Business confidence is on the up, according to the latest ICAEW Economic Forecast, but growth is still expected to be modest.

ICAEW's figure show GDP forecast to grow by 1.0% in 2013. Capital investment expectations are also on the rise, with total real business investment forecast to grow by 1.9% this year, up from the 0.4% growth forecast in Q4 2012.

Staff development budgets are also expected to increase by 1.5% which ICAEW says suggests businesses are more willing to spend money on attracting and retaining talent within their organisations.

However, unemployment is expected to average at 8.0% in 2013, and pay growth will remain weak with average total earnings expected to grow by just 1.4% in 2013, largely due to firms controlling costs through wage restraint.

Robin Fieth, ICAEW executive director, members and operations, said: 'The key now is to build on this confidence and to change the mind set of UK plc who need to be willing to invest. There is currently an estimated £725bn sitting on corporate balance sheets and if just 10% of this was invested it would make a significant difference to the UK economy.'

ICAEW is calling on the government to do more to help businesses by introducing measures to improve access to finance, encourage businesses to export and reduce the regulatory burden by simplifying the tax system.