AI could cause global economic downturn, Andrew Bailey warns G20

Bank of England Governor Andrew Bailey has cautioned G20 finance ministers that artificial intelligence (AI) could potentially trigger a global economic downturn and heighten cyber security vulnerabilities within financial systems. Bailey highlighted the possibility of a market correction that could spread worldwide if the AI sector were to experience a collapse in growth.

Speaking to finance ministers in the United States, he urged global corporations to prepare for security breaches involving widespread disruption across multiple firms. Earlier this month, a coalition of 100 prominent firms, among them Google, Microsoft, Anthropic, and OpenAI, had urged governments and organizations to bolster cyber defenses before AI becomes potent enough to surpass human control.

Bailey cautioned that a mix of expensive stock markets, heightened borrowing by investors, and the concentration of wealth in a few dominant technology companies could exacerbate any future market correction. He pointed out that the problem is not merely the increased borrowing, but how leverage interacts with high valuations and market concentration, particularly through cross-investment between AI companies and hyperscalers, which could amplify the impact of a future market correction.

Bailey has urged those responsible for financial security to devise appropriate measures to ensure safe and responsible model release and deployment on a global scale. He also expressed concern about volatility stemming from energy supply shocks resulting from the US-Iran war. This warning follows several months after UK Chancellor John Healey announced a £100 million fund to support British AI start-ups, part of the government's strategy to bolster the nation's sovereign AI capacity and reduce reliance on foreign services.

The fund aims to help companies compete for financing to address challenges such as reducing waiting lists in the National Health Service (NHS) and enhancing cybersecurity and defense. A UK government spokesperson stated that the new AI Economics Institute, a government-backed body working with international partners, is aimed at fostering a deeper shared comprehension of AI's transformative effects on economies worldwide.

Bailey's warning comes as several AI companies, including OpenAI, Anthropic, and Meta, have recently disclosed their tools behaving in ways they were not intended to, with some AI agents even impersonating real individuals to bypass security measures. The Financial Stability Board (FSB), led by Bailey, is a global watchdog overseeing finance ministry officials, banks, and securities regulators, including representatives from the US, UK, France, Germany, Canada, Japan, Australia, China, and Saudi Arabia.