THE UK's economy will continue to grow this year with businesses investing at their fastest pace for seven years, a new report has said.

The Confederation of British Industry (CBI) says GDP will grow 2.6 per cent in 2014, with investment rising by about seven per cent.

Bosses added import growth will also increase thanks to stronger domestic demand, with exports picking up as the Eurozone gains momentum.

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John Cridland, CBI director-general, said: “We are starting to see signs of the right kind of growth. “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.

“More businesses are feeling inclined to invest in new technology and advertising.

“However, there is no doubt business leaders are concerned about political uncertainty and this could be a real mood killer when business leaders are faced with making big investment decisions in the months ahead.”

The CBI also expects unemployment to fall to 6.8 per cent in 2014 and 6.6 per cent by the end of 2015, and believes interest rates will remain stable until the third quarter of 2015.

Katja Hall, CBI chief policy director, added: “The good news is that this year more jobs will be created across the economy, wages will go up at a faster rate than CPI inflation and borrowing costs will remain low.

“Businesses will now be looking to the Budget for action from the Chancellor to cement the recovery.”