AI could cause global economic downturn, Andrew Bailey warns G20

Andrew Bailey has told G20 finance ministers to treat AI as more than a growth story. In an open letter sent on Monday, the Bank of England governor said a sharp slowdown in the AI sector could set off a market correction with global reach, and he warned that financial systems face a serious cyber risk as well.

Bailey said the danger is not just that investors have piled in. The problem, in his view, is the mix of high stock valuations, rising borrowing, and a growing concentration of money in a handful of big tech firms. He pointed specifically to the way AI companies and so-called hyperscalers are increasingly investing in one another, saying that overlap could make any correction worse.

He also urged financial security officials to plan for breaches that hit several firms at once. That concern lines up with a warning published earlier this month by 100 companies, including Google, Microsoft, Anthropic and OpenAI, which called on governments to strengthen cyber defences before AI becomes powerful enough to override them.

Bailey’s letter came in his role as chair of the Financial Stability Board, the international watchdog. He also said the board was worried about volatility tied to energy supply shocks from the US-Iran war. The message is pretty clear: the people who oversee finance are no longer talking about AI only as a productivity tool. They’re talking about it as a source of market fragility.

The timing matters for the UK too. Chancellor John Healey announced a £100m fund for British AI start-ups, part of a wider push for “sovereign AI” so the country is not dependent on foreign services. The government says its new AI economics institute is working with international partners to build a better understanding of what AI means for growth, jobs and public services. Bailey’s warning is the awkward reminder that the bill for speed may show up somewhere other than the obvious place.