AI could cause global economic downturn, Bank of England chief warns

Andrew Bailey, Governor of the Bank of England, warned G20 finance ministers that artificial intelligence could trigger a global economic downturn and poses a significant cyber threat to financial systems. He said excessive optimism in the AI sector could lead to a "future market correction" that would spread worldwide. Speaking to finance ministers in the United States on Monday, Bailey urged companies worldwide to prepare for breaches "involving simultaneous disruption across multiple firms". Earlier this month, a coalition of 100 firms — including Google, Microsoft, Anthropic and OpenAI — called on governments to strengthen cyber defences before AI becomes powerful enough to override them. Bailey told the G20 finance ministers that a mix of highly valued stock markets, rising investor borrowing and the growing concentration of wealth in a few large technology firms could exacerbate any future market correction. "The contented is not simply that investors are borrowing more, but that leverage is interacting with precocious valuations and marketplace concentration, successful peculiar the expanding cross-investment betwixt artificial quality (AI) companies and hyper scalers, successful a mode that could amplify a aboriginal marketplace correction," helium said. Bailey has called on those responsible for financial stability to take "appropriate steps to enactment safe and liable exemplary merchandise and deployment connected a planetary basis". Bailey, who also serves as president of the Financial Stability Board (FSB), expressed concern about the "volatility" stemming from energy supply shocks linked to US‑Iran tensions. His warning follows several months after UK Chancellor John Healey announced a £100 million fund to support British AI start‑ups. The initiative forms part of the government’s strategy to build a “sovereign AI” capability, developing domestic AI technology to reduce reliance on foreign services. Ministers want firms to compete for the funding to address challenges such as cutting NHS waiting lists and strengthening cybersecurity and defence. A UK government spokesperson said its new AI economics institute is working with international partners to forge "a stronger shared understanding of how AI is transforming economies around the world." "The institute is the archetypal government-backed assemblage of its benignant focused connected AI's economical impact, helping policymakers recognize what AI means for growth, productivity, jobs and nationalist services arsenic the exertion develops astatine pace," the spokesperson said. Nevertheless, there is mounting concern that AI companies are increasingly creating models that could easily bypass the safeguarding systems of banks and financial centres.