In its 2026 Economic Survey of the United Kingdom, the OECD said stronger productivity growth and fiscal discipline would be central to raising living standards over the longer term.
The OECD and IMF expect the United Kingdom’s economy to slow in 2026, forecasting growth of 0.9 per cent and 1.0 per cent, respectively, as higher energy prices and geopolitical tensions weigh on activity.
Both institutions stress fiscal discipline, productivity-enhancing reforms and targeted investment, while expecting inflation to remain elevated in 2026 before easing towards target in 2027.
Asa Johansson, director of economics policy and research at OECD, said: “The challenge for the United Kingdom is to drive faster productivity growth and higher living standards while preserving sound public finances.”
The report called for reallocating spending towards productivity-enhancing public investment, improving tax-system efficiency and reducing inefficient tax expenditures to help rebuild fiscal buffers and support long-term growth.
For the outlook, the OECD highlighted regional productivity gaps, transport connectivity, local government capacity and energy security as areas for reform. It said better aligned electricity and gas price signals, faster investment in electricity networks and greater system flexibility are needed as the United Kingdom expands renewable electricity and seeks lower, more stable energy costs for households and businesses.
Meanwhile, the International Monetary Fund (IMF) Executive Board has concluded the 2026 Article IV Consultation with the United Kingdom and has projected the country’s economic growth to slow to 1 per cent in 2026, as the conflict in the Middle East drives up energy prices, weakens household purchasing power and tightens financial conditions.
The IMF expects growth to gradually recover once the energy shock eases.
In its release, the IMF said the UK economy had gathered momentum before the conflict, expanding by 1.4 per cent in 2025 on the back of stronger private consumption and investment. It noted that inflationary pressures had eased, allowing the Bank of England to lower the Bank Rate to 3.75 per cent by February 2026.
The IMF added the government’s fiscal strategy appropriately balances deficit reduction with growth-supporting expenditure and recommended that monetary policy remain sufficiently restrictive to prevent second-round inflationary effects from higher energy prices while remaining data dependent.
IMF expects headline inflation to rise above 3.5 per cent by the end of 2026 before returning to the Bank of England’s target towards the end of 2027. It added that structural reforms remain well targeted but stressed that effective prioritisation, sequencing and transparent implementation will be essential for achieving sustained economic growth.
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