Bank of England sees only a modest AI effect on UK productivity so far

The Bank of England’s November Monetary Policy Report, published on 5 November, carried two passages on AI: a box on UK productivity growth and a section on what has supported the economy this year. They gave a cautious reading. The Bank said that “so far there is only evidence of a modest AI-driven rise in UK productivity growth”, while flagging “increasing upside risks”.

The report accompanied the Monetary Policy Committee’s 8–1 vote to raise Bank Rate by 0.25 percentage points to 4%, against a backdrop of higher energy prices from the conflict in the Middle East. Productivity matters to that decision because it sets how fast the economy can grow without adding inflationary pressure. Box D of the report starts from a separate development: the Office for National Statistics’ new method of measuring labour inputs, which indicates that productivity growth since the 2008 financial crisis was stronger than previously estimated.

On AI specifically, the Bank said productivity growth has been relatively strong over the past two years but that “much of this recent strength is likely to reflect cyclical factors which are unlikely to be sustained”, chiefly firms unwinding pandemic-era labour hoarding, with higher labour costs at the lower end of the pay scale a further candidate. It noted that productivity had also risen in sectors less exposed to AI, and that it had not risen above pre-Covid averages in heavily exposed sectors such as information and communication. The 0.5% figure comes from firms, not from the Bank’s own modelling: respondents to the Bank’s Decision Maker Panel survey estimate that AI has raised their productivity by around 0.5% over the past three years, which the Bank said would point to a contribution of about 0.1 to 0.2 percentage points to annual productivity growth since early 2024. Those firms reported close to zero impact on employment so far, though the Bank’s Agents said AI adoption is reducing the likelihood that firms hire or replace workers, without materially raising the likelihood of firing.

Looking forward, the Bank said firms in the same survey expect AI to add about 0.9 percentage points a year to productivity growth over the next three years, but that its central projection has productivity growth falling back toward an assumed trend of 1%.

In a separate box on the resilience of UK activity, Bank staff built an “AI activity proxy” from output in programming, information services and publishing, which it cautioned captures only part of AI activity and some longer-run technology growth. Adjusting for trend, it said novel AI-related activity accounts for “just under a fifth of GDP growth since the start of 2026”, and that this support was expected to wane.