OECD says UK growth depends on narrowing regional productivity gaps

On 15 July 2026, the OECD said reducing productivity gaps between UK regions was central to raising the country's economic growth and living standards.

The message was included in the OECD's 2026 report on the UK economy. The organisation said progress would need a long-term strategy that connects skills, infrastructure, innovation and finance, backed by strong local governance to help regions use their productivity potential.

The report's message echoes a recent statement from Andy Burnham, who is shortly expected to take over from Keir Starmer as Britain's prime minister. In a speech last month, Burnham promised to devolve more powers to UK regional mayors to support economic growth and living standards. He said he would give Britain the "circuit breaker" it needed.

Burnham is especially focused on improving productivity in northern England so it can better compete with London in the south. He recently stepped down as mayor of Manchester to launch his bid to become prime minister.

The OECD said the UK economy had stabilised, but that activity remained subdued and the conflict in the Middle East was testing its resilience. It said high and volatile energy prices, rising fiscal pressures, weak productivity growth and large regional disparities continued to weigh on the economy. The OECD also said fiscal discipline remained essential and that strengthening energy security was essential for growth.

Burnham has acknowledged the need to reduce the UK's welfare bill and has sought to reassure markets by committing to the Labour government's current borrowing limits. Starmer resigned last month after months of internal pressure following scandals, economic missteps and policy reversals.

The OECD forecast that UK economic output would slow to 0.9 percent this year from 1.4 percent in 2025, before gross domestic product growth rises to 1.1 percent next year. In its global report in June, the OECD said the war in the Middle East had weakened economic growth prospects worldwide, with a more severe shock likely if no effective ceasefire is agreed before 2027. Oil prices rose sharply at the start of the week after the United States and Iran launched fresh strikes.