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Macro Effects of AI on the UK Economy

Geoff Riley

15th May 2026

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AI acts as a dual supply and demand shock for the UK. It shifts LRAS rightward via TFP growth and capital deepening, though structural unemployment and widening inequality remain significant risks. On the demand side, surging investment in infrastructure is offset by rising imports of energy and semiconductors, potentially straining the current account while fundamentally reshuffling the labour market's composition.

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Geoff Riley

Geoff Riley FRSA has been teaching Economics for nearly forty years. He has over twenty years experience as Head of Economics at leading schools. He writes extensively and is a contributor and presenter on CPD and Revision conferences in the UK and overseas.

@tutor2uGeoff

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