In nearly every financial services board I encounter, the same conversation happens in sequence: first, the Chief Executive talks about digital acceleration and the strategic necessity of AI capability. Then, ten minutes later, the Chief Financial Officer talks about reducing SG&A spend and tightening headcount control. Nobody seems to notice they’re describing two incompatible things.
They notice afterwards. When the people function gets flattened because the cost target was set before the AI strategy was articulated, and suddenly there’s nobody left to redesign roles, build literacy at management level, or create the organisational readiness that makes AI returns actually materialise.
This is the budget paradox at the heart of financial services in 2026.
The contradiction in the numbers
The data is clean. Sixty-seven percent of CFOs were actively cutting costs in mid-2025. At the same time, those same organisations were protecting and expanding their technology budgets. AI spend is sacrosanct. People spend is not.
What makes this problematic is not complicated: AI returns are not a function of the technology. They’re a function of organisational readiness. And organisational readiness requires investment in skills development, role redesign, management capability, and cultural adaptation. It requires a people function with both bandwidth and strategic credibility.
When cost-cutting means removing the layers of specialist expertise that would otherwise support transformation, you don’t get faster implementation. You get implementation that stalls because the necessary groundwork was never done.
You cannot build a modern organisation with a cut-price people function. But nearly every board is trying.
In most UK financial institutions, the people function has been flattened by five to eight percent over the past 18 months while the transformation pipeline has expanded by three to four multiples. The maths don’t work. The people, I’m afraid, are exhausted — though they’re too professional to say that in a board presentation.
The readiness gap
Only 35 percent of leaders believe they’ve adequately prepared their people for AI roles. One in three employees have received zero AI training in the past year. Eight percent of organisations describe themselves as “very well prepared” for AI transformation. The gap between ambition and readiness is now the single largest people risk in financial services.
This gap doesn’t close without investment. It doesn’t close with a compliance module and an engagement survey. It closes when the people function has the capacity and the credibility to work with business leaders on skills architecture, identifying the roles that will change and how to support people through that change. It closes when managers at every level understand that part of their job, in an AI-enabled world, is enabling their teams to work with technology that’s fundamentally different from what came before.
3x Organisations that explicitly managed AI-related upskilling and role redesign saw three times faster return on their AI investments compared to those that treated technology implementation separately from people strategy. The capability gap was the difference between successful deployment and expensive underutilisation. Forrester, 2025
The paradox deepens when you look at it commercially. Global skills shortages are estimated to cost the economy three point eight trillion pounds by 2026 — not in recruitment costs, but in lost revenue and competitiveness. In financial services, where the same talent is wanted by every competitor, a skills development programme isn’t a cost. It’s a competitive moat. It’s also the only realistic way to deliver on the AI strategy without hiring talent you literally cannot find on the market.
The conversation nobody is having
Here’s what I notice: the CPOs who succeed in keeping their budgets are the ones who have learned to speak in commercial language. They’re not defending “people investment.” They’re framing it as “cost to income impact,” “return on capability,” and “execution risk.” They’re calculating the cost of the skills gap — not as a philosophical exercise, but as a concrete drag on revenue, margins, and time-to-value on technology investments. They’re able to say, with evidence: this AI transformation will cost us X, and without adequate people readiness, Y percent of that will be wasted. Here’s what it costs to avoid that waste.
That conversation shifts the frame from “should we cut people spend?” to “what is the actual cost of not investing?”
Most CFOs, when they see the numbers properly framed, are no longer cutting people budgets for the readiness work. They’re reprioritising within the overall spend, because they can see the return. The boards that get this right are the ones where the CFO and CPO are speaking to each other before the cost-cutting exercise begins — not after.
This is not about sentiment. This is about math. AI transformation without people readiness is just expensive software sitting on a hard drive, slowly depreciating.
The boards that will outcompete their peers on AI are not the ones with the best technology budgets. They’re the ones with the clearest-eyed understanding that transformation is a people problem with a technology solution attached, not the other way around. The CPO who can make that case clear — and transparent in its commercial logic — won’t be fighting for budget. They’ll be allocating it.
Domi Alzapiedi is a Chief People Officer in banking, focused on the intersection of people strategy, organisational design, and commercial performance. She writes about the questions that keep leadership teams honest.