Don't panic! UK recovery is 'firmly entrenched'
The U.K. economy will expand significantly more than forecast in 2013, according to a leading economic forecasting group, which has become the latest organization to up its growth outlook for the country following a slew of positive data.
Ernst and Young's ITEM Club said U.K. gross domestic product would grow by 1.1 percent this year – a 5 percentage point increase on its April forecast of 0.6 percent.
The group was also optimistic looking further ahead, upping its growth forecasts to 2.2 percent in 2014 and 2.6 percent in 2015, from 1.9 percent and 2.5 percent respectively.
Britain's economy will be supported by an improvement in consumer sentiment and the housing market, the ITEM Club said, with both mortgage approvals and consumer spending set to pick up over this year and next.
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But it said the most significant boost to Britain would be a revival in business investment and exports, which it expected to kick in during 2014, due to the improving outlook in key markets like China and the U.S.
The ITEM Club report followed a number of upgraded growth forecasts from other organizations, on the back of data and business surveys suggesting the U.K. economy is recovering quicker than expected.
The country recorded growth of 0.3 percent in the first quarter of this year, and the Bank of England expects growth of 0.5-0.6 percent in the second quarter. In addition, data from sectors including manufacturing and construction, as well as consumer confidence surveys, has come in better than expected.
Last week, UBS said the positive data had provided the "necessary green shoots" to raise its growth forecasts from 1.0 percent to 1.1 percent for this year, and from 1.2 percent to 1.8 percent for 2014.
The International Monetary Fund also backtracked on Britain, upgrading its growth outlook for the country to 0.9 percent this year, following a downward revision to 0.7 percent in April.
"The UK recovery is becoming firmly entrenched," said Peter Spencer, chief economic adviser to the ITEM Club. "It's looking much more positive and we're unlikely to see a repeat of 2011 when a recovery in confidence was crushed by the euro crisis."
"Spending on the high street is holding up nicely, housing market transactions are beginning to gather pace and, perhaps most significantly, the global economy also appears to be on the mend. In fact, it's the first time in many months where we can see balanced growth in the economy," he added.
(Read More: UK Economy Picked Up Steam in the Second Quarter)
-- By CNBC's Katrina Bishop. Follow her on Twitter @KatrinaBishop