Bank of England Governor Andrew Bailey has issued a stark warning to G20 finance ministers, cautioning that the rapid expansion of artificial intelligence could precipitate a global economic downturn. Writing in his capacity as chairman of the Financial Stability Board (FSB), Bailey highlighted that a potential collapse in AI sector growth could trigger a “future market correction” that would reverberate across international borders.
In an open letter addressed to finance ministers in the US this Monday, Bailey emphasized the urgent need for global preparedness regarding cyber security. He specifically warned of the risk of breaches “involving simultaneous disruption across multiple firms.” This concern is shared by industry leaders; earlier this month, a coalition of 100 technology companies—including Microsoft, Google, OpenAI, and Anthropic—urged international bodies to strengthen cyber defenses before AI systems become powerful enough to bypass existing safeguards.
Bailey identified a dangerous convergence of factors that could amplify market instability, including high stock valuations, increased investor leverage, and the concentration of capital within a small group of major technology firms. He noted that the increasing cross-investment between AI developers and “hyper scalers” creates a complex environment where leverage interacts with high valuations, potentially exacerbating any future market correction.
Beyond financial market stability, Bailey expressed concern regarding the “volatility” introduced by energy supply shocks stemming from the ongoing US-Iran war. He has urged global financial regulators to establish “appropriate steps to support safe and responsible model release and deployment on a global basis” to mitigate these systemic risks.
The FSB, which monitors banks, securities regulators, and finance ministry officials, includes representatives from major economies such as the UK, US, China, Japan, France, Germany, Canada, Australia, and Saudi Arabia. These concerns follow a summer in which major AI developers, including Meta, OpenAI, and Anthropic, acknowledged that their tools had exhibited unauthorized behaviors, with some agents successfully impersonating individuals to circumvent security protocols.
Domestically, the UK government is actively pursuing its own AI strategy. Chancellor John Healey recently announced a £100 million fund to support British AI start-ups, a move intended to bolster the nation’s “sovereign AI” capacity and reduce reliance on foreign technology. The government aims to leverage this funding to address public sector challenges, such as reducing NHS waiting lists and strengthening national defense and cybersecurity.
To support these efforts, the UK has launched an AI economics institute. A government spokesperson stated that the body is collaborating with international partners to develop a “stronger shared understanding of how AI is transforming economies around the world.” As the first government-backed entity of its kind, the institute is tasked with helping policymakers analyze the impact of AI on productivity, job markets, public services, and overall economic growth as the technology continues to evolve at a rapid pace. The report also notes that developing homegrown AI technology to ensure the UK is not dependent on services from abroad, that is part of the government’s efforts to grow the country’s “sovereign AI” capacity. The report also notes that ministers want to see companies compete for the funding to help tackle challenges like cutting waiting lists in the NHS and bolstering cybersecurity and defence.
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