In this newsletter, we look at the obstacles blocking productivity growth with a focus on the potential for generative AI to sweep them away. We delve into the new technology’s impact on the telecoms and banking sectors and ask whether poaching AI whizzes raises competition concerns.

The standard prescription to cure the UK’s poor productivity performance is to invest more in innovation, but recent academic research suggests that innovation itself is becoming less productive. We argue that the new crop of ministers need to think as much about the transmission mechanism from innovation inputs to productivity outcomes as they do about the sums being spent on R&D.

Generative AI could deliver immense benefits for business and broader society, but the technology will not realise its full potential if people fail to trust it – if, for example, Gen AI apps spew out misinformation. Learning from working on our own AI tools, we set out three priorities for AI developers and businesses to mitigate this risk: minimise the chances of hallucinations, maximise data quality and address behavioural bias in user transactions.

Top AI developers are in such demand that competition authorities are considering whether poaching the best AI brains could constitute a restriction of competition. We look at whether they are right to worry. A further article examines what the Gen AI boom means for the telecoms sector as an important enabler of AI services. Our conclusion is that policy interventions may be needed to further incentivise 5G deployment so that mobile networks have sufficient bandwidth to handle AI applications.

Finally, we argue that new AI will be just part of a series of transformational changes that high-street banks face in the next 10 years as neobanks mature alongside fast-changing trends in digital banking and customer behaviour.