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Katja Hall, CBI deputy director general, said the strong performance of the UK economy was down to rising confidence.

The UK economy is growing at its fastest pace in more than a decade amid rising consumer and business confidence, according to a respected survey.

The Confederation of Business Industry (CBI) said the retail, manufacturing and service sectors registered record growth in May in a sign that the recovery is broadening.

In a triple boost for the Chancellor George Osborne, the British Chambers of Commerce (BCC) upgraded its UK growth forecasts last night, while a report by GfK, Germany's largest market research institute, showed that all five measures of consumer confidence surged in May.

Katja Hall, CBI deputy director general, said the strong performance of the UK economy was down to rising confidence, as well as "better credit conditions at home and [abroad]".

However, she said sluggish eurozone growth and rising tensions in Ukraine still posed risks to the recovery.

The CBI's survey of 726 businesses showed a balance of 35pc of respondents believed activity had increased in the three months to May, up from 25pc in April. This was the highest reading since records began in 2003.

The BCC upgraded its UK growth forecast to 3.1pc for 2014, from 2.8pc. The UK economy has not shown annual growth of more than 3pc since 2007.

Robust growth means the BCC now expects the Bank of England to start raising rates in the first quarter of next year, two quarters earlier than previously forecast. It also upgraded its 2015 forecast to 2.7pc from 2.5pc.

John Longworth, BCC's director general, described the upgrades as "great news", but warned that Britain still had a lot of work to do to secure the recovery. "Our forecast confirms that Britain is leading, rather than following, other major economies when it comes to short-term growth," he said. "The task at hand is to ensure that 2014 is not 'as good as it gets' for the UK economy."

GfK said that all five measures of consumer confidence increased this month, leading to an overall index score rise of three points to zero. Nick Moon, managing director of social research at GfK, said the most important development was "psychological" given that this is the first time since 2005 that the index has "left negative territory".

The index is calculated by adding up increases in the personal finance situation, general economic situation, major purchase index and savings index.

A spokesman from HM Treasury said that today's reports provide "further evidence that the government's long term economic plan is working".
Ukip is a "very intolerant" party and its appeal is not likely to last for a "long time" despite its success in the European elections, Sir John Major has said.

The former Conservative Prime Minister said Nigel Farage has been "very smart" and proved "good at exploiting grievances".

But he warned that the arguments for quitting Europe are "absolute nonsense" and said it would cost billions and leave this country in a "very isolated and very difficult" position.

He told BBC Radio 4's today programme: "Ukip are extremely good at exploiting grievances and people are very upset about Europe. Politically, Ukip have been very smart in exploiting those disagreements, but Ukip are not, frankly, a very tolerant party.

"I don't think their appeal is one that is instinctively likely to continue for a long time and I think we have seen that in some of the things they have done recently. So I think they are there and of course they are an impediment for the moment.

He added the investment which has helped Britain's economic recovery has not just come to this country for our "pretty blue eyes" but because of the single market and the European Union.

He said: "Frankly [those calling for Britain to leave the EU] are wrong. Much of this publicity about that is absolute nonsense. We would lose free access to the single market ... we'd have to pay for access to the single market.

"How much inwards investment coming into this country, John, that's currently helping our economy grow faster than it's grown in over a decade comes here just for our pretty blue eyes? And how much of it comes here because through Britain they have access to the single market and the European Union as a whole?"

He said that the rise of anti-establishment parties across Europe will make it "much easier" for David Cameron to renegotiate Britain's relationship with the EU ahead of his pledged referendum in 2017.

He said: " I think the results right across Europe have made a renegotiation much easier. It's apparent now to governments right across Europe that reform of the European Union is necessary - it isn't working as it should, it isn't working in the way in which European citizens think it should."

He said that while free movement is important for trade, it needs to be reformed. He said: "I think there are some things that could be done, as the Prime Minister's already said, free movement to take up work, not benefits. I don't think you can have an absolute restriction on movements, but maybe you could qualify it in different ways and I think that is something that would find an echo in many European governments, as well as here."

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