AI news ·
AI delivers just 0.5 percent UK productivity gain over three years, Bank of England finds
AI added just 0.5% to UK productivity over three years, the Bank of England reports. That gain came mainly from companies building AI, not from businesses using it to become more efficient.
The Bank of England has found that artificial intelligence added just 0.5 percent to UK productivity over the past three years - equivalent to 0.1 to 0.2 percentage points of extra annual growth since early 2024. The figures, published in the central bank's latest Monetary Policy Report, undercut years of promises that AI would transform economic output.
"AI investment appears to be contributing somewhat to current demand strength, but so far there is only evidence of a modest AI-driven rise in UK productivity growth," the Bank said. Even sectors most exposed to the technology, such as information and communications, have not exceeded their pre-pandemic productivity averages.
The report draws a sharp distinction between making money from AI and making money with AI. AI-related activity has accounted for just under a fifth of UK GDP growth since the beginning of 2026, but the Bank attributes this largely to companies developing and deploying the technology rather than businesses becoming more efficient by using it. "The contribution to growth from AI to date appears to reflect activity in the upstream development and implementation of AI technologies rather than broader gains from their adoption elsewhere in the economy," the report said.
Where the productivity gains actually come from
The Bank cautioned against crediting AI for Britain's recent productivity improvements. Much of the measured increase reflects businesses hiring fewer workers while output continues to grow, partly as companies unwind post-pandemic staffing levels and respond to higher employment costs.
Firms responding to the Bank's Decision Maker Panel survey reported virtually no overall impact on employment from AI so far. The technology is, however, making some employers less inclined to hire new staff or replace those who leave - a subtle shift rather than the mass redundancy many predicted.
Other research reinforces the picture of delayed returns. A Gartner survey published last month found that while three-quarters of corporate board members expected AI to improve productivity and cut costs, just 3 percent of organizations had actually achieved their targets. Meanwhile, 38 percent were already over budget on AI spending, yet 85 percent planned to spend more next year. A separate study of nearly 6,000 executives in February found that more than 80 percent of firms had seen no discernible impact from AI on either employment or productivity.
Financial watchdogs sound warnings
The growing gap between AI investment and returns has drawn scrutiny from international financial institutions. The International Monetary Fund warned last month that the AI spending spree could hurt investors if promised profits fail to materialize, potentially dragging the wider economy down with it. The Bank for International Settlements issued a similar alert in June, comparing current spending patterns to the dotcom boom of the 1990s. Its concern: tech giants are committing enormous sums to infrastructure on the assumption that AI will eventually deliver equally enormous returns.
One area where AI is already making its economic presence felt is prices. The Bank of England noted that surging demand for AI-related products, including memory chips, has pushed up export prices in China and other Asian economies, raising import costs for Britain. Businesses waiting for their AI productivity windfall are already absorbing the costs of the boom.
The Bank has not written off the technology. Businesses surveyed expect AI to add around 0.9 percentage points to annual productivity growth over the next three years, with gains split roughly equally between faster output growth and slower employment growth. For executives weighing AI investment against measurable returns, the data suggests patience - and scrutiny of vendor claims - remains warranted. Those looking to sharpen their strategic approach may find structured guidance through AI for Executives Courses, which address the gap between AI spending and practical implementation.
Why this matters for executives and strategy leaders
The Bank of England's findings confirm what many leadership teams already sense: AI spending is racing ahead of measurable returns. The 0.5 percent productivity gain over three years, concentrated in AI development rather than adoption, signals that most organizations are funding the AI supply chain rather than benefiting from it. For CFOs and strategy heads, the warning from the IMF and BIS adds a risk-management dimension to budget decisions. The near-universal intent to increase AI spending next year, despite 80 percent of firms reporting no discernible impact, suggests competitive pressure is driving investment more than evidence. Leaders who tie AI expenditure to specific, measurable productivity targets - rather than broad expectations - will be better positioned when boards and investors start asking harder questions about the gap between promise and payoff.