The UK must maintain strict budget discipline, control rising pension costs and tackle high energy prices to strengthen economic growth, according to the Organisation for Economic Co-operation and Development (OECD), as Andy Burnham prepares to take over as prime minister.
The OECD warned that Britain’s economic recovery remains fragile, with weak productivity growth, high public debt and ongoing cost pressures limiting the government’s ability to increase spending. The organisation said the next government would need to balance investment ambitions with responsible financial management.
A major challenge for Burnham’s incoming administration will be managing public finances while attempting to deliver economic reforms. The OECD highlighted the need to address rising pension and healthcare spending, warning that long-term costs could put additional pressure on government budgets.
The economic body also pointed to elevated energy prices as a major obstacle for households and businesses. The ongoing conflict in the Middle East has increased uncertainty around energy markets, adding further pressure to inflation and economic activity in the UK.
The OECD said Britain should focus on policies that improve productivity, support investment and reduce regional economic inequality. It also encouraged reforms aimed at boosting infrastructure, skills development and business growth.
Burnham, who is expected to become the UK’s next prime minister, has promoted greater regional decision-making and increased investment powers for local governments. However, the OECD cautioned that ambitious spending plans must be matched with credible funding strategies to avoid worsening debt pressures.
The OECD forecasts UK economic growth to remain modest, projecting expansion of around 0.9% in 2026 and 1.1% in 2027, reflecting continued challenges from weak productivity, high borrowing costs and global uncertainty.
The warning comes as financial markets and businesses watch closely for signals from Burnham’s government on taxation, public spending and investment priorities.
