THE United
Kingdom's economy is projected to expand this year and next, but challenges
remain to boost productivity and make future growth more inclusive, according
to the OECD's latest Economic Survey.
The Survey, presented in London by OECD Secretary-General Angel Gurría and UK Chancellor George Osborne, says that annual growth in the UK rose 2.6% in 2014, the fastest among G7 countries, and is projected to be at the same rate this year. The recovery has been underpinned by highly accommodative monetary policy and measures to support lending and revive the housing market. With a vibrant and inclusive labour market, the unemployment rate has fallen rapidly to 5.7% and employment is at record levels. However, labour productivity has been sluggish since 2007, which is holding back real wages and improvements in living standards. House prices have increased rapidly as housing supply has not risen to meet demand.
“The United Kingdom has made tremendous progress exiting from the worst economic crisis of our lifetime. Job creation is remarkable and growth is strong, but the UK has to finish the job,” Secretary-General Gurría said. “Boosting productivity is essential to making this recovery durable and to ensuring that the benefits are shared by all. This requires further efforts to improve infrastructure, enhance access to finance for sound businesses and promote skills.”
In
a second report also released yesterday, Local Job Creation:
Employment and Skills Strategies in England, the OECD said that
gradual devolution of employment and skills policies to the local level can
support growth and productivity by improving connections between skill formation
and employers' needs.
The Economic Survey addresses several ways in which productivity could be enhanced. The UK is one of the most flexible economies in the OECD, and structural reforms have strengthened work incentives and supported an already positive business friendly environment. However, improvements in education and skills are necessary as well as measures to reduce income inequality. Developing further the knowledge-based economy (including innovation and skills), and strengthening infrastructure and improving the financing of the economy are also critical in this regard.
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