By Marcus Leach

The Institute of Chartered Accountants in England and Wales (ICAEW) have released their latest Economic Forecast, which shows that business confidence is improving.

However, it also reveals that growth is still expected to be modest, with GDP forecast to grow by 1.0% in 2013. After marginal growth of just 0.2% in 2012, the ICAEW has forecast a modest expansion in 2013 with expected GDP growth of 1.0%.

Other findings:

- Capital investment expectations is also on the up with total real business investment forecast to grow by 1.9% this year, up from the 0.4% growth forecast in Q4 2012;

- Encouragingly, staff development budgets are also expected to increase by 1.5% which suggests businesses are more willing to spend money on attracting and retaining talent within their organisations;

- The labour market has held up with private sector employment reducing the unemployment rate. However, with more public sector job shedding on the way, unemployment is expected to average at 8.0% in 2013;

- Meanwhile, pay growth will remain weak with average total earnings expected to grow by just 1.4% in 2013, probably due to firms controlling costs through wage restraint

“Business confidence improved notably in the first quarter of this year which reflects the sentiments of businesses up and down the country who are expecting growth this year," Robin Fieth, ICAEW Executive Director, Members and Operations, said.

"The key now is to build on this confidence and to change the mind set of UK PLC who need to be willing to invest. There is currently an estimated £725bn sitting on corporate balance sheets and if just 10% of this was invested it would make a significant difference to the UK economy.

“In a letter to the Chancellor ICAEW has urged Government to do more to help businesses by introducing measures to improve access to finance, encourage businesses to export and reduce the regulatory burden by simplifying the tax system. Unfortunately, unless this happens, I fear that we will continue to have a low growth economy for a number of years.”

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