Recovering from the recession, improving longer-term growth potential and reducing inequality are key challenges for the UK economy. Lingering effects from the global financial crisis, the restrictive impact from necessary fiscal consolidation and headwinds from the euro area sovereign debt crisis risk prolonging and worsening the economic downturn and hurting the long-term growth potential. Monetary policy and the operation of the automatic stabilisers should support the economy in the short term. Structural reforms, including those current implemented by the government, are crucial to boost growth and equality.