‘Global Spillovers’ from US Could Swamp UK Economy, Bank of England Warns

The UK economy could be swamped by “global spillovers” from the United States, the Bank of England has warned, identifying a fragile AI market and political turmoil as the sources of a potential tidal wave. The Financial Policy Committee (FPC) stated that the risk of a “sharp market correction” has grown.
The first source of risk is the “stretched” US tech market, where AI hype has propelled companies like OpenAI to a $500 billion valuation. The FPC fears this is a bubble that could burst, sending a shockwave across the Atlantic.
The second source is political pressure on the US Federal Reserve. The FPC is concerned that Donald Trump’s rhetoric could erode the Fed’s credibility, triggering a “sharp repricing of US dollar assets.” This would create a separate, powerful wave of volatility.
The Bank of England’s primary concern is that these waves could hit the UK simultaneously, overwhelming its financial defences. As an “open economy with a global financial centre,” the UK is particularly susceptible to such events.
The FPC’s conclusion is stark: the “risk of spillovers to the UK financial system from such global shocks is material.” A crisis originating in the US could lead to a credit crunch in the UK, impacting everything from small businesses to the housing market.