The UK will see stronger than expected growth of 2.6 per cent in 2014 and the economy will rebalance with business investment hitting heights not seen since 2007, business group the CBI says.

The CBI’s new economic forecast suggests that growth will be stronger in 2014 than its own prediction of 2.4 per cent made in November last year.

Business investment growth will also reverse from minus 3.7 per cent in 2013 to 6.6 per cent this year and 8.8 per cent in 2015, as confidence among business owners increases dramatically.

“In our view this is not a debt-fuelled, housing bubble-led recovery - our forecast shows encouraging signs that business investment and net trade are starting to play their part,” said CBI chief John Cridland.

“More businesses are feeling inclined to invest in new technology and advertising. We can also expect to see more companies coming to market to raise finance and an uptick in merger and acquisitions activity as animal spirits return.”

The report also suggests that unemployment fell below seven per cent in the final quarter of 2013 and will continue to fall to around 6.8 per cent this year.

Bank of England chief Mark Carney said his interest-rate setting Monetary Policy Committee would not consider raising benchmark rates until the jobless figure fell below seven per cent.