The Organisation for Economic Co-operation and Development (OECD) emphasized the importance of narrowing regional productivity disparities across the United Kingdom to boost economic growth, according to its 2026 report released Wednesday. The international group highlighted that addressing these gaps is crucial for raising living standards and called for a comprehensive, long-term strategy that integrates skills development, infrastructure investment, innovation, and finance. Strong local governance was also identified as essential to unlocking the full economic potential of all regions.

The OECD’s recommendations align with recent policy proposals from Andy Burnham, the former mayor of Manchester and a leading candidate to succeed Keir Starmer as prime minister. Burnham has pledged to devolve additional powers to regional mayors to drive economic growth and improve living standards outside London. In a speech last month, he stated his commitment to providing “the circuit breaker” the country needs, with a particular focus on boosting productivity in northern England to reduce the economic imbalance with the capital and the south of England.

The report noted that although the UK economy has stabilized, activity remains subdued and faces ongoing challenges from external geopolitical developments. The conflict in the Middle East has placed additional strain on the economy’s resilience, contributing to volatility in energy prices and fiscal pressures. The OECD warned that weak productivity growth and persistent regional inequalities continue to hinder economic progress. It stressed the need for fiscal discipline and for strengthening energy security measures as essential components for sustainable growth.

Burnham has acknowledged the urgency of addressing the rising welfare costs and has sought to reassure markets by committing to adhere to the current Labour government’s borrowing limits. His bid for prime minister follows Starmer’s resignation last month after months of internal party pressure stemming from a series of political setbacks and economic policy reversals.

The OECD forecasted that the UK economy will slow down this year, with gross domestic product (GDP) growth expected to decline to 0.9 percent compared with 1.4 percent in 2025, before increasing modestly to 1.1 percent in 2027. In its broader global economic outlook published in June, the OECD warned that the ongoing war in the Middle East has dampened growth prospects worldwide, noting that the risk of a more severe economic shock remains if an effective ceasefire is not reached before 2027. The report came amid renewed tensions, with oil prices surging earlier this week following fresh strikes by the United States and Iran.