Growth Hopes for revival British economy showing signs of life

Increasing signs that the British economy could beat growth forecasts and see a firm revival this year provided Mark Carney with a warm welcome as new governor of the Bank of England on Monday.

The proportion of UK services companies reporting rising exports rose to a record high in the second quarter, according to a closely watched survey by the British Chambers of Commerce.

The balance of exports for services rose to 36 per cent between April and June, the highest since the survey began in 1989. This figure is the difference between the percentage of companies with rising and falling exports.

Exports from the manufacturing sector also picked up, according to the survey, a finding reinforced by a separate survey showing a boost in new orders helped factory activity rise at the fastest pace for more than two years in June. The gauges for employment, business confidence, and profitability also rose in the second quarter of the year.

However, some continuing signs of frailty mean Dr Carney is unlikely to have completely escaped inheriting what he recently described as a "crisis economy".

"The improvement in most key balances in Q2, building on the upturn recorded in Q1, supports our view that the UK economy is slowly strengthening," British Chambers of Commerce chief economist David Kern said.

If progress could be sustained, there were "realistic hopes" the chambers' estimate that the economy would grow 0.6 per cent this year would be revised up, he said.

ING economist James Knightley said the British economy was on course for posting faster growth in the second quarter than it did in the first three months. He estimated GDP grew 0.4 per cent to 0.5 per cent in the second quarter, after expanding 0.3 per cent between January and March.

Key barometers of activity in the construction and services sector by financial data compilers Markit, are also expected to show improvement on their release this week.

However, economists warned that recent upward trends in the UK economy may not be sustainable against weakening activity in the US and China.

Despite the rise in many of the chambers' measures of business activity, most remained below pre-crisis levels. The survey also exposed worrying signals that businesses could lack the strength to drive a robust recovery. The proportion of services sector companies planning to grow investment in equipment fell in the second quarter, while cash flow remained weak in both sectors.

Mr Kern highlighted the turmoil in the global markets sparked by the US Federal Reserve's move to unwind quantitative easing, and ongoing troubles in the eurozone, as the main threats to recovery in the UK.

Commentators on the separate manufacturing data also were cautiously optimistic.