If the UK wants to carve a space in the AI revolution it needs all industries and freelancers on board (and IR35 isn’t helping).
All the headlines about AI investment during this week’s AI Paris Summit would have the general population thinking the UK tech recruitment scene is booming. But behind the headlines, there’s a bit of a situation.
We’ve got a massive skills shortage, especially in areas such as AI, cybersecurity, and data science. For many of us, AI wasn’t even on our radar until about two years ago. For many, that meant we were playing around with the latest language models (Chat GPT, Gemini and now DeepSeek) as users, not the ones behind the technology.
With that in mind, if you aren’t an AI prompt engineer, coder, software engineer, cybersecurity specialist or even have a course certificate in Python, where does that leave you? On the shelf?
Not necessarily. Companies at this burgeoning stage of AI advancement and integration are scrambling for talent who can make sense of AI’s capabilities. But specifically, within the confines of their industry, their departments, products and services. Those sector-specific needs require a high level of AI, training and business skills. Yet at this stage, it’s not just about having the skills – it’s about actually finding the people who have them and then getting them to educate or train in-house staff.
That is why businesses are increasingly relying on fixed-term contractors and freelancers to fill the gaps. A whopping 99% of companies using contingent talent say it’s been a positive experience, especially for upskilling their existing staff. AI and machine learning are prime examples of where this is happening, according to a Gigged.AI report.
IR35 is not helping the UK tech recruitment crisis
But IR35, the Off-Payroll rules in the UK, have had some unintended consequences. Some 57% of senior tech leaders, according to the UK survey, say contingent talent has helped them upskill internal teams. However, the latest rise in national insurance and IR35 reform means businesses are struggling to engage the right talent. There is a hiring freeze for permanent staff, according to numerous reports.
That is not just them saying it. Loads of contractors are either out of work or looking for assignments abroad. The UK is losing these skills, particularly in AI, just when we need them most. As Rich Wilson, CEO and Co-Founder of Gigged.AI, puts it, the government’s current approach is completely missing the mark when it comes to upskilling the UK
The UK Government’s Autumn budget opposes what is needed to upskill the UK workforce. To ensure we have more AI talent in the UK we must scrap NI increases so companies stop outsourcing AI work outside the UK, remove the IR35 Reform so companies can easily tap into freelance and contract AI talent that is currently working abroad and create an internal mobility platform so all government departments can share talent and share the upskilling and displacement of Jobs.
–Rich Wilson, CEO and Co-Founder of Gigged.AI
Skills-based hiring: why it hasn’t caught on yet
Then there’s the”skills-based hiring” aspect to add to the recruitment mix. Sounds great in theory whereby those hiring focus on what people can actually do rather than just what degrees they have. But in practice, it’s a bit of a mess. Most companies are saying they’re doing it, but only a small fraction have actually implemented skills-focused hiring. There’s a disconnect between the idea and the reality. It’s like everyone’s talking the talk, but no one’s walking the walk.
Many aren’t even doing internal skills tracking. It’s like having a treasure map of the talent you already have in your company, but most businesses aren’t using it properly. They’re still relying on what Wilson sees as old-fashioned performance reviews and spreadsheets, which in his estimations are about as useful as a chocolate teapot when it comes to finding hidden skills. A lot of companies don’t even have software to track skills, even though the ones that do are seeing big improvements, he says.
Now, Gigged.AI would be promoting skills-based tracking software given their products “employ AI and skills-based matching to help tech leaders put the right people into the right roles with rapid speed and efficiency.”
The Glasgow-based recruitment specialist claims its “Internal Talent Marketplace” captures the skills within a workforce and matches them to the right projects, reducing hiring costs and improving employee retention. Then its “Open Talent Marketplace” helps companies easily and compliantly hire global contingent talent through either an outcome-based or time and material Statement of Work.
So, where does that leave most of us freelancers? Well, it’s a bit of a perfect storm. Fellow freelancers, employees and companies need to acquire AI skills that are actually useful for their work or industry. That means all those people will be looking to contingent workers or turn to online training to educate or train them. Then IR35 will only make this harder to materalise.
As John Winsor from Harvard Business School points out, we need to get smart about using contingent workers and internal talent if companies want to survive
This report is a timely reminder that untapped internal talent and a strategic embrace of contingent workforces are not just solutions but critical imperatives for future-proofing organisations in the AI era.
–John Winsor from Harvard Business School
Cultivate in-house skills with a skilled contingent workforce
Basically, all UK industries not just the tech sector should have a serious rethink. The Chancellor of the Exchequer must consider scrapping IR35, since this will enable more companies and recruitment agencies to track down freelancers with the ideal skill sets. If not, as a nation the UK will fall behind the AI growth trajectory. Too many contractors that would be engaged to train staff cou;d be deemed inside IR35 and that usually means being forced as a contractor to join an umbrella company. That usually means a cut in earnings, more risk as umbrellas are unregulated and more fees.
All things concerned, according to Gigged.AI’s survey findings, over two-thirds (69%) of UK businesses are concerned about the tech talent shortage in 2025. A quarter (26%) worry they lack the internal skills to fill roles, and one in five (20%) are concerned that their freelance hires don’t possess the necessary skills to bridge the gaps.
The AI skills gap is no longer a future problem—it’s a reality. Research by IDC paints a concerning picture: by 2026, the global cost of failing to secure tech talent will reach $5.5 trillion in lost revenue, delays, and quality issues.
UK businesses must rethink their upskilling and training strategies to meet the demands of emerging technologies and remain competitive. There’s no single solution, but organisations that adopt a blended workforce approach—intelligently tracking and mobilising their internal skills alongside specialist contingent talent—will be best placed to address this recruitment crisis. Imagine it, everyone from Sue in accounting to Anthony in product management could be AI-trained and empowered.
