Bank of England governor Bailey sees signs that AI is starting to boost economies
Analysis suggests that heavy investment in AI contributed to around half of the growth in US GDP in H1 2025
[LONDON] There are early signs that artificial intelligence (AI) is starting to deliver on its promise as a technology that boosts productivity, said Bank of England (BOE) governor Andrew Bailey.
He said that his discussions with companies suggest that AI is feeding through to the economy, but added that he still thought valuations in the sector look “stretched”.
“I’m a bit more encouraged. Certainly in my discussions with companies, I’m picking up more stories of signs of AI coming through,” he said in an interview at a Financial Times event.
Bailey has argued that AI could be a game-changing technology that helps to turbocharge the UK’s lacklustre economic growth rates.
He pins much of Britain’s recent growth woes on the economy being stuck between waves of innovation, as the productivity gains from the previous computer and Internet boom fade.
Analysis by the BOE suggests that the heavy investment in AI contributed to around half of the growth in US’ gross domestic product in the first half of 2025, and two-thirds of this year’s gains in the S&P 500.
Still, there is a wide range of estimates by economists on how transformative AI will be for productivity growth rates, which have sagged across advanced economies in recent decades.
Bailey cited a recent discussion with the boss of a telecommunications company who had used the technology to improve efficiencies.
The governor said: “He gave me a number for the cost saving, and it was very substantial, and he said, ‘That’s AI’.”
However, Bailey said it was still possible that AI companies transform the economy while also being overvalued by investors. He said that forward-looking valuation measures suggest that AI stocks are stretched.
“From a point of view of overall growth and economic growth, we do need it to do that,” he said. “It can be the next productivity uplift and markets, of course, could overrate the degree of uplift and the degree of earnings.” BLOOMBERG
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