Bank governor says UK innovation needs ‘supportive’ investment environment

The governor of the Bank of England has said the UK needs a “supportive” investment environment if it is to realise the economic benefits of innovative new technologies.

Speaking at an event in Edinburgh on Monday, Andrew Bailey said “general purpose technologies” (GPT) such as AI, green energy and the space sector could lead to “industry-wide growth” and a boost to productivity.

However, he said achieving this required “the necessary investment”, which he said depended on “a lot of commitment”.

“If we are on the cusp of seeing another advance in GPT, we need the conditions to support an environment where investment occurs across the economy,” he said.

“From the official side, we need to provide a policy framework which sustains growth and innovation.”

He went on: “We must do all we can to ensure the domestic investment environment – by which I mean the institutions and individuals who direct investment to where it is needed – is supportive.”

He also said the investment environment had to allow for the slow pace of “technological shifts” such as AI and space technologies, which he said take time to feed through into economic improvements.

“GPT innovation in history has benefited from, and needed, long development periods, so it is important that we have an investment environment that supports this type of patient progress,” he said.

As part of this, Mr Bailey said it was necessary to take a “pragmatic and open-minded approach to the potential and risks of AI”.

“We must understand what it can and cannot deliver, and where it can create broader issues that will need to be tackled,” he said.

“But I would say to the alarmists that it is all of our responsibility to solve such issues rather than just broadcast them.”

Mr Bailey sounded a positive note about the future of innovation in Scotland and the UK more widely, and praised some of the recent moves to support investment.

He described himself as a “strong advocate” of the UK Government’s proposals to boost the level of investment by UK pension funds in British businesses, which he said demonstrated “a level of commitment to growth in the economy and to the British public”.

He also said British Business Bank was increasing its commitment to “create growth capital in UK unlisted high-potential companies”, while the Scottish National Investment Bank was “seeking to support longer-term investment projects”.

“These developments provide a real opportunity to generate external institutional capital into high-potential companies,” he said.

Mr Bailey was delivering a keynote address at Scotland’s Global Investment Summit in the Scottish capital on Monday.