’s guidance on how to appraise policies, projects and programmes – may turn out to be as significant. In the meantime, it is essential that careful, rigorous work, responsible pilots, and sense-making should continue to build the evidence, tools and institutional capabilities needed to manage the next wave of technological transformation.

Just as the Employment Rights Bill (ERB) passes, the promise of an overarching AI Act in 2026 – one to guide human-centred AI development and serve the public interest rather than just the margins of tech providers - has been withdrawn. This has left some marked gaps in the ‘AI at Work’ space, which was not a focus of the ERB, and the chance for amendments to it has passed.

Without a dedicated legislative vehicle to steer anticipatory and participatory innovation and good governance together, a major challenge for 2026 will be to address these governance gaps and support good work transitions in other ways. This may need to be through adjacent and secondary legislation, and regulatory sandboxes, through sector or domain-specific regulation and guidance, and other initiatives. On that, we particularly welcome the launch of a new Women in Tech taskforce, with IFOW Chair of Trustees Dr Anne-Marie Imafidon appointed to lead it alongside Secretary of State Liz Kendall. This has huge potential to change the narrative around AI and make headway here without statutory underpinning.

In many ways, the Government is facing the same challenges as businesses themselves. Rather like many firms across the country, it is struggling with the reality of AI adoption and feeling as if it is combating forces out of its control.  

In 2026, it must turn its attention from buying time and hoping for the best to actively investing in human-centred automation and managing good transitions for people and British SMEs. With growth forecasts downgraded to 1%, it is time to escape the current trajectory of “digital technologies unmaking shared prosperity”, as MIT’s Daron Acemoglu puts it in this piece for the FT.  

Rather than replacing workers through blunt, low-road automation, AI can be deployed to improve the experience, value and quality of work and mediate better outcomes for individuals, firms and the economy. Putting 2025 behind us, that should be our mission for 2026.

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