BUSINESS confidence has increased for the first time in a year, according to a survey, as companies become more optimistic about the future of the UK economy.

Financial performance has also improved compared to a year ago, in the period between February and April, according to research by the Institute of Chartered Accountants in England and Wales (ICAEW).

The Business Confidence Monitor index saw a rise of 4.1 to 13.7 in the period, reversing four consecutive quarters of declines.

The survey revealed a twostrand recovery, the ICAEW said, with manufacturing and engineering being the most confident sector and retail being the only sector with a negative result.

Michael Izza, chief executive of ICAEW, said: ‘‘This quarter’s confidence index shows that growth and certainty are returning to the UK economy.

‘‘Businesses are more optimistic about the future and this is reflected in their forecasts for turnover and profit growth.

‘‘They are, however, wary of the reality that the recovery is going to be slow.

“As a result, there is greater caution over making longterm commitments and investment.’’ Turnover and profit growth have continued to strengthen and are up 3.9 per cent and 3.8 per cent respectively compared to a year ago, according to the research.

But growth in exports, a key factor for economic recovery for the Government, appears to have levelled off, the ICAEW said.

Businesses reported a 0.9 per cent increase in employment over the past year – a welcome sign for the Government, which has pinned its hopes on a private sectordriven recovery.

But the squeeze on consumer spending is likely to continue as the research revealed employees are forecast to receive a 1.7 per cent salary increase on average over the next 12 months.

Customer demand remains a key concern for many firms, the ICAEW said, as nearly half said customer demand is a greater challenge to business performance than a year ago.