UK growth to beat pre-recession peak in 2014: BCC
Economic growth in the U.K. will beat its pre-recession peak in the second half of next year, according to a new report from the British Chambers of Commerce (BCC).
The business lobby group upgraded its short-term gross domestic product (GDP) growth forecasts for the country, from 1.3 to 1.4 percent for 2013 and from 2.2 to 2.7 percent for 2014.
Although the BCC slightly downgraded its 2015 forecast from 2.5 to 2.4 percent, the forecasts predict that economic output growth in the U.K. could climb above its pre-recession peak (in the first quarter of 2008, U.K. GDP hit an annualized rate of 2.5 percent) in the second half of 2014.
Household consumption (which accounts for two thirds of U.K. GDP) would be the main driver of growth, according to the report from the nationwide business group, but "high personal debt levels" would subdue demand in 2015, the group warned.
The report is just the latest bit of good news for the U.K. economy, which appears to be booming in comparison with its euro zone neighbors.
(Read more: UK's economic growth picks up in third quarter)
Not only did the latest economic growth data for the third quarter show that the U.K. economy grew 0.8 percent (while the euro zone grew 0.1 percent and the EU grew 0.2 percent in the same period) but a range of figures -- from consumer confidence to manufacturing and housing sector activity -- have also shown positive trends as 2013 progressed.
Director General of the BCC, John Longworth commented that it was "really great" news that the U.K. economy was finally expected "to bounce back from the deepest recession in modern times."
"British businesses have remained determined to compete and grow in the face of difficult circumstances, and the upgrading of our short-term forecast is testament to their sheer hard work, resilience and creativity."
In a note of caution, however, Longworth added that "we must acknowledge that longer-term challenges are still looming."
"As household consumption slows in the medium-term, we have to find ways of boosting business investment and exports as rebalancing our economy is critical to our long-term economic future," he said, adding that U.K. firms needed government support as they struggled to access available credit.
The growth upgrades will be a further boost for the U.K. Finance Minister George Osborne, who seized upon the country's spate of positive economic data as a vindication of his economic policies last month when he delivered his annual economic address, the "Autumn Statement."
The BCC's Longworth warned the government not to "take their eyes off the ball" in the run up to the next General Election in 2015, however, stating "the economy remains front and center at all times."
For its part, the Bank of England (BoE) has not responded to increasing growth data by raising interest rates yet as U.K. inflation figures remain benign and below target. In early December, the bank's Monetary Policy Committee opted to keep the bank rate at a record low of 0.5 percent, and left its monetary stimulus program (also known as quantitative easing, or QE) at £375 billion ($613 billion).
The bank's governor, Mark Carney, has said the bank will consider raising interest rates until unemployment in the country hits the 7 percent mark (as of November, it is at 7.6 percent).
Chief economist at the BCC, David Kerns, told CNBC Europe's "Squawk Box"that businesses wanted to see continued low interest rates and low inflation.
"The economy is improving but I don't think we're at the situation whereby the Bank of England needs to put the foot on the brake. We think the present governor (Carney) is playing things just right."
"He made it clear that he will be guided by the economy and he will keep rates as low as possible for as long as possible. There may come a point when this has to change but what matters is that business believes he will not be 'trigger happy'."
- By CNBC's Holly Ellyatt, follow her on Twitter @HollyEllyatt