UK business optimism has surged over the past year and it is now ranked seventh most optimistic country globally on growth prospects, ahead of the US and China, according to research from Grant Thornton.

GT's International Business Report (IBR) shows UK business optimism is up by 74%, rising from - 3% in Q4 2012 to 71% in Q4 2013. Over two-thirds (69%) of UK businesses are expecting increased revenues over the next 12 months - a 20% year-on-year increase.

UK companies are also more optimistic about future profits, with 63% now expecting improvements, a 13% rise. At the same time, the numbers anticipating reduced demand have dropped by 7% over the quarter to reach 24%.

The research reveals a 12% climb in research and development (R&D), 11% increase in plant and machinery, and a 3% boost in new building investment expectations over the past year.

Scott Barnes, GT CEO, said: 'The rebound in confidence and sustained performance of UK businesses over the past year is something that can truly be applauded. The broad base of the recovery, largely driven by mid-market businesses, sets a solid foundation for growth to continue in 2014, but it remains crucial we don't rest on our laurels at this critical juncture.'

In particular, Barnes said there was a shortage of skilled workers in many areas; onein four (23%) companies said this would be a major constraint on their business (up 9% year-on-year) and a potential threat to growth prospects.