Bank of England Governor Andrew Bailey said artificial intelligence investment is helping explain why UK economic activity has held up better than expected, while warning that investors may be pricing in gains that arrive late or never materialize.
Bailey spoke Monday at the Swiss Institute of International Studies’ lecture series at the University of Zurich. He pointed to business services as one area where AI investment is supporting activity, but gave no estimate of the amount involved or its contribution to growth. The Bank of England published the speech Monday.
Bailey said AI, digital technology and robotics could improve productivity growth and raise sustainable growth rates in many economies. He presented that prospect as a favorable supply-side shift, contrasting it with conflict-related disruptions that can push prices higher while weakening economic activity.
The potential economic gains do not remove financial risks. Bailey warned that investors may overstate future AI returns or expect them sooner than they arrive. Even if returns eventually meet expectations, a longer wait could disappoint markets. He also cautioned against treating every AI-related company as a likely winner.
Bailey pointed to the time it took for electricity to deliver its benefits as a reminder that major technologies can take time to pay off. He cited Netscape as an example of how companies once seen as winners may fail. He did not say an AI bubble had formed. “Bubble spotting is an imprecise science,” Bailey said, describing a possible bubble as a financial stability risk. He also linked public confidence in AI to asset valuations.
Bailey said Frontier AI had increased cyberattack risks. He called for testing models both before launch and after release, alongside better systems for reporting incidents, monitoring them and acting on what they reveal.
