HR teams in the UK and Europe can look forward to having bigger budgets to play with next year – but this will come alongside greater scrutiny, increasing workforce tensions, and an ongoing acceleration of AI adoption, research has argued.
The study from HR platform Lattice has found that nearly two-thirds (64%) of UK and European HR teams expect their budget to increase in the next six to 12 months, and 52% expect headcount growth.
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However, more than half are also reporting being under mounting pressure to defend spending on engagement, wellbeing, and manager enablement, as well as spending on diversity, equity, inclusion and belonging (DEIB).
The poll of 1,002 HR leaders and managers worldwide found 41% cited aligning HR strategy with overall business goals as their top challenge for 2026. This came ahead of compliance complexity (37%) and evolving employee needs (27%).
The expansion and adoption of AI within the workplace will continue to be a key challenge, and opportunity, next year, especially the embedding of ‘agentic’ AI, or AI that can set its own goals, make decisions, and take actions with minimal human intervention.
Three-quarters (75%) of UK and European HR teams were already experimenting with agentic AI, said Lattice, with 68% taking a leading role in guiding adoption across their organisations.
Globally, 83% of the HR professionals polled said they were either excited, hopeful, or optimistic about outsourcing to agentic AI. This was, however, offset by the 61% who maintained ethical concerns about this new technology.
The 2026 State of People Strategy report emphasised a clear correlation between technology adoption and team performance, with 72% of high-performing teams using four or more specialised HR tools compared with an average of three tools across all respondents.
Generational attitudes toward technology also varied significantly, with 53% of Gen Z respondents saying they actively sought out new technology, 58% of Gen X requiring ‘proof’ before trying new tools, and 56% of Baby Boomers believing technology reduces human connection.
Despite these differences, AI adoption was gaining momentum across all age groups, Lattice found, with 42% of white-collar HR professionals already using agentic AI regularly.
Next year will also see workforce tensions sharpening, Lattice predicted. Four out of 10 (40%) of UK and European HR leads were reporting employees being asked to do more without more pay, with more than half also seeing staff push back.
While 41% were increasing bonuses (50% in France), the disconnect between workload and reward was widening, Lattice argued.
“This year’s report makes one thing clear: it’s back to business basics. HR is at the centre of today’s most critical opportunities: driving performance, engaging people, and adopting AI responsibly,” said Sarah Franklin, CEO of Lattice.
“The most effective leaders aren’t using AI to replace people, but to embrace what makes us human – scaling creativity, ingenuity, and diverse perspectives,” she added.
Drilling down into the findings, the survey highlighted that performance management is currently the top priority for 40% of HR teams globally, closely followed by employee engagement at 39%.
But there were also notable regional variations in these HR priorities. European teams, for example, showed equal focus on employee engagement and learning and development (both at 36%).
They were also twice as likely as their US counterparts to prioritise (DEIB) initiatives (24% versus 11%).
However, DEIB as a global priority was declining significantly, Lattice highlighted, with only 16% of teams focusing on it in 2026, down from a peak of 30% in 2023.
Despite this shift, 61% of HR teams with dedicated DEIB roles nevertheless planned to maintain them, and the highest-performing HR teams were five times as likely to prioritise DEIB.
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