The UK economy is set to grow at its fastest rate since 2010 as business confidence continues to rise, according to research by ICAEW.

ICAEW's predictions are more positive than those of either the Bank of England or the OECD, which recently cut its prediction for growth in the UK economy from 0.9% to 0.8% for the year.

In contrast, ICAEW has upgraded its growth forecasts for the UK economy this year from 1.0% to 1.2%. After marginal growth of just 0.2% in 2012, ICAEW says the revision reflects the improvement in business confidence.

The ICAEW Economic Forecast looks at the outlook for the UK economy based on the views of chartered accountants across the UK, surveyed through the quarterly ICAEW/Grant Thornton Business Confidence Monitor (BCM).

Michael Izza, ICAEW chief executive, said: 'The main risk to this forecast being achieved is the continued economic weakness in the eurozone and the forthcoming Comprehensive Spending Review, when more austerity measures are expected. Another downside is that companies remain cautious about spending and have yet to increase their investment plans.'

The ICAEW/GT BCM currently stands at +16.7 up from +12.8 in Q1 2013. Capital investment expectations have also improved from 1.9% forecast last quarter to 2.5% in 2013.

However, salaries are unlikely to rise significantly this year, with total pay growth of just 1.5% in 2013. The institute says public sector job shedding continues to place downward pressure on employment and expects the unemployment rate to rise from 7.8% to 8.1%.