The governor of the Bank of England says that the UK economic recovery is becoming more balanced but it will be years before Britain will increase its exports to the levels that Chancellor George Osborne has hoped for.
"There are signs of more balance in the recovery than previously," said Mark Carney at a Treasury Select Committee (TSC) hearing.
According to the central bank's forecasts, the UK economy will grow by around 3% in 2014. Though primarily driven by household consumption and a revival in housing market activity, Carney said an increasingly larger portion of growth is accounted for by business investment – around a quarter.
Consumption has been fuelled by the depletion of household savings. For consumption to continue powering part of the recovery, wages, which have been in real terms decline, need to rise meaningfully again. The Bank of England expects this to start happening in the second half of 2014.
But one of the big disappointments of the recovery is trade, with UK exports remaining flat. Osborne has set the target value of £1tn (€1.2tn, $1.7tn) for UK exports by the end of the decade.
He is widely expected not to get near this goal.
"There are still reasonable challenges there given the weakness of demand abroad the recent strength in sterling, which has not yet been supported by increases in productivity and competitiveness," said Carney.
Global demand for UK exports has been hampered by slowing growth in target markets such as China and the economic crisis that has gripped Europe, the country's largest trading partner.
David Miles, who sits alongside Carney on the central bank's rate-setting monetary policy committee, told the TSC that increasing exports to fast-growth markets is taking much longer than anybody had thought it would.
Rebalancing the UK economy towards trade "will take many years", he added.
UK exporters also face the hurdle of a stronger pound. The Bank of England is indicating it will lift interest rates within months as the economic recovery strengthens, which will drive up sterling.