The UK economy has improved, but growth remains subdued and new global uncertainties continue to test its resilience. Persistent headwinds, including high and volatile energy prices, rising fiscal pressures, weak productivity growth and lasting regional disparities, are weighing on economic performance and living standards. The government’s pro-growth agenda is broadly appropriate, but delivering stronger and more inclusive growth will require sustained structural reforms alongside sound macroeconomic and fiscal policies. Fiscal discipline remains essential as high public debt, high interest costs and mounting spending pressures limit fiscal space, underscoring the need to reinforce the fiscal framework, improve tax efficiency and reallocate spending towards productivity-enhancing investment. In parallel, rising long-term spending pressures call for pension reform to contain fiscal risks while preserving adequacy, including by reviewing indexation, strengthening work incentives and expanding private pension coverage. Strengthening energy security, while advancing the green transition, will require better-aligned price signals and faster investment in electricity networks to support electrification and reduce exposure to gas price volatility. Finally, unlocking the full productivity potential of regions requires a long-term strategy that aligns skills, infrastructure, innovation, and finance, supported by strong local governance capacities.
SPECIAL FEATURES: ENSURING STATE PENSION SUSTAINABILITY; STRENGTHENING ENERGY SECURITY; BOOSTING PRODUCTIVITY ACROSS REGIONS
