UK economy showing fastest growth in over 10 years

Friday 30 May 2014 17.33
CBI says the UK is surging ahead at its strongest rate since at least 2003
CBI says the UK is surging ahead at its strongest rate since at least 2003

Britain's economy is growing at its fastest pace for more than a decade while consumers are increasingly confident about prospects, according to a raft of bullish reports today. 

The CBI said the UK is surging ahead at its strongest rate since at least 2003, while the British Chambers of Commerce (BCC) has upgraded its growth forecast for this year from 2.8% to 3.1%.

And research company GfK said its consumer confidence index had climbed out of negative territory for the first time in nine years.

The figures will provide a boost for Chancellor George Osborne and were welcomed by the UK Treasury.

The CBI said a survey of growth recorded in May gave the strongest reading since its data began in 2003.

The poll of 726 firms found a balance of plus 35% - the difference between those reporting higher output in the last three months and those saying it was lower. It was up from plus 25% in April.

It suggested the UK economy - which grew by 0.8% in the first three months of 2014 - had continued to perform strongly going into the second quarter, the CBI said.

The pace of growth was expected to remain above average, with a balance of plus 30% predicting that output will increase over the next three months.

"The UK economy is performing strongly thanks to rising business and consumer confidence, better credit conditions at home and improving global economic conditions," the CBI's deputy director-general Katja Hall said.

"What's encouraging is that growth is becoming more broad-based, with solid increases in business investment over the past year. This bodes well for the year ahead," she added.

But the CBI said global developments including tensions over Ukraine and the euro zone crisis posed risks to the UK outlook.

Meanwhile the BCC upgraded forecasts for this year as well as for 2015, when it now expects growth of 2.7%, up from 2.5%. It continues to expect 2.5% growth in 2016.

And the GfK survey showed consumer confidence had increased by three points this month to reach zero, the first time it has been out of negative territory since April 2005.

A rise of 27 points since April 2013 has been the steepest for more than 36 years - since a climb of 34 points over a seven-month period to December 1977.

Nick Moon, managing director of social research at GfK, said that the real driver of the increase is people's assessment of the general economic climate.

Separate survey data from Markit showed households' financial concerns for the coming year were topped by fears over a rising cost of living, energy bills and interest rates. 

Some 17% of mortgage holders felt there would be a "very significant" impact from rising rates. Households have also brought forward their expectations of when they will be hiked, with 23% now expecting this in the next six months, the figures showed.