Unlocking AI-Led Productivity Growth in the United Kingdom

Selected Issues Papers, July 31, 2026

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AI offers a significant opportunity to lift the UK's lackluster productivity growth.
The UK is well positioned given its concentration in high-skill, knowledge-intensive services where AI shows the greatest potential.
Realizing AI gains hinges on five enabling conditions: infrastructure, financing, regulation, skills, and trade openness.
Bottlenecks are identified in each of the five enabling conditions.
Economy-wide reforms are a prerequisite but should be complemented by targeted interventions in regulation and skills.
A model of endogenous technology adoption calibrated to the UK finds that halving regulatory constraints and expanding AI-related skills supply could jointly increase output gains by two thirds.
Investment in sovereign AI capabilities carries substantial insurance value against supply-chain disruptions.

Prioritize economy-wide reforms to address structural bottlenecks across infrastructure, financing, regulation, skills, and trade openness.
Implement targeted regulatory reforms to reduce constraints on AI adoption (example impact: halving regulatory constraints).
Expand AI-related skills supply to complement regulatory reforms and amplify output gains.
Consider investment in sovereign AI capabilities to provide insurance value against supply-chain disruptions.