The CBI has raised its growth forecast from 1% to 1.2% in 2013 citing increased confidence and credit availability.
The business lobbying group that it has upped its gross domestic product (GDP) forecasts for this year and 2014 after a “better-than-expected” second quarter.
In 2014, the CBI expects 2.3% GDP growth, compared to the 2% it predicted in May this year.
John Cridland, CBI director general, said: “The economy has started to gain momentum and confidence is picking up, but it’s still early days.
“We need to see a full-blown rebalancing of our economy, with stronger business investment and trade before we can call a sustainable recovery. We hope that will begin to emerge next year, as the Eurozone starts growing again.”
The group explained that household spending is expected to strengthen during the second half of 2013 and into 2014 as confidence “lifts” and credit conditions continue to improve.
Business investment is predicted to grow by 7.3% next year from -2.8% in 2013.
Stephen Gifford, director of economics at the CBI, added: “Increased confidence, improved credit conditions and a pick-up in disposable income should underpin consumer spending in the UK through 2014.
“As the Eurozone returns to growth and global momentum continues to build we should see a gradual increase in business investment and UK trade.”