A combination of positive economic factors have caused a surge in business confidence, with bosses expecting to take on new recruits and increase wages in 2015.

The latest business trends index from UK accountancy group BDO shows that low inflation and costs are providing a stable environment for businesses to expand.

The index of optimism reached 104.9 in December, well above the 100 mark denoting the long term average.

Experts said the positive mood would feed through to consumers in the first half of 2015 as increased employment and pay increases bolsters people’s spending power.

It’s good news for the government running in to May’s general election, which will be fought in part over the strength of the economy.

Peter Hemington at BDO LLP said: “This is a great start to 2015. Optimism has increased, hiring expectations remain strong and inflationary pressures are down.

“In the short term, the chancellor couldn't have hoped for a better way to ring in the New Year. But there are clouds on the UK’s economic horizon.

“The chancellor will be looking to the housing market to support growth. But if UK house prices drop by 0.6% in 2015, consumer confidence could take a knock and spending could quickly be reined in.

He added: “In these relatively good times, the government needs to do everything it can to support business growth, encourage long term investment and end underemployment.”