2013.11.0301:02:00UTC+00U.K. Business Group Upgrades GDP Growth Forecast

The British economy will likely expand at a faster pace than estimated earlier on improved business investment and exports, and is set to remain steady through 2015 and beyond, a report from the Confederation of British Industry (CBI) revealed Sunday.

The latest economic forecast from the CBI showed that the economy will expand 1.4 percent this year, faster than 1.2 percent the business lobby had predicted in August. The upward revision mainly reflects third quarter's better-than expected GDP growth and improving sentiment across the major business sectors.

However, growth is seen slowing to 0.5 percent quarter-on-quarter in the fourth quarter of 2013 from 0.9 percent recorded in the September quarter.

Going ahead, the growth rate for 2014 has been upgraded to 2.4 percent from 2.3 percent. Quarter-on-quarter growth will be limited to 0.6 percent in every quarter next year as government spending begins to drag on GDP, the report said.

In 2015, growth would accelerate to 2.6 percent, supported by a lift to domestic demand from improved consumer spending and income growth, the CBI said.

"Consumer spending will rise, underpinned by increased confidence, improved credit conditions and a gradual pick-up in real incomes," Stephen Gifford, CBI Director of Economics, said.

"But risks remain, despite the relatively stable global environment of the past year, with financial markets moving to a new regulatory environment, the Eurozone continuing to evolve, emerging markets facing structural change and the challenge of unwinding unconventional monetary policies."

Further, the CBI said it does not expect the Bank of England to hike its benchmark interest rate until the end of 2015. U.K.'s unemployment rate is seen falling to 7.5 percent in 2014 from this year's rate of 7.7 percent, and then to 7.3 percent in 2015.

In the third quarter, the British economy expanded at the fastest rate since the second quarter of 2010. Gross domestic product grew 0.8 percent from the preceding three-month period, when it rose by 0.7 percent.