The Bank of England Counts AI as Nearly a Fifth of UK Growth This Year - and Firms Say It Is Slowing Their Hiring

Just under a fifth of the UK's economic growth this year has come from businesses that build and sell artificial intelligence, according to the Bank of England's November Monetary Policy Report, published on November 5 — the day after the Bank's rate-setting committee raised interest rates by a quarter point to 4 percent, its first increase since 2023. Bank staff measure the AI share through three proxy industries: computer programming and consultancy, information services such as data processing and data centers, and publishing, which in official statistics includes developing AI agents and AI software.

Stripping out the long-run expansion those industries would have enjoyed anyway, Bank staff concluded that novel AI-related activity accounts for just under 20 percent of GDP growth since the start of 2026. The economy is expected to end the year about 2.2 percent larger than a year earlier — a sharp contrast with the near-1 percent pace recorded in late 2025. Crucially, the Bank notes that the growth so far comes from firms that develop, install and host AI, not yet from productivity gains among the businesses that use it.

The labor-market picture is more ambiguous. In the Bank's regional agents' summary of business conditions from October 30, companies across a wide range of sectors reported AI moving from experimentation to deployment at scale, with the strongest productivity gains in document review, coding, research, forecasting, customer service and office administration. But the effects show up, in the Bank's words, through lower replacement hiring, slower recruitment and reduced trainee intakes rather than widespread job losses.

Entry-level and routine professional roles are the most exposed, the agents write, while demand rises for AI-literate, technical and judgment-intensive roles — some of them commanding higher pay. The Decision Maker Panel, the Bank's standing survey of UK executives, reports close to zero impact of AI on employment so far. The UK unemployment rate fell to 4.7 percent in the three months through August, and the Bank sees few signs of a rise in layoffs.

The productivity arithmetic remains modest for now. Firms responding to the panel estimate AI has raised their productivity by around 0.5 percent in total over the past three years — which the Bank converts into roughly 0.1 to 0.2 percentage points of extra annual productivity growth since early 2024. The same survey expects AI to boost productivity growth by about 0.9 percentage points per year over the next three years, split roughly equally between slower employment growth and faster output growth. Those are self-reported expectations from a survey of executives, not measurements.

The international echoes are hard to miss. Anthropic has said the share of juniors in its technical hires fell from 27 percent to 9 percent, based on the company's own data, and a Nikkei survey found more than one in five large Japanese companies may hire fewer university graduates from 2029. The UK agents' observation that AI use is deepest in professional and business services matches the deployment patterns reported by enterprise AI vendors on both sides of the Atlantic.

For policymakers, the report cuts two ways. AI-related spending is already one of the drivers behind business investment, which grew nearly 5 percent in the first half of 2026, and it explains much of the economy's resilience this year. But a growth model concentrated in a handful of upstream AI suppliers — many of them foreign — leaves the broader productivity payoff unproven, which is precisely the gap between the Bank's 0.9 percentage-point expectation and the 0.1 to 0.2 points actually delivered so far.