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Strong prospects for UK economic growth during 2007 has left businesses feeling upbeat, a survey shows.

High street bank Lloyds TSB's latest monthly business barometer, published today, shows an increase in the number of firms claiming conditions are set to improve.

Sixty-nine per cent said their business activity would rise in the next 12 months, compared t to 62 per cent in February's poll.

Sustained European growth and continually strong domestic demand are the underlying factors driving this increase, the survey found.

"Demand has also been strong in the UK, which has, in turn, allowed firms to pass on price increases," Lloyds TSB Corporate Markets' chief economist, Trevor Williams, said.

"As well as this, we're witnessing a boom in business investment and accelerating consumers spending, providing a solid foundation for rising business confidence."

Britain's GDP growth rate could rise to three per cent by the end of 2007, having achieved 2.7 per cent – above expectations – in 2006.

"Despite the strong pound, we should see manufacturing output growth remain positive in 2007, which would make it the best performance since 2004," Mr Williams added.

"However it's the services side of the economy that will be the runaway success story of the next few months."

Lloyds TSB's barometer found that 80 per cent of companies in the services sector expected more business activity in the next 12 months.