Despite the billions being thrown at artificial intelligence, the technology has delivered little in the way of productivity gains for UK businesses, according to the Bank of England.

In its latest Monetary Policy Report, the central bank found that AI has increased UK productivity by an estimated 0.5 percent over the past three years. That works out to just 0.1 to 0.2 percentage points of additional annual productivity growth since early 2024, hardly the economic revolution Silicon Valley has been promising.

"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 industries supposedly best placed to benefit from the technology have little to boast about. Productivity growth has improved in AI-heavy sectors such as information and communications, but has yet to exceed pre-pandemic averages.

That's not to say AI isn't doing anything for the British economy. The bank estimates that AI-related activity has accounted for just under a fifth of UK GDP growth since the beginning of 2026, though much of that appears to come from companies developing and deploying the technology rather than businesses becoming more productive 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. In other words, selling AI is proving rather more lucrative than actually using it,

The bank also cautioned against giving AI too much credit for Britain's recent productivity improvements. Much of the increase appears to reflect businesses hiring fewer workers while output continues to grow, partly as companies unwind post-pandemic staffing decisions and respond to higher employment costs. 

And despite predictions that AI will make vast swathes of the workforce redundant, firms responding to the Bank's Decision Maker Panel survey reported virtually no overall impact on employment so far. The technology is, however, making some employers less inclined to hire new staff or replace those who leave.

Other studies suggest businesses are still waiting for the payoff. 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 even more next year.

Another study involving nearly 6,000 executives, published in February, found that more than 80 percent of firms had seen no discernible impact from AI on either employment or productivity. Apparently, the answer to disappointing returns is to keep writing checks.

That growing disconnect between AI spending and actual returns has also caught the attention of financial watchdogs. The International Monetary Fund warned last month that the AI spending spree could come back to bite investors if the promised profits don't show up, potentially dragging the wider economy down with it.

The Bank for International Settlements sounded a similar alarm in June, comparing the current spending spree to the dotcom boom of the 1990s. Its concern is that tech giants are committing enormous sums to infrastructure on the assumption that AI will eventually deliver equally enormous returns, leaving them exposed if reality fails to cooperate.

However, AI is already making its presence felt in one area: 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.

So while businesses are still waiting for their AI-powered productivity windfall, the costs of the boom are already making their way through the economy.

The bank isn't writing off the technology just yet. Businesses surveyed expect AI to add around 0.9 percentage points to annual productivity growth over the next three years, with the gains split roughly equally between faster output growth and slower employment growth.

It seems the AI industry's most impressive productivity achievement is convincing businesses to keep opening their wallets. ®