Businesses power sunny UK economic forecast

GDP expected to exceed pre-recession peak by the summer - three months earlier than expected

The UK economy is set to exceed its pre-recession form one quarter earlier than expected, according to the British Chamber of Commerce (BCC) which pointed to businesses investment and a services surge as a key driver in its positive predictions.

The BCC's GDP growth forecast for 2014 was 2.7 per cent, but today it upgraded it to 2.8 per cent, meaning it will exceed its pre-recession peak in this year's second quarter – three months earlier than the BCC initially thought.

The sunny picture is expected to continue into next year, with the BCC's initial 2015 GDP growth forecast of 2.4 per cent being notched up to 2.5 per cent.

UK businesses that are expanding and taking on extra staff were praised by the BCC director general John Longworth, and were labelled as a key factor in its decision to upgrade the growth forecast.

"Our economic recovery is gaining momentum," he said. "Businesses across the UK are expanding and creating jobs, and our increasingly sunny predictions for growth are a testament to their drive and ambition.

"Our new forecast shows that the service sector is performing particularly well, and is likely to be a key driver of growth."

The BCC added that business investment is expected to enjoy strong growth of 6.6 per cent in 2014 and 5.7 per cent in both 2015 and 2016, but levels will still not manage to exceed pre-recession levels by that time.

"While business investment is expected to grow, it will remain way below pre-crisis levels for some time," Longworth added. "...Crucially, Britain is simply not investing enough.

"There is also more to do in securing access to finance for growing firms, as this too will be crucial to securing our economic future."

Longworth urged chancellor George Osborne to use his upcoming budget to give businesses incentives to take on more young people in order to combat what he described as an "unacceptably high level of youth unemployment."

The percentage of out-of-work youngsters will still stand at 19.9 per cent by the end of this year, close to three times the national unemployment average.