The Bank of England Governor has urged the incoming Prime Minister to focus on one issue above all others

The Governor of the Bank of England has delivered a stark warning as Andy Burnham prepares to take office.

Speaking to MPs, Andrew Bailey said the UK's biggest economic challenge cannot be ignored.

Mr Bailey said the country's weak economic growth should be the new Government's top priority, warning Britain has struggled to grow its economy for almost two decades.

Appearing before the Treasury Committee, he said: "The overall message I would give is that I think the big issue is growth in the economy."

Mr Bailey said the UK's weak growth has persisted for around 16 to 17 years and stressed it is a long-term problem rather than the fault of any one Government.

"So this is not a story about any one government... but I think it's important because a critical structural issue," he told MPs.

Andy Burnham is on course to become Britain's next Prime Minister as early as next week after securing the backing of more than 85 per cent of Labour MPs.

The former Greater Manchester mayor received a further 27 nominations on Monday, taking the total number of Labour MPs supporting his leadership bid to 349.

The Bank of England's comments come ahead of the latest economic figures from the Office for National Statistics, due to be released on Thursday.

Deutsche Bank expects the data to show the economy shrank by 0.1 per cent in May.

If confirmed, it would mark the second consecutive monthly contraction after the economy also shrank by 0.1 per cent in April, the first monthly decline since August last year.

Before that, the economy grew by 0.3 per cent in March and 0.4 per cent in February.

The April decline was driven by the services sector, which makes up the largest part of the UK economy, despite growth in construction and manufacturing.

Sanjay Raja, Deutsche Bank's chief UK economist, described services activity as "sluggish" in May across information, professional, financial services and real estate sectors.

The conflict between the US, Israel and Iran continues to weigh heavily on Britain's economy through persistently high fuel and energy costs.

These elevated prices squeezed both businesses and households throughout April and May, though wholesale costs have eased somewhat in recent weeks.

Chancellor Rachel Reeves acknowledged the domestic fallout, stating: "It was not a war we wanted or joined, but one that will have an impact at home."

Government ministers have cautioned that economic repercussions from the Iran conflict could linger for eight months beyond any ceasefire.

Food industry figures have also warned that supermarket prices could surge by up to 10 per cent later this year as the war's inflationary effects filter through.

Mr Bailey emphasised that economic expansion cannot occur without a stable financial system, responding to questions about whether regulatory frameworks might be hampering growth.

"We will not get growth if we don't have financial stability," the Governor told the committee, while noting signs of resilience within the financial sector.

Despite the gloomy outlook, some economists identified potential bright spots.

Ms Raja noted it was "not all bad news," pointing to retailers reporting that promotional offers and warmer temperatures had lifted demand for outdoor furniture and fans.

England's World Cup progress could also provide a fillip, with pubs and bars expected to benefit from increased custom.