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UK businesses are optimistic that strong growth in demand and output will continue in the coming year, a new survey has revealed.

Firms are hopeful that profit margins will increase this year on the back of this demand, which have been under pressure recently from energy and other costs.

Job creation is also expected to increase, though at a slower rate than the previous 12 months; in the last year the balance of employers that expanded their workforces rose to 15 per cent.

The renewed optimism is a result of demand and output growing robustly during the last year, according to the CBI (Confederation of British Industry)/RDA (Regional Development Agency) survey of regional economic trends.

The twice-yearly survey covers all sectors of the economy and more than 3,000 companies were questioned.

They indicated that price increases were the fastest in the survey's four-year history and nearly of quarter of businesses said that prices had gone up over the past 12 months. These rises were strongest in the south-west of England.

Both domestic and export orders rose in the last year and are expected to carry on doing so.

Doug Godden, the CBI's head of economic analysis, said that businesses in the majority of the regions have seen "solid growth" in the last year.

"Firms remain confident about the outlook, and with the trend in profit margins improved, are looking to step up investment in equipment, innovation and training," he said.

"Further price increases in the next 12 months may prove to be wishful thinking by some businesses, and it remains to be seen how far prices can be raised in an environment of higher interest rates.

"Skilled staff are essential to business success, so it is pleasing that more and more organisations are investing in their workforce," Mr Godden added.

According to the CBI/RDA survey, the main factors holding back growth are red tape and regulation, inadequate business support and skills problems.