Artificial intelligence could unleash a global economic downturn, the governor of the Bank of England has warned in a letter to governments from around the world.
Andrew Bailey said that a “future market correction” could spread across the world if the AI bubble bursts, in a letter to G20 finance ministers who are currently meeting in North Carolina, USA.
Mr Bailey warned in his letter of the “volatility” caused by the impact of energy shocks from the US-Iran war.
Writing in his capacity as chairman of the Financial Stability Board, and international watchdog, he said that “markets remain vulnerable to a potentially disorderly correction that could spread across borders, particularly given fragilities in sovereign debt markets”.
He added: “The issue is not simply that investors are borrowing more, but that leverage is interacting with high valuations and market concentration, in particular the increasing cross-investment between artificial intelligence (AI) companies and hyper scalers, in a way that could amplify a future market correction.
“I remain concerned therefore that a large shock or combination of shocks could concurrently trigger multiple vulnerabilities.”
Mr Bailey’s warning comes as Chancellor John Healey announced a £100 million fund aimed at backing British AI start-ups.
The fund is part of the Government’s efforts to grow the country’s so-called “Sovereign AI” capacity, homegrown AI technology aimed at ensuring the UK is not dependent on services and infrastructure developed abroad.
Ministers want to see companies compete for the funding to help tackle challenges like cutting waiting lists in the NHS, and improving patient care, as well as bolstering cybersecurity and defence.
Mr Healey said: “Britain is home to some of the most innovative AI companies in the world, and this Government is backing them to start, scale and succeed here in the UK.
“This first-of-its-kind competition will help make sure more of the benefits of AI are felt in every UK postcode.
“As G20 countries seek to make the most of AI opportunities, I’m determined Britain has a lead role in harnessing this technology to drive more jobs, better public services, and growth that’s UK-wide.”
