UK Business Confidence Rises as Economy Moves Towards Recovery

The UK economy has shown signs of growth and is moving from "flat to growth", particularly boosted by the central bank's funding scheme, says the Confederation of British Industry.

"The right way to judge the economy is that it's moving from flat to growth," John Cridland, CBI director-general, told reporters in London.

The CBI expects the GDP growth to remain at 0.3% in the second quarter but to expand to 0.4% in the third and fourth quarter. The UK's leading business lobby maintained its earlier prediction of 1% GDP growth for this year, followed by 2% growth in 2014.

The CBI said that there is a general sense that the forward mood has brightened a little and the businesses are more optimistic on the continued growth momentum.

The Bank of England's Funding for Lending Scheme, launched last year, has provided banks with cheap funding to enable them lend to small businesses and households.

"And when I talk to banks ... they are quietly optimistic that, as the months go on, for them the Funding for Lending enables them to do more lending," said Cridland.

"With the year getting off to a positive start, the mood amongst companies growing a little brighter, our outlook remains one of cautious optimism for the U.K. economy."

However, the lobby group did not believe that the BoE would continue with the quantitative easing. In its 9 May meeting, the central bank has held its bond buying target at £375bn.

The CBI said that it expects the inflation to reach 3.1% this year but will remain the BoE's target level of above 2% throughout 2014.

"Household spending is expected to remain subdued with wage growth weak and unemployment expected to rise slightly," said a CBI statement.

The CBI sees a small rise in unemployment to 2.58 million this year before receding slightly to 2.51million in 2014.

Separately, data from BDO LLP showed that business confidence index rose to 93 in April from 92.2 in March, while its measure of company output expectations jumped to 94.1 from 93.