Britain’s economic recovery is reaching record pace on the back of a wave of consumer confidence, according to business groups.
The latest CBI growth indicator hit an all-time high today, while the British Chambers of Commerce (BCC) upgraded its growth forecast for the year to levels not seen since before the financial crisis.
The news comes after Bank of England policymaker Martin Weale broke ranks with his colleagues on the monetary policy committee (MPC) by suggesting that interest rates should start rising sooner and faster than previously expected.
Weale said that even a gradual rise would involve hiking rates by 1 percentage point a year, almost twice the speed the City has been expecting.
He said the MPC would have to start sooner in order to avoid a more painful, sharper rise. But BCC director general John Longworth warned that there was still a “lot of work to do” to ensure long-term growth.
“Everything possible must be done to avoid slower growth in future,” he said. “We need to invest, innovate, export and build.
“To sustain investment momentum into the future, the government and the Bank of England need to give businesses the confidence they need to invest. We urge the Bank of England to keep official interest low for as long as possible, and ensure that future rate rises are gradual and modest.”
The BCC now expects the UK economy to grow by 3.1 per cent this year and 2.7 per cent in 2015 – up from 2.8 per cent at 2.5 per cent respectively.
The CBI’s survey of the manufacturing, retail and service sectors registered record high business activity growth in May, with a positive balance of 35 per cent, up from 25 per cent in April.
The growth indicator suggests the UK economy has continued to perform strongly going into the second quarter of 2014, with the pace of growth predicted to remain firmly above average for the coming quarter as well.
Growth strengthened in retail sales, while manufacturing output kept the same solid pace as the previous two months.