UK Firms' AI Adoption Drives Productivity Growth, But at What Cost?

The Bank of England's analysis suggests that AI adoption is having a mixed impact on the UK economy. While British firms developing and using artificial intelligence are becoming more productive, gains in productivity are coming at the expense of jobs.

Firms that use AI have seen a significant increase in productivity, with software and IT consulting firms contributing 0.1 percentage point to annual productivity growth between 2023-2025. This is a tenfold increase compared to the previous decade before COVID.

A separate analysis by the BOE found that vacancies for jobs most exposed to AI fell by 15% over the past three years, compared to declines of 10% and 6% for occupations with medium and low exposure to AI. Customer service and administrative roles saw the sharpest decline in vacancies, dropping by more than 20%.

The BOE's Governor Andrew Bailey has said that AI's effect on productivity is likely to follow a J-curve, as businesses take time to learn how to use the technology effectively. He believes that AI has the potential to break the economy out of its prolonged period of weak growth.