Bank of England governor says AI could cause global economic downturn

The governor of the Bank of England, Andrew Bailey, has expressed concern that artificial intelligence could trigger a global economic downturn in a letter to G20 finance ministers. This warning emerged as Chancellor John Healey announced a £100 million fund to support British AI startups, as reported by PA Media/dpa.

Bailey highlighted the potential for a "future market correction" to spread across the world, citing "volatility" caused by energy shocks from the US-Iran war. He emphasized that markets remain vulnerable to disorderly corrections due to fragile sovereign debt markets and the interaction of leverage with high valuations and market concentration, particularly in AI companies and hyperscalers.

The issue, according to Bailey, goes beyond increased borrowing by investors; it involves the amplification of a market correction through cross-investment between AI firms and large technology companies. He expressed concern that a significant shock or combination of shocks could simultaneously expose multiple vulnerabilities.

This warning comes amid efforts by the UK government to bolster its "Sovereign AI" capacity, with the £100 million fund aimed at backing AI startups. The fund seeks to address challenges such as reducing NHS waiting lists, improving patient care, and enhancing cybersecurity and defense. Healey emphasized the importance of British innovation, stating that the country is home to innovative AI companies and that the government is committed to supporting their growth to ensure benefits are felt nationwide.