UK economy gathering strength

The gloomy air surrounding the UK's economy has lifted to some extent with the news that business confidence has risen to pre-recession levels, sparking suggestions that the country could be lifting out of its current slump.

According to the latest quarterly report from the British Chambers of Commerce (BCC), service export deliveries balance rose to 36 per cent this year, the highest level since the survey began in 1989, while the majority of other metrics also showed a degree of improvement.

Businesses are expecting to make greater profits in the second half of the year, while employment balances looked stronger in both the manufacturing and services industries.

BCC director general John Longworth described the results as "incredibly encouraging" but stressed that there are still a number of risk factors that need to be considered when it comes to making growth predictions.

He pointed to falls in the service investment balances and the poor cashflow balances in both services and manufacturing as potential causes for concern, warning that any economic growth could be slow and gradual.

"It must be recognised that recovery will only be turbo-charged if we can create a truly enterprise-friendly economy here in the UK," the BCC director general added.

To do this the government must deliver the infrastructure improvements alluded to in the latest spending review, support exporters who want to enter new markets, make finance available to growing companies and commit to supporting the private sector, concluded Mr Longworth.

BCC chief economist David Kern also struck a relatively cautious note, despite the positive data contained in the report. He pointed to a decrease in stimulus in the US as something that could have a knock-on effect on the UK's attempts to drive economic growth.

However, more good news has emerged from the services sector, with Markit's monthly study indicating that business activity grew faster over the month of June than it has done for the last two years.

This has inspired hopes of a broad-based economic upturn, which could be positive for the financial services sector.