The economy looks on track for a modest recovery after businesses across all sectors staged a rebound in the first three months of 2012, two surveys showed on Tuesday.
The Chambers of Commerce's latest quarterly economic survey of nearly 8,000 businesses pointed to 0.3 percent first quarter growth - a shade above economists' consensus - though the group also warned of uncertainties ahead.
The Purchasing Managers' Index (PMI) for the construction sector posted an unexpected rise in March to a 21-month high as orders rose at the fastest rate in 4-1/2 years and firms became more optimistic about the outlook.
With a return to growth in the first quarter, Britain would avoid a renewed recession after the economy contracted by 0.3 percent in the last three months of 2011.
The results ... point to a welcome but modest improvement in the economic situation. The UK economy will likely avoid a recession, said BCC chief economist David Kern. However, growth is likely to remain low for some time, and a return to a more normal pace is unlikely until 2013.
The BCC expects growth of just 0.6 percent for 2012 as a whole, slightly below the 0.8 percent forecast by the government's Office of Budget Responsibility last month.
Following a surprise acceleration in manufacturing growth in March, the BCC survey and the construction PMI indicate that the need for more stimulus from the Bank of England is fading.
The BCC represents firms employing more than one in five private-sector workers in Britain. Most of the key measures in its quarterly survey were at their highest level in nine months in the manufacturing and service sector, though they remain well below levels seen before the 2008 financial crisis.
Export growth is outpacing that of domestic demand, something that is likely to please the government and the Bank as they seek to rebalance Britain's economy away from its past reliance on public spending and consumer demand.
The figures mark a sharp turnaround from the BCC's fourth-quarter survey, published at the start of January, which showed an increasingly stagnant economy.
Hiring intentions for both manufacturers and services companies are the strongest in nine months, and the PMI showed that construction firms are also adding staff, which may help to stem rising unemployment, currently at 8.4 percent.
Investment in plant and machinery - a particular weak spot in last year's GDP data - is now the highest since Q4 2010 for manufacturers, and since Q2 2008 for services firms, though in the latter case, the BCC said it still remained very low.
However the BCC, like the Bank, sees a bumpy road ahead.
Unresolved problems in the euro zone may trigger new upheavals later this year. Secondly, in view of the increases in oil and food prices since January, our current forecast is that the fall in inflation over the next 12-18 months will be slower than first expected, Kern said.
Bank Governor Mervyn King warned last week that Britain faces a long road back to pre-crisis economic growth rates as banks are still reducing their balance sheets.
(Reporting by David Milliken; editing by Stephen Nisbet)