AI set to give the UK economy a 0.2% boost every year, says watchdog
Key Points
- The OBR expects AI to add 0.2 percentage points a year to UK productivity growth.
- 30% of UK businesses now use AI, up from 15% two years ago.
- Information and communication output per worker grew 7.6% a year since late 2024.
- Productivity 0.5 points higher could cut borrowing by around £50 billion by 2030-31.
The Office for Budget Responsibility (OBR) expects AI to add 0.2 percentage points a year to UK productivity growth.
The budget watchdog set out the forecast in its October 2026 Economic and fiscal outlook, published alongside the Budget. It said the boost would build over the medium term, but that the scale and timing of any effect remain highly uncertain.
The OBR cited the latest ONS Business Insights and Conditions Survey, which found that 30% of UK businesses used at least one type of AI technology in September 2026. That figure has doubled from 15% two years ago.
Output per worker in the information and communication sector grew at an annualised rate of 7.6% between the final quarter of 2024 and the second quarter of 2026. Growth in the sector averaged 5.6% a year from 2016 to 2019 and 1.3% a year from 2022 to 2024.
Professional, scientific and technical services, another sector the OBR linked to producing and using AI, grew output per worker by 3.7% a year over the same recent period. Its growth rate between 2016 and 2019 stood at 1.1% a year.
The OBR said growth also accelerated in sectors less likely to feel the effects of AI so far. Output per worker in accommodation and food grew 3.2% a year, while wholesale and retail grew 2.4%.
It added that productivity growth in AI-linked sectors was already relatively strong before the pandemic, and that it would keep monitoring the emerging evidence.
AI and the public finances
The OBR left its medium-term forecast for total factor productivity growth unchanged from March. This measure tracks how efficiently the economy combines workers and capital to produce output.
The watchdog said productivity growth 0.5 percentage points higher or lower than forecast could leave government borrowing around £50 billion lower or £40 billion higher by 2030-31.
The OBR also pointed to the IMF’s July 2026 update, which found that momentum in the technology sector from AI had partly offset the global energy shock.
It noted that some commentators have linked rising government borrowing costs across advanced economies to competition for financing from increased AI investment.
